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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Structured Product Merrill Lynch Dow Jones Euro Stoxx 50 Index Mitts | NYSE:MLB | NYSE | Ordinary Share |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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| 0.00 | 0.00% | 9.97 | 0.00 | 01:00:00 |
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RNS Number:7953M
M.L. Laboratories PLC
26 June 2003
Embargoed until 0700 26th June 2003
ML Laboratories PLC
Interim Results for the Six Months Ended 31st March 2003
- Further significant progress with divestment of non-core
assets - disposal of Icodextrin manufacturing plant and sale of
five million shares in Cobra Biomanufacturing PLC, the Group's
former biological manufacturing business, generate net cash
proceeds of #9.0M. Total gross sum realised to date from
divestment programme now in excess of #13.5M
- Downsizing of research activities completed on schedule -
decision to concentrate pre-clinical activities only on products
and technologies with the potential to produce income in the
relatively near term reduces research department headcount by 50%
- Further commercial success - Innovata Biomed, the Group's
respiratory drug delivery business, grants Otsuka Pharmaceutical
Co. Ltd., a leading Japanese healthcare business, an exclusive
licence to deliver Japan's market leading asthma treatment,
Meptin, in IB's Clickhaler product in Japan and Spain
- Continued clinical and regulatory progress - key events
include:
- Baxter Healthcare launches Extraneal, the Group's dialysis
solution, in the US in the period and launch in Japan should
follow later this year, following receipt of marketing approval
in the first half
- Analysis of interim data from pivotal US clinical study of
Adept post-operative adhesion reduction product now underway -
study to complete in Q3 2004
- Application for European marketing authorisation for
Formoterol Clickhaler filed in November 2002 - market launch
anticipated in first half of 2004
- Good progress made with compiling application for European
Marketing authorisation for Budesonide Clickhaler - filing
anticipated in Q4 2003 - launch anticipated in second half 2004
- Phase I study of novel compound for the treatment of
hyperphosphatemia, being developed in collaboration with INEOS
Silicas, confirms the indication of efficacy seen in pre-clinical
studies - Phase II expected to commence in Q4 2003
Stuart Sim, Chairman, commented: "Following a period of
significant restructuring activity I believe we have now
successfully repositioned the Group and as a result we are now a
much more streamlined organisation with a clear focus on
developing our portfolio of pharmaceutical products and
technologies - all of which are capable of generating income in
the relatively near term.
"We consider that the refocused Group is capable of meeting both
its short term and long term objectives. In the short term, by
creating a business of exciting potential with established income
streams, capable of achieving profitability in the near term we
believe we can meet the criteria of investors in the sector and
in the long term we believe the Group is now positioned to fulfil
its objective of delivering significant value to shareholders."
Enquiries:
ML Laboratories PLC (26/06/03) 020 7067 0700
Peter Shennan, Chief Operating Officer (Thereafter) 01925 844 700
Stuart Sim, Executive Chairman
Weber Shandwick Square Mile 020 7067 0700
Kevin Smith/Cass Helstrip
Embargoed until 0700 26th June 2003
ML Laboratories PLC
Interim Results for the Six Months Ended 31st March 2003
Chairman's Statement
During the six months to 31st March 2003 and the subsequent period
to date the Group has continued to divest non-core activities and
to progress the development and commercialisation of our portfolio
of pharmaceutical products and technologies, which remains our
primary objective.
Following a period of significant restructuring activity I believe
we have now successfully repositioned the Group and as a result we
are now a much more streamlined organisation with a clear focus on
developing our portfolio of pharmaceutical products and
technologies all of which are capable of generating income in the
relatively near term. Our reduced cost base is partly supported
by income streams from products and technologies we have already
successfully developed and licensed to other pharmaceutical
companies and which should both increase as markets are penetrated
and expand as new licence agreements are completed.
Further successful divestments
The divestment programme, which is fundamental to ensuring that we
remain focussed on and generate essential funding for our
development programme, has progressed well in the period.
In April following approval by shareholders at EGM, we completed
the disposal of our remaining specialised manufacturing business,
the Icodextrin manufacturing business located in Liverpool. The
gross consideration of #6.5M, plus the value of stock, produced
net proceeds of #5.1M after expenses and the settlement of related
obligations, principally finance leases and the repurchase of Paul
Capital's entitlement under the terms of our agreement. Paul
Capital continues to be entitled to receive a proportion of ML's
royalty income generated by Adept and Extraneal.
The turnover and profit before tax attributable to the Icodextrin
manufacturing business in the previous financial year to 30th
September 2002 were #2866K and #330K respectively and the net
assets at that date were #1561K. We therefore consider the
purchase consideration achieved for the business represented full
value. The results of the Icodextrin manufacturing business in
the period under review have been included in discontinued
activities and the profit on the disposal will be recorded in the
second half of the financial year.
