Final Results

RNS Number:2760S
Fulcrum Pharma PLC
20 November 2003

For immediate release           20 November 2003

                               Fulcrum Pharma plc

             Preliminary Results for the Year Ended 31 August 2003


Fulcrum Pharma plc (AIM: FUL), the drug development and strategic outsourcing
services company, today announces its preliminary results for the year ended 31
August 2003.

Highlights:

  * Strong finish with contract wins in the final quarter, continuing into the
    first quarter of the current year. These provide confidence for the year
    ending 31 August 2004.
  * Profitable in second half of the year ended 31 August 2003 before
    exceptional items.
  * Lower than expected contract wins in the third quarter, combined with
    greater expenditure to generate growth in Europe, Japan and the US held back
    performance for the year to 31 August 2003.
  * Platform created for future growth.  Staff numbers doubled. New European
    office, the establishment of the US subsidiary and the commencement in Japan
    of Niphix, an in-house clinical research organisation.
  * Loss before tax and exceptional items #564,000 (2002: #917,000 profit).
  * The Group's balance sheet remains strong with net cash of #3.5 million.
  * The Group is trading ahead of forecasts for the half year to 28
    February 2004.


Commenting on the results, Professor Sir Charles George, Chairman of Fulcrum
Pharma, said:

"With improving market conditions and Fulcrum's growth platform, the Group can
look forward to the coming year with confidence. However the Board recognise
that the business environment is still in the early phases of recovery in
Europe.  Fulcrum will continue to focus on adding value for its customers and
providing best-in-class expertise and resources."



For further information, please contact :

Fulcrum Pharma PLC
Jon Court, Chief Executive                                  08707 107152
Geoffrey Smith, Finance Director                            08707 104501

Buchanan Communications
Mary-Jane Johnson                                           0207 4665000




Report of the Chairman and Chief Executive Officer
for the year ended 31 August 2003



Overview

Fulcrum's strategy is to build a scalable outsourcing Pharma business which
provides virtual drug development services that have global reach, supported by
infrastructure and expertise on the ground in the major regions for
pharmaceutical commercialisation.



Fulcrum was originally established in the UK and has expanded into the US with
an office in Research Triangle Park in North Carolina and an East Coast Regional
office in Boston. Further US expansion both in terms of staff numbers and
offices is planned for the future.



Fulcrum has increased its presence in the Japanese pharmaceutical community,
with Fulcrum Pharma KK and Niphix KK, our specialist clinical research
organisation. Through our local resources and appropriate sub-contracting,
Fulcrum conducts pre-clinical and early clinical development activities in
Japan.



Following the recent improvement in market conditions the Group has had a strong
finish in terms of contract wins in the final quarter of the financial year.
This has continued into the first quarter of the current year, providing
confidence in the outcome for the next financial year ending 31 August 2004.



However in common with other companies in the Pharma outsourcing sector,
difficult trading conditions in the first half of the year impacted sales,
particularly in the EU where sales were flat. This was reflected in the Group's
Interim Statement in May 2003, where Fulcrum reported its first loss. The
difficult trading conditions seen in the first half continued into the third
quarter when lower than expected contract wins, combined with the step-up costs
associated with the Company's growth in Europe, Japan and the US, mean the
outcome for the year to 31 August 2003 has been disappointing.



Financial review

The results for year ended 31 August 2003 show a loss before tax and exceptional
items of #564,000 (2002: profit of #917,000)



The pre-tax loss for the year was #947,000 compared with a profit of #1,671,000
in 2002, a year that included a #935,000 exceptional credit relating to the
reversal of an accounting adjustment as set out in Note 2 of this statement.



The loss per share of 0.62p compares with diluted earnings per share of 1.42p in
2002.



Fulcrum retains a healthy cash position with net funds of #3.5 million.



An interim dividend of 0.2p per share was paid in June 2003 (2002: 0.2p per
share). No second half dividend is recommended in accordance with the Company's
dividend policy.  The Board expects to pay an interim dividend following the
half year results to February 2004.



Exceptional items

The exceptional charges of #383,000 represent the cost of the company's new
venture JRiCo1 Ventures Limited (JRiCo is an acronym for Japan Rights Company).