In my last report I reaffirmed that it was our intention to
realise over time our 46% shareholding in Cobra Biomanufacturing
PLC ("CBM") our former biological manufacturing business, which we
divested in June 2002 by flotation on AIM.
As is usual in such circumstances our shareholding was subject to
a 'lock-in' arrangement which placed restrictions on the timing
and quantum of any disposal of the shares. A placing and open
offer announced by CBM in May presented us with the opportunity to
reduce our holding earlier than originally anticipated and realise
additional funds for the Group. Consequently we disposed of
approximately 85% of our holding, raising #4M before expenses. We
have retained a holding of 1 million CBM shares being
approximately 5% of its issued share capital, which is not subject
to any lock-in arrangement.
As we divested of CBM in the previous financial year its results
are included in discontinued activities in the comparative periods
only.
The above transactions bring the total gross sum realised to date
from the divestment of non-core manufacturing businesses to in
excess of #13.5M which has both improved our liquidity position
and relieved the Group from the requirement to incur the
significant capital expenditure necessary to further develop
those businesses.
We are continuing to examine options for the disposal of other non-
core assets.
Research refocusing completed
In my last report I informed you that we had determined that we
would defer research into those of our gene therapy technologies
that were not producing revenue or were considered unlikely to do
so in the near term, which would result in the significant
downsizing of our research activities. I can advise you that the
downsizing exercise was completed in February and has resulted in
a reduction in research department headcount of circa 50% and a
consequent reduction in both personnel costs and consumables. Our
pre-clinical activities are now focused on products and
technologies with the potential to produce income in the
relatively near term.
Further commercial success
In March we were pleased to announce that our respiratory drug
delivery subsidiary, Innovata Biomed ("IB") had signed an
agreement granting Otsuka Pharmaceutical Co. Ltd., a leading
Japanese healthcare company, an exclusive licence to deliver
Japan's market leading asthma treatment, Meptin, in IB's
Clickhaler in Japan and Spain. In consideration IB will receive
milestone payments and will supply inhalers to Otsuka. We
consider that this agreement adds further accreditation to our
Clickhaler platform and is an endorsement of the strength of this
fully industrialised product.
Continued clinical and regulatory achievements
The principal achievements in the period were -
- Extraneal
Baxter Healthcare, the worldwide licensee of our dialysis solution
was granted marketing approval in Japan in April which we anticipate
will enable the product to be launched in that country later
this year. This follows the launch of the product in the US in
April and both offer the prospect of significant royalty income.
- Adept
The important US pivotal study has passed the interim stage and
the analysis of the data up to that point is underway and should
be completed next quarter. The study should complete in Q3 2004.
- Formoterol Clickhaler
The application for European Marketing authorisation was filed in
November 2002 with launch anticipated in the first half of 2004.
- Budesonide Clickhaler
The process of compiling the dossier for the application for
European Marketing authorisation was commenced with filing anticipated
in Q4 2003 and launch anticipated in the second half of 2004.
- Phosphate Binder
The Phase I clinical study of the novel compound for the treatment
of hyperphosphataemia in kidney failure patients, which we are
developing in collaboration with INEOS Silicas, has been completed
and has confirmed the indication of the efficacy of the product
seen from the results of the pre-clinical studies. Together we
are currently finalising plans for the initiation of Phase II
studies which we expect to commence in Q4 2003.
Funding
The projected cash flow of the group includes the receipt of
significant milestone income.
Historically we have demonstrated that we are able to generate
milestone receipts from licence agreements and we anticipate we
will continue to able to do so in the foreseeable future.
Consequently, we have a reasonable expectation that the Group will
have sufficient working capital for its present requirements.
However, given the difficulty in predicting accurately the timing
and amount of future milestone payments we will continue to keep
the adequacy of our working capital under review.
Prospects
We consider that the refocused Group is capable of meeting both
its short term and long term objectives. In the short term, by
creating a business of exciting potential with established income
streams, capable of achieving profitability in the near term we
believe we can meet the criteria of investors in the sector and in
the long term we believe the Group is now positioned to fulfil its
objective of delivering significant value to shareholders.
S.W. Sim
CHAIRMAN
26th June 2003
Operational Review
The Group's activities are organised into two principal
operations - ML Pharmaceuticals, a biopharmaceutical product
development business, and Innovata Biomed, the Group's
respiratory subsidiary.
A summary of the key product development events for each business
in the first half follows below.