Operating Review
Platform for growth

Consistent with Fulcrum's strategy to build a global scalable Pharma outsourcing
business, the company has incurred step costs. These costs fall into two
categories. The first were one off or non-recurring costs of #547,000 associated
with the establishment of the US subsidiary and Niphix in Japan. In the Interim
results, the Directors considered that these costs should be treated as
exceptional, however they have since decided that these costs are additional
administrative expenses related to the overall plan to grow the business. The
second category was step costs of #775,000 related to the scaling up of the
company through a doubling of staff numbers and the new UK office. These costs
were not treated as exceptional in the Interim results.  All of these costs are
in addition to the exceptional costs for JRiCo.



Drug development services and client update

Fulcrum has used its expanded global resources and drug development expertise to
win new clients in Europe and in the USA in the final quarter. New client work
has included early phase development, Strategic Advisory Boards and Strategic
Services.



Fulcrum has deepened its services in a number of therapeutic areas with a
particular focus in oncology, CNS, anti-inflammatory and infectious diseases.
The company has continued to work successfully with the Medicines for Malaria
Venture ("MMV"), an internationally funded Public Private Partnership, to work
on a novel class of anti-malarials. Fulcrum has now also expanded its franchise
in this area into other related areas known as "Diseases of Neglect" where
Fulcrum is providing clients with new drug development solutions.



European Office

There has been a significant improvement in bid conversion in the final quarter
of this financial year. In addition, a good pipeline of client prospects has
been established, including the partnership deal described above. Overall the
lower than expected contract wins in the third quarter and the poor start to the
year have meant sales have been flat in Europe.



Japan Office

The Japanese business is recovering from the impact of the cancellation of a
major contract due to a change in our client's strategy and the slow conversion
of bids into contracts. Fulcrum has established a strong reputation within the
Japanese cancer community for excellence in clinical development.  There has
been a steady growth in contracts from the industrial sector and the Company's
reputation has now led to interest from the non-commercial research sector.
Typically this type of research, led by academic clinicians and funded by
government or sponsored foundations has not had an effective route to move into
the rigorously regulated area of human clinical studies.  Fulcrum has been able
to fill this need by building on its work with the Tokyo Collaborative Oncology
Group to investigate the most appropriate combination chemotherapy for the
treatment of Non-Small Cell Lung Cancer. Encouragingly contracts to provide data
management have also been won by Niphix, Fulcrum's newly formed clinical
research organisation.



US Office

In its first full year, Fulcrum Pharma Development Inc. has achieved critical
mass in North Carolina and has now established a regional office in Boston. The
US group has been initially structured to meet the needs of Biotech and emerging
companies and has won a number of small preclinical and manufacturing contracts.
Some of these are now leading to programmes  where the full "Fulcrum Effect" can
add value to our clients and their products i.e. increased productivity by
reducing cost, shortened development time, reduced dependence on fixed resources
and access to experienced global development skills.



Cross-selling

The strategy of cross-selling between EU, USA and Japan has been a feature of
the Group's business since Fulcrum first established itself in Japan.
Unfortunately at the start of this year one of our European clients altered its
strategy in Japan and cancelled a major contract. This has had significant
impact on the current year's sales. However prospects are again improving. The
Japan office has been successful in winning contracts to manage technology
transfer from Japan to the US and to conduct programme work in EU for Japanese
clients



Partnerships strategy

Fulcrum has established a new subsidiary called JRiCo Ventures Ltd (JRiCo) and
is providing the initial support required to secure funding prior to the
spin-out of JRiCo as a stand-alone division or company. JRiCo will obtain
development and marketing rights in Japan for oncology products that are already
marketed or in late stage development in Europe and the United States. It is
intended that Fulcrum will then provide drug development services to JRiCo
through a Preferred Supplier Arrangement or partnership, employing the
specialist development expertise of FPKK and Niphix to obtain marketing
authorisation for the products in Japan. During the period of incubation within
Fulcrum, JRiCo is focused on acquiring a balanced portfolio of products,
consisting of both primary and supportive therapies.



By creating this new company to address a specific opportunity in Japan, Fulcrum
intends to increase the demand for the specialist services of FPKK and Niphix,
and to have some share of the increased value of the products as they obtain
market authorisation in Japan.