ML PHARMACEUTICALS
EXTRANEAL - an Icodextrin solution for use in Peritoneal Dialysis
Icodextrin solution is used in peritoneal dialysis (PD) for the
treatment of renal failure patients. ML holds patents over
Icodextrin, the active ingredient, in all major world markets.
Extraneal received US marketing approval on 23rd December 2002
and was launched in that major market in April 2003. Japanese
approval was received in April 2003 and we anticipate launch in
Q4 2003.
Sales of Extraneal in the US and Japanese markets are expected to
have a significant impact on ML's royalty income.
ADEPT - an Icodextrin solution for the reduction of post-
operative adhesions
Adhesions are a serious and frequent complication following
abdominal and gynaecological surgery and are expensive to treat,
often requiring further surgery and hospitalisation. ADEPT
offers significant advantages over competing products as it is an
easy to use, low viscosity solution which can be delivered via a
laparoscope in minimally invasive (keyhole) surgery and is
readily incorporated into routine surgical procedures.
Furthermore ADEPT is significantly less expensive than other
products.
Clinical development of ADEPT has been concentrated in the US
where we are carrying out a Phase III clinical trial in sixteen
hospital centres to determine efficacy in reducing the incidence
of post-operative adhesions following laparoscopic gynaecological
surgery. An interim analysis of the first set of completed
patients is underway conducted in accordance with a strict
protocol approved by the US FDA and will be reviewed by an
independent data monitoring committee in the US. The purpose of
the analysis is to establish the efficacy and safety of the
product. The outcome of the interim analysis is anticipated in
Q3 2003 and we anticipate the full trial will be completed in Q3
2004.
We anticipate appointing a licensee for the US market following a
successful outcome to the US trial and we are in discussion with
potential licensees for the Japanese and other Asian markets.
We consider it is likely that Japanese marketing approval will be
facilitated by data generated by our US study.
EMMELLE - an Icodextrin based intra-vaginal gel to prevent AIDS
Transfer of virus during sexual intercourse is the major cause of
infection of women by HIV, the virus which causes AIDS, and the
availability of products such as EMMELLE, which is a self-
administered product, would put prevention in their hands.
The low probability of development of effective vaccines has
increased the public health need for rapid development of
products such as EMMELLE which could limit the spread of HIV
disease in developing countries and at the same time fulfil the
potential requirement for products for personal protection in
developed markets.
Emmelle gel is one of only two late stage products selected to be
evaluated in this regard in a large Phase III clinical trial to
be conducted in Africa under Medical Research Council supervision
and which is currently being planned.
In addition we are evaluating EMMELLE in the prevention of other
important sexually transmitted diseases and we will shortly
commence in vitro studies of its effectiveness in the prevention
of chlamydia infection.
Treatment of Hyperphosphataemia
Abnormally high and damaging levels of phosphate in the blood
occur when damaged kidneys are unable to rid the body of excess
phosphate absorbed from food. Patients suffering from end-stage
renal failure (ESRF) usually need to take a phosphate binding
product to prevent absorption of phosphate and reduce blood
concentrations. The novel compound we are co-developing with
INEOS Silicas has been shown in pre-clinical tests to have
substantial phosphate binding activity.
Furthermore the product does not contain aluminium or calcium
ions which could cause safety concerns in long term use and may
therefore also render it applicable for use in pre-dialysis renal
failure patients.
A Phase I study has now completed and has confirmed the
indication of the efficacy of the product seen in the pre-
clinical studies. The clinical development plans for Phase II
are currently being formulated.
This product meets our product selection criteria ideally as its
efficacy can be readily demonstrated in a relatively small number
of kidney failure patients which is a body of patients of whom we
gained considerable experience during the successful development
of our kidney dialysis solution.
We are pleased to be working with INEOS in developing their first
pharmaceutical compound and look forward to sharing in the
rewards of this exciting product which we consider is a
potentially significant entrant to this rapidly growing market
segment.
Gene Therapy Cancer Products
Our initial gene based cancer treatment, CTL102, has undergone
evaluation in patients suffering from head and neck, liver and
prostate cancer. This product delivers the gene for a bacterial
enzyme, nitroreductase, to cancer cells such that a separately
administered, relatively harmless drug, CB1954, will be activated
to kill the cancer cells.
We have recently demonstrated gene expression in prostate tumours
and applied to the authorities for permission to treat those
patients. We have determined that we will concentrate
exclusively on prostate tumours in the next phase of this study
as we are readily able to both deliver multiple injections to
those tumours and to monitor effect on tumour size by measuring
an established serum marker (prostate specific antigen, PSA).
We are hopeful that the novelty of the product, combined with the
delivery vehicle, will establish a marketable platform from which
gene therapy products can be developed by third party licensees
for the treatment of other tumours.