Fulcrum has also focussed on establishing "partnership" arrangements directly
with clients. Such partnerships take a significant amount of time to put in
place, however, the first contract of this type has been signed with an emerging
European Pharma Company. This contract envisages a long term relationship where
Fulcrum will provide multiple resources and expertise. This relationship enables
better planning and predictability of revenues and allows both parties to
benefit from efficiencies and continual improvement. The Directors believe this
strategy will yield future benefits plus ensure



Fulcrum provides excellent service through constant close contact with its
customers.



Board changes

In the current year, the Board has been undergoing restructuring to meet the
future needs of the Fulcrum Group. On 7th May 2003 Fulcrum was delighted to
announce the appointment of Dr Michael Carter as a non-Executive Director. This
appointment strengthens the Board for the future and adds important skill sets
and experience that have been gained from a range of directorship roles in start
up Pharma companies in Europe and the US, a venture partner role with Schroder
Ventures Life Sciences and through commercial roles in big Pharma.



In addition Dr Robert Miller and Dr Gareth Walters intend to discontinue their
service on the Board as from the company's next Annual General Meeting in
December 2003, having served as Executive Directors since the company was
founded in September 1999. Dr Miller and Dr Walters will continue to perform key
roles on the Executive Committee as Medical Director and Director of Regulatory
Affairs and Knowledge Management. The Board would like to thank them for their
important contributions to the company.



Future Strategy

Fulcrum attracts and retains highly experienced individuals so that the quality
of its services can be continuously improved. The cornerstones of the company's
strategy remain:



1.  Scaling up of the European operation to win and provide services for
    more clients.

2.  Expansion of the global business development and service capacity of the
    Group through the office in the US and by growing our business in Japan.

3.  Accessing portfolios of contracts from clients through a partnership
    strategy.

4.  Providing new products in the development process in the EU, US and
    Japan



Prospects

With improving market conditions and Fulcrum's growth platform, the group can
look forward to the coming year with confidence. However the Board recognises
that the business environment is still in the early phases of recovery in
Europe.  Fulcrum will continue to focus on adding value for its customers and
providing best-in-class expertise and resources.




Professor Sir Charles F George                        Dr Jon P Court
Chairman                                              Chief Executive Officer



20 November 2003

Consolidated profit and loss account for the year ended 31 August 2003
(unaudited)


                               Year ended 31 August 2003             Year ended 31 August 2002

                     Note       Before   Exceptional                  Before    Exceptional
                           exceptional         items             exceptional          items
                                 items      (Note 2)      Total        items       (Note 2)    Total
                                 #'000         #'000      #'000        #'000          #'000    #'000        
                                                                                          
Turnover                         7,809             -      7,809         5,742             -    5,742
Cost of sales                  (5,554)             -    (5,554)       (3,808)           554  (3,254)
Gross profit                     2,255             -      2,255         1,934           554    2,488
Selling expenses                 (513)             -      (513)         (275)           185     (90)
Administrative                 (2,424)             -    (2,424)         (817)           196    (621)
expenses
Exceptional            2             -         (383)      (383)             -         (181)    (181)
administrative
expenses
Total                          (2,424)         (383)    (2,807)         (817)            15    (802)
administrative
expenses
                                 

Operating (loss)/                (682)         (383)    (1,065)           842           754    1,596
profit
Interest receivable                120             -        120            75             -       75
and similar income
Interest payable                   (2)             -        (2)             -             -        -
and similar charges
(Loss)/profit on                 (564)         (383)      (947)           917           754    1,671
ordinary activities
before taxation
Tax on (loss)/         3           195             -        195         (286)            55    (231)
profit on ordinary
activities
(Loss)/Profit on                 (369)         (383)      (752)           631           809    1,440
ordinary activities
after taxation
Dividends              4         (244)             -      (244)         (123)             -    (123)
(Loss)/profit for                (613)         (383)      (996)           508           809    1,317
the year
transferred to
reserves


(Loss)/Earnings per    5
share (pence) )
   Basic                                                (0.62p)                                1.44p
   Diluted                                              (0.62p)                                1.42p
   Adjusted basic              (0.30p)                                  0.63p
   Adjusted diluted            (0.30p)                                  0.62p



Statement of Total Group Recognised Gains and Losses
For the year ended 31 August 2003

                                                                  Note          2003            2002
                                                                               #'000           #'000
(Loss)/profit on ordinary activities after taxation                            (752)           1,440
Exchange adjustments offset in reserves                                            5            (10)
Total recognised gains and losses since last annual                            (747)           1,430
report