INNOVATA BIOMED
CLICKHALER - a fast-to-market dry powder inhaler for new asthma
therapies.
CLICKHALER is a proven, industrialised dry powder inhaler with
many established advantages over standard asthma inhalers.
CLICKHALER has been extensively studied and shown to be highly
acceptable to patients, regulators and potential licensees and is
already marketed with standard asthma therapies (salbutamol and
beclomethasone) in UK, Ireland and France.
In September 2002 we announced that we had entered into a licence
agreement with a major global pharmaceutical group for the rights
to market the two molecules budesonide and formoterol in
CLICKHALER in Europe and a number of other territories. This
Agreement should generate in total #10m in access fees and
milestones plus double digit royalties on future product sales.
In November 2002 the first application for marketing
authorisation for formoterol CLICKHALER in Europe was submitted
and we anticipate reaching the market though IB's licensee in
2004. The application for Budesonide CLICKHALER is currently
being compiled with filing anticipated Q4 2003 and launch
expected in the second half of 2004.
Negotiations were completed in March for the delivery of Otsuka
Pharmaceutical Company's established drug, Meptin, using IB's
CLICKHALER in Japan and Spain. This drug is already being sold
by Otsuka in a CFC metered dose inhaler format and they expect to
be able to commence substitution of sales of their existing
product with CLICKHALER once approval is granted by the Japanese
regulators.
C200 Device - building on the CLICKHALER technology
Patents have already been published on the C200 device which is a
novel adaptation of the proven dose-metering 'engine' of
CLICKHALER, whereby in the same device two drug reservoirs feed
two drug formulations to separate metering chambers from which
they are delivered to the patient in the same breath. The ability
to formulate the drugs separately permits optimisation of each
individually thereby offering the potential to overcome
significant formulation challenges. Innovata Biomed's growing
library of CLICKHALER-compatible formulations make this a low
risk, versatile and fast-to-market delivery option.
This advance in the core technology offering of IB presents an
opportunity to partner companies by providing a device which can
deliver either more or larger doses (thereby reducing cost to the
manufacturer and healthcare provider), or can deliver a novel
molecule in combination with an established drug to address the
rapidly growing inhalation market already worth over #6 billion
p.a. globally.
C200 is undergoing extensive device development utilising IB's
expert device development facility located in Tewkesbury.
Financial Review
The operating results of the Group for the period and comparative
periods have been analysed in the consolidated profit and loss
account between continuing activities and those discontinued as a
result of divestments, namely the Icodextrin and DNA
manufacturing businesses in April 2003 and June 2002 respectively
Turnover includes income from royalties and pharmaceutical
product sales - which are stated net of the entitlement of Paul
Capital Royalty Acquisition Fund ('PCRAF') where applicable - and
fee income from licensing evaluation and development agreements.
Total turnover in the period was #4.4m (2002: #9.2M) of which
#1.4m (2002: #2.0m) related to discontinued businesses. The
reduction was due principally to a decrease in licensing
evaluation and development fees, which are typically triggered by
regulatory or commercial events and as such are irregular in
timing and subject to substantial variation from one period to
another. Royalty income, which was adversely affected by
movements in the $/# exchange rate, was #1.0m (2002: #1.1m).
Pharmaceutical products sales were #1.7m (2002: #2.4m),
reflecting the discontinuation of the DNA manufacturing business.
The reduction in turnover resulted in a decrease in gross profit
to #2.7m (2002: #7.2m) again reflecting principally the reduction
in licensing evaluation and development fees.
Research and development expenditure at #5.2m (2002: #5.4m) was
at a similar level to the comparative period as were selling,
marketing and distribution costs of #0.2m (2002: #0.3m).
Administrative expenses were reduced to #4.3m (2002: #5.4m)
reflecting the discontinuation of the DNA manufacturing business
and reductions in the Group's cost base.
Other operating income of #6.1m (2002: #0.7m) includes the
release to profit and loss account of #5.0m of PCRAF funding
received during the year ended 30th September 2002, following the
satisfaction of an outstanding condition relating to its
potential repayment. The balance represents the release of the
relevant portion of the deferred element of funds received from
PCRAF in the year ending 30th September 2001 and which
specifically relates to the clinical development of Adept in the
US.
The operating loss was #0.9m net of a profit of #0.1m on the
discontinued activities (2002: loss of #3.2m inclusive of a loss
on discontinued activities of #0.5m), and after net interest
income the loss before tax was reduced to #0.9m (2002: #3.1m).
After R&D tax credits estimated to be receivable in respect of
the half year to 31st March 2003 of #0.2m (2002: nil) the loss
for the half-year after taxation was #0.7m (2002: #3.1m). This
represents a loss per share of 0.47p (2002: 1.94p).