Consolidated balance sheet
as at 31 August 2003 (unaudited)

                                                                                  Note 2003           2002
                                                                                      #'000          #'000
Fixed assets
Tangible assets                                                                         541             24
Investments                                                                              53             53
                                                                                        594             77
Current assets
Debtors                                                                               2,930          1,982
Short term investments                                                                2,825          4,520
Cash at bank and in hand                                                                771            582
                                                                                      6,526          7,084
Creditors: amounts falling due within one year                                      (2,075)        (1,249)
Net current assets                                                                    4,451          5,835
Total assets less current liabilities                                                 5,045          5,912
Creditors: amounts falling due after more than one year                                (86)              -
Provisions for liabilities and charges                                                 (43)            (5)
                                                                                      4,916          5,907
Capital and reserves
Called up share capital                                                               1,219          1,219
Share premium account                                                                 4,370          4,370
Merger reserve                                                                        (454)          (454)
Profit and loss account                                                               (219)            772
Equity shareholders' funds                                                            4,916          5,907



Consolidated cash flow statement
for the year ended 31 August 2003 (unaudited)

                                                                        Note 2003           2002
                                                                             #'000          #'000

Net cash (outflow)/inflow from operating activities                        6          (691)            228
Returns on investment and servicing of finance
Interest received                                                                       120             75
Interest payable                                                                        (2)
Net cash outflow from returns on investments and service of                             118             75
financing
Taxation
Corporation Tax                                                                       (209)          (145)
Capital expenditure and financial investment
Purchase of tangible fixed assets                                                     (614)           (23)
Dividends
Equity dividends paid to shareholders                                      4          (244)          (123)
Net cash (outflow)/inflow before management of liquid resources                     (1,640)             12
and financing
Management of liquid resources
Decrease/(increase) in short term investments                                         1,695         (4520)
Financing
Issue of ordinary share capital                                                           -          3,250
Share issue costs                                                                         -          (140)
New finance leases                                                                       75              -
Bank loan received                                                                       75              -
Capital element of finance lease payments                                               (8)              -
Bank loan repayments                                                                    (8)              -
                                                                                        134          3,110
Increase/(decrease) in cash                                                6            189        (1,398)



Reconciliation of net cash flow to movement in net funds
                                                                                          2003          2002
                                                                                         #'000         #'000

Increase/(decrease) in cash                                                                189       (1,398)
(Increase) in bank loans                                                                  (67)             -
Cash flow from (decrease)/increase in short term investments                           (1,695)         4,520
(Increase) in finance leases                                                              (67)             -
Change in net funds from cash flows                                                    (1,640)         3,122
Net funds at 1 September 2002                                                            5,102         1,980
Net funds at 31 August 2003                                                              3,462         5,102



1          Financial Information

The results for the year ended 31 August 2003 are unaudited and do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985.  They have been drawn up using accounting policies and principles
consistent with those applied in the preparation of the audited accounts for the
year ended 31 August 2002.  The comparative information contained in the report
for the year ended 31 August 2002 does not constitute the statutory accounts for
the financial period.  Those accounts have been reported on by the Company's
Auditors, PricewaterhouseCoopers, 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.



2          Exceptional items

The Group has reported a loss before tax and exceptional items of #564,000
(2002: profit of #917,000).

As set out in the paragraphs below, the group has recorded an exceptional charge
of #383,000 (2002: #181,000).  In 2002 the Group recorded an exceptional credit
of #935,000.

a)         Exceptional charge of #383,000 (2002 : #181,000)

The exceptional charge of #383,000 to administrative expenses represents the
costs of a new subsidiary, JRiCo Ventures Limited, which will in-licence rights
to mid-to-late clinical stage oncology products and develop them.  The charge
for 2002 of #181,000 represents the set up and related costs for the group's new
subsidiary in the USA.


                                                                                    2003              2002

                                                                                   #'000             #'000
Administrative expenses                                                              383               181



b)         Exceptional credit of #935,000 in the prior year

Fulcrum acquired the share capital of Fulcrum Pharma Developments Ltd (FPD Ltd)
in March 2000 by means of a share for share exchange. Due to uncertainties
regarding the valuation of FPD Ltd, it was agreed between the company and the
vendors that additional shares would be issued by the company by way of deferred
consideration, the number of such shares depending on the profits of the company
in the year ending 31 August 2001. Although the directors believed that the
substance of this arrangement was deferred consideration, they received advice
that the appropriate accounting treatment was to charge the profit and loss
account in the year ended 31 August 2001 with the fair value of the additional
shares to be issued (#950,000). This charge was reversed in the year to 31
August 2002.