Net assets at 31st March 2003 were #9.5m reduced from #10.2m at
30th September 2002 by the loss for the period.
Cash consumed in the half year by operations, capital expenditure
and net finance lease repayments, offset by net interest income,
amounted to #10.0m. This was offset by cash received in the
period from milestones, other similar receipts and R&D tax
credits totalling #3.9m resulting in a net cash outflow of #6.1m.
We ended the half-year with net cash balances of #3.2m compared
with #9.3m at 30th September 2002.
Since 31st March 2003 the sale of the Icodextrin manufacturing
business and the disposal of 5 million CBM shares have generated
net cash proceeds of #5.1m and #3.9m respectively.
P.J. Shennan
FINANCE DIRECTOR
26th June 2003
- Ends -
Enquiries:
ML Laboratories PLC (26/06/03) 020 7067 0700
Peter Shennan, Chief Operating Officer (Thereafter) 01925 844 700
Stuart Sim, Executive Chairman
Weber Shandwick Square Mile 020 7067 0700
Kevin Smith/Cass Helstrip
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the half year ended 31 March 2003
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
half year half year half year half year half year half year
NOTEs to to to to to to
31/3/2003 31/3/2003 31/3/2003 31/3/2002 31/3/2002 31/3/2002
Continuing Discontinued Total Continuing Discontinued Total
# # # # # #
Turnover 4 2,971,870 1,444,938 4,416,808 7,230,403 1,999,203 9,229,606
Cost of sales (419,976) (1,299,921) (1,719,897) (526,995) (1,503,362) (2,030,357)
_________________________________________________________________________________
Gross profit 2,551,894 145,017 2,696,911 6,703,408 495,841 7,199,249
Research and
development
expenditure (5,200,143) - (5,200,143) (4,900,245) (504,864) (5,405,109)
Selling, marketing and (235,390) (12,393) (247,783) (245,022) (267,469)
distribution costs (22,447)
Administrative
expenses (4,257,932) - (4,257,932) (4,915,378) (473,341) (5,388,719)
Other operating
income 5 6,092,941 - 6,092,941 707,450 - 707,450
-
_________________________________________________________________________________
Operating
(loss)/profit (1,048,630) 132,624 (916,006) (2,649,787) (504,811) (3,154,598)
======================== ===========================
Exceptional
profit 3 - -
_________________________________________________________________________________
Loss before
interest (916,006) (3,154,598)
Interest
receivable 130,802 217,056
Interest payable (77,245) (129,184)
_________________________________________________________________________________
Loss on ordinary
activities
before taxation (862,449) (3,066,726)
Taxation 6 113,826 -
_________________________________________________________________________________
Loss on ordinary
activities
after taxation (748,623) (3,066,726)
Minority interests - -
_________________________________________________________________________________
Loss for period (748,623) (3,066,726)
_________________________________________________________________________________
Loss per
ordinary share 7 (0.47p) (1.94p)
_________________________________________________________________________________
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the half year ended 31 March 2003 (continued)
Audited Audited Audited
full year full year full year
to to to
NOTES 30/9/2002 30/9/2002 30/9/2002
Continuing Discontinued Total
# # #
Turnover 4 9,639,471 3,610,345 13,249,816
Cost of sales (1,592,053) (2,837,635) (4,429,688)
____________________________________________
Gross profit 8,047,418 772,710 8,820,128
Research and development
expenditure (10,092,810) (752,360) (10,845,170)
Selling, marketing and
distribution costs (515,184) (51,485) (566,669)
Administrative expenses (10,663,486) (697,295) (11,360,781)
Other operating income 5 5,623,796 - 5,623,796
____________________________________________
Operating
(loss)/profit
(7,600,266) (728,430) (8,328,696)
===========================
Exceptional profit 3 2,873,899
____________________________________________
Loss before interest (5,454,797)
Interest receivable 431,926
Interest payable (238,066)
____________________________________________
Loss on ordinary activities
before taxation (5,260,937)
Taxation 6 2,837,891
____________________________________________
Loss on ordinary activities
after taxation (2,423,046)
Minority interests -
____________________________________________
Loss for period (2,423,046)
____________________________________________
Loss per ordinary share 7 (1.53p)
____________________________________________
ML Laboratories PLC
CONSOLIDATED BALANCE SHEET
at 31 March 2003
Unaudited Unaudited Audited
half year half year full year
NOTES at 31/03/2003 at 31/03/2002 at 30/09/2002
# # #
Fixed Assets
Intangible assets 3,400,458 5,328,961 3,500,471
Tangible assets 2,975,666 4,529,151 3,286,839
Investments 2,859,331 - 2,859,331
________________________________________
9,235,455 9,858,112 9,646,641
________________________________________
Current Assets
Stocks 1,489,829 1,747,762 1,217,388
Debtors 6,788,015 7,064,426 8,343,840
Investments 1,039 3,560 1,039
Cash and short term deposits 3,917,820 10,932,893 9,748,370
________________________________________
12,196,703 19,748,641 19,310,637
Current Liabilities
Creditors: amounts falling
due within one year (9,788,594) (14,969,272) (15,118,568)
________________________________________
Net Current Assets 2,408,109 4,779,369 4,192,069
________________________________________
Total Assets less
Current Liabilities 11,643,564 14,637,481 13,838,710
Creditors: amounts
falling due after
more than one year (414,102) (1,295,789) (767,684)
________________________________________
11,229,462 13,341,692 13,071,026
Deferred income (1,761,300) (3,768,587) (2,854,241)
________________________________________
Net Assets 9,468,162 9,573,105 10,216,785
========================================
Capital and Reserves
Share capital 8 1,581,686 1,581,686 1,581,686
Share premium account 8 36,502,990 36,502,990 36,502,990
Merger reserve 8 8,335,897 8,335,897 8,335,897
Profit and loss account 8 (36,952,411) (36,847,468) (36,203,788)
________________________________________
Equity Shareholders'
Funds 8 9,468,162 9,573,105 10,216,785
Minority interests - - -
________________________________________
9,468,162 9,573,105 10,216,785
========================================
ML Laboratories PLC
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 March 2003
Unaudited Unaudited Audited
half year half year full year
NOTES to to to
31/3/2003 31/3/2002 30/9/2002
# # #
Net cash (outflow)/inflow from
operating activities 9 (6,318,742) 3,287,837 678,668
Returns on investments and
servicing of finance
Interest received 145,162 181,999 396,545
Interest paid (6,484) (8,548) (16,502)
Interest paid on finance leases (70,609) (122,639) (222,636)
_________________________________
Net cash inflow from returns on
investments and
servicing of finance 68,069 50,812 157,407
_________________________________
Taxation
UK Corporation tax recovered 921,603 - 787,315
_________________________________
Capital expenditure
Purchase of tangible fixed assets (371,825) (1,780,446)(2,534,650)
Disposal of fixed asset investment - 125,058 125,058
Receipts from sale of tangible
fixed assets 41,720 27,200 147,655
_________________________________
Net cash outflow for capital
expenditure (330,105) (1,628,188)(2,261,937)
_________________________________
Disposals
Deemed disposal of subsidiary undertaking
Post deemed disposal settlement
of overdraft - - 3,000,000
_________________________________
Net cash inflow from disposals - - 3,000,000
_________________________________
Net cash (outflow)/inflow before
management of liquid
resources and financing (5,659,175) 1,710,461 2,361,453
=================================
Management of liquid resources
Cash withdrawn from/(placed on)
short term deposits 5,832,000 (941,000) 243,000
_________________________________
Net cash inflow/(outflow) from
management of liquid resources 5,832,000 (941,000) 243,000
_________________________________
Financing
Capital element of finance lease
rental payments (627,379) (697,648)(1,658,229)
Lease finance acquired 194,853 759,872 1,105,234
Capital element of unsecured loan
payments (38,486) (31,122) (67,728)
Unsecured loan received - 38,550 38,550
_________________________________
(Decrease)/increase in debt and
lease financing 10 (471,012) 69,652 (582,173)
_________________________________
Net cash (outflow)/inflow from
financing (471,012) 69,652 (582,173)
_________________________________
_________________________________
(Decrease)/increase in net cash
in period 10 (298,187) 839,113 2,022,280
=================================
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the half year ended 31 March 2003
1.Basis of preparing the interim financial statements - going
concern
The interim financial statements have been prepared on a going
concern basis which is supported by the projected cash flow of
the Group. The projections include receipt of milestone and
similar income the Group anticipates will arise on the
commercialisation of its products and divestment proceeds arising
from the disposal of non-core assets. The Directors recognise
that the timing and amount of such receipts is not guaranteed and
that as a result the Group's financial position cannot be
certain. However, the Directors have a reasonable expectation
that the Group will have sufficient working capital for the
foreseeable future and consequently believe that it is
appropriate for the interim financial statements to be prepared
on a going concern basis. The interim financial statements do not
contain any adjustments that would arise if the interim financial
statements were not drawn up on a going concern basis. If
required these adjustments would be made to the balance sheet of
the Group to increase or reduce the balance sheet values of
assets to their recoverable amounts, to provide for further
liabilities that might arise and to reclassify fixed assets and
long term liabilities as current assets and liabilities.