Consequently, there is an exceptional credit in the year to 31 August 2002. The
credit has been allocated to the same cost centres to which the exceptional
charge was allocated in 2001, as follows:



2          Exceptional items (cont.)


                                                                                    2003              2002

                                                                                   #'000             #'000
Cost of sales                                                                          -             (554)
Selling expenses                                                                       -             (185)
Administrative expenses                                                                -             (196)
                                                                                       -             (935)



As disclosed in the document dated 8 March 2000, produced by the Company in
connection with its admission to AIM and in the Company's annual accounts for
the year ended 31 August 2000, certain shareholders, including directors, of the
Company were entitled under a share exchange agreement dated 7 March 2000 to be
allotted up to a maximum of 56,666,666 additional 1p ordinary shares in the
Company by reference to the consolidated profits before tax of the Group for the
twelve months ended 31 August 2001.  Based on the profit before tax for that
year, of #546,000, the Company issued 31,666,666 additional ordinary shares for
no cash consideration on 11 June 2002.



3          Tax on (loss)/profit on ordinary activities
                                                                                         2003          2002
                                                                                        #'000         #'000
Current taxation
UK Corporation tax at 30%                                                               (190)           241
Adjustment in respect of prior period                                                    (43)           (5)
                                                                                        (233)           236
Deferred taxation
Origination and reversal of timing differences                                             38           (5)
                                                                                        (195)           231



4          Dividends

An interim dividend of #244,000 (2002: #123,000), representing 0.2p per share
(2002:  0.2p per share), was declared and paid during the year. No final
dividend has been proposed (2002: #nil).



5          Earnings per share

The basic earnings per ordinary share is based on the group's loss for the year
of #752,000 (2002: profit of #1,440,000) divided by the weighted average number
of ordinary shares in issue, excluding those shares held by the Employee Share
Ownership Plan ("ESOP"), which are treated as cancelled.



In 2003, the number of shares used in the calculation of diluted earnings per
share was the same as that used in the calculation of basic earnings per share
as the effect of options and shares to be issued was anti-dilutive because the
Group incurred a loss during the year.



Adjusted basic earnings per ordinary share is based on the Group's loss before
exceptional items of #369,000 (2002: profit of #631,000), divided by the
weighted average number of ordinary shares in issue, excluding those shares held
by the ESOP, which are treated as cancelled.


                                                                                     2003          2002

                                                                                   Number        Number

Weighted average number of shares for basis EPS                               121,401,451    99,846,929
Dilutive potential ordinary shares:
  - employee share options                                                              -     1,680,999
Weighted average number of shares for fully diluted EPS                       121,401,451   101,527,928



6          Notes to the statement of cash flow

Reconciliation of the operating (loss)/profit to net cash (outflow)/inflow from
operating activities:


                                                                                         2003          2002
                                                                                        #'000         #'000

Operating (loss)/profit                                                               (1,065)         1,596
Depreciation                                                                               97            41
Exchange gain/(loss)                                                                        4          (10)
Non cash exceptional item                                                                   -         (935)
(Increase)/decrease in debtors                                                          (740)         (298)
Increase/(decrease) in creditors                                                        1,013         (166)
Net cash (outflow)/inflow from operating activities                                     (691)           228



6          Notes to the statement of cash flow (cont.)

Analysis of net funds

                                                                    As at                           As at
                                                              1 September                       31 August
                                                                     2002        Cashflow            2003
                                                                    #'000           #'000           #'000

Cash at bank and in hand                                              582             189             771
Bank loan                                                               -            (67)            (67)
Short term investment                                               4,520         (1,695)           2,825
Finance leases                                                          -            (67)            (67)
                                                                    5,102         (1,640)           3,462



7          Copies of Report and Accounts

Copies of the Report and Accounts are being sent to the shareholders and will be
available to the public at the registered office of Fulcrum Pharma plc, 5th
Floor, Kodak House, Station Road, Hemel Hempstead, Hertfordshire, HP1 1JY.


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