2.Discontinued activities
On 15th April 2003 the Group completed the disposal of its
Icodextrin manufacturing business to Baxter Healthcare Limited.
The results of this business have been included in the Group's
consolidated profit and loss account for the half years ended
31st March 2003 and 31st March 2002 and for the year ended 30th
September 2002 as a discontinued activity. Further information on
this transaction is given in note 12, "Post balance sheet
events".
On 12th June 2002 the Group made a deemed disposal of the DNA
contract manufacturing business of Cobra Therapeutics Limited
("Cobra") through the flotation on AIM of Cobra Bio-Manufacturing
PLC ("CBM"). The results of this business have been included in
the Group's consolidated profit and loss account for the half
year ended 31st March 2002 and, up until the date of the deemed
disposal, the year ended 30th September 2002, as a discontinued
activity. On the flotation of CBM, the Group retained its
interests in CBM comprising six million shares and representing
approximately 46% of CBM's post-flotation issued share capital.
As explained further in note 12, "Post balance sheet events", on
29th May 2003 the Group sold five million of its holding of six
million CBM shares.
3.Exceptional profit on disposal
The exceptional profit of #2,873,899 in the year ended 30th
September 2002 arose on the deemed disposal of the DNA contract
manufacturing business, referred to in note 2,"Discontinued
activities".
4.Segmental analysis by class of business
The analysis by class of business of the Group's turnover,
research and development expenditure, other expenses, other
operating income, loss before taxation and net assets is set out
below:
Segmental reporting
Unaudited Research
half year and Other Loss
to 31st development Other operating before Net
March 2003 Turnover expenditure expenses income taxation assets
# # # # # #
Licensing, 1,072,450 - - - - -
evaluation
and
development
fees
Royalties 950,041 - - - - -
Product sales 1,698,505 - - - - -
_______________________________________________________________________________________
Total
pharmaceutical
activities 3,720,996 (5,146,300) (5,416,364) 6,092,941 (717,093) 33,692,730
Other
activities 695,812 (53,843) (809,248) - (145,356) (24,224,568)
_______________________________________________________________________________________
Total 4,416,808 (5,200,143) (6,225,612) 6,092,941 (862,449) 9,468,162
=======================================================================================
Unaudited Research
half year and Other Loss
to 31st development Other operating before Net
March 2002 Turnover expenditure expenses income taxation assets
# # # # # #
Licensing,
evaluation
and
development
fees 5,030,000 - - - - -
Royalties 1,097,166 - - - - -
Product sales 2,410,373 - - - - -
_______________________________________________________________________________________
Total
pharmaceutical
activities 8,537,539 (5,219,250) (6,387,835) 707,450 (2,282,818) 11,979,694
Other
activities 692,067 (185,859) (1,298,710) - (783,908) (2,406,589)
_______________________________________________________________________________________
Total 9,229,606 (5,405,109) (7,686,545) 707,450 (3,066,726) 9,573,105
=======================================================================================
Audited full Research
year to and Other Loss
30th September development Other operating before Net
2002 Turnover expenditure expenses income taxation assets
# # # # # #
Licensing,
evaluation
and development
fees 5,064,572 - - - - -
Royalties 2,104,208 - - - - -
Product sales 4,492,665 - - - - -
_______________________________________________________________________________________
Total
pharmaceutical
activities 11,661,445 (10,366,659) (13,510,750) 5,623,796 (3,537,639) 12,611,462
Other activities 1,588,371 (478,511) (2,846,388) - (1,723,298) (2,394,677)
_______________________________________________________________________________________
Total 13,249,816 (10,845,170) (16,357,138) 5,623,796 (5,260,937) 10,216,785
=======================================================================================
5.Other operating income
Other operating income includes the release to consolidated
profit and loss account of monies received from Paul Capital
Royalty Acquisition Fund ("PCRAF") as explained in more detail
below and amounts received and receivable in connection with the
termination or amendment of licence agreements with third
parties.
In July 2001 the Group entered into an Agreement ("the First
Agreement") with PCRAF under which PCRAF paid #17.5m and was to
receive a proportion of the royalty and revenue streams arising
from ADEPT and two other products in the period to 30th September
2010. Of the sum received from PCRAF under this Agreement,
#13,023,963 was treated as"Other operating income" in the year to
30th September 2001 and the balance of #4,476,037 was included in
the balance sheet at 30th September 2001 as deferred income as it
represented the balance outstanding at that date of our
obligation under the First Agreement to apply an agreed portion
of the funds received specifically to the clinical development of
ADEPT in the US market. Other operating income in the half years
to 31st March 2003, 31st March 2002 and the year to 30th
September 2002 includes respectively #1,092,941,#707,450 and
#1,621,796 in respect of the partial release of this deferred
income which will continue to be released to the consolidated
profit and loss account under "Other operating income" as the
remainder of our spending obligation is met.
In February 2002 a second transaction ("the Second Agreement")
with PCRAF was entered into whereby PCRAF provided a further #5m
for which it was to receive an increased proportion of the
royalty and revenue streams from two of the three products which
were the subject of the First Agreement. This transaction
included a condition whereby the Group might have been required
to repay the #5m in certain circumstances. As at 30th September
2002 this condition remained outstanding and accordingly this
amount was included in "Creditors : amounts falling due within one
year". Following the confirmation announced on 9th January 2003
that the outstanding condition had been satisfied, this amount
has been taken to consolidated profit and loss account as income
in the half year to 31st March 2003. While the risk relating to
that proportion of the future royalty and revenue streams
receivable by PCRAF under both the First and Second Agreements
has effectively been transferred to PCRAF, under certain
specified circumstances (including change of control of M.L.
Laboratories PLC, certain major corporate transactions, and
events of default material in the context of the PCRAF
transaction) PCRAF has the right to require the Group to purchase
PCRAF's interests in the royalty and income streams concerned for
a consideration calculated to give PCRAF an agreed minimum rate
of return. PCRAF's entitlement to participate in the revenue
stream from sales of Icodextrin to Baxter was re-purchased on the
disposal of the Icodextrin manufacturing business which was
completed on 15th April 2003, further information on which is
given in note 12, "Post balance sheet events".
6.Taxation
The current period tax credit represents R & D tax credits and
overseas withholding tax. There is no charge to corporation tax
during the period nor is there any provision required for
deferred taxation. Accumulated tax losses have not been
recognised as deferred tax assets as there is insufficient
certainty as to their future recoverability.
As at 31st March 2003, the total tax losses in Group companies
amounted to #45m (2002 #65.4m). These losses are available for
offset against future profits in the companies concerned, subject
to agreement with the Inland Revenue.
(a) Analysis of credit in period #
UK corporation tax - R & D tax credit
- current period 201,984
Overseas tax suffered (88,158)
________
113,826
________
(b) Factors affecting the tax credit
for the period
#
Loss on ordinary activities before
tax 862,449
________
Loss on ordinary activities at 30% 258,734
Effects of :
Carry forward of tax losses (45,625)
Amortisation of goodwill (30,034)
Expenses not deductible for tax
purposes (6,659)
Adjustment in respect of R & D tax
credits (819)
Effect of overseas tax suffered (61,771)
________
113,826
________
7.Loss per ordinary share
Unaudited Unaudited Audited
half year half year full
year
to to to
31/3/2003 31/3/2002 30/9/2002
# # #
Loss on ordinary activities
after taxation and minority
interests (748,623) (3,066,726) (2,423,046)
___________________________________
Average number of shares 158,168,563 158,168,563 158,168,563
___________________________________
Loss per ordinary share (0.47p) (1.94p) (1.53p)
___________________________________
The calculation of basic earnings per share is based on the
loss on ordinary activities after taxation and minority
interests and on 158,168,563 ordinary shares, weighted on a
time basis.
The effect of dilutive share options outstanding and not yet
exercised at 31st March 2003 would be to reduce the loss per
ordinary share.
8.Movement in capital and reserves
Share Share Merger Profit & Equity
capital premium reserve loss shareholders'
account account funds
The movement
in capital
and reserves
during the
period
was as
follows : # # # # #
At 1st October
2002 1,581,686 36,502,990 8,335,897 (36,203,788) 10,216,785
Loss for
period - - - (748,623) (748,623)
_______________________________________________________________________
At 31st March
2003 1,581,686 36,502,990 8,335,897 (36,952,411) 9,468,162
_______________________________________________________________________
9.Reconciliation of operating loss to net cash flow from
operating activities
Unaudited Unaudited Audited
half half full
year year year
to to to
31/3/2003 31/3/2002 30/9/2002
# # #
Operating loss (916,006) (3,154,598) (8,328,696)
Depreciation of tangible fixed assets 651,657 886,165 1,614,610
Amortisation of goodwill 100,013 148,027 272,047
Provision for impairment of
value of current asset
investments - - 2,521
Net profit on disposal of
tangible fixed assets (16,569) (15,610) (37,755)
(Increase)/decrease in stocks (272,441) 159,357 505,029
Decrease/(increase) in debtors 817,699 (164,713) (1,223,677)
(Decrease)/increase in creditors (5,590,154) 6,136,659 9,496,385
Decrease in deferred income (1,092,941) (707,450) (1,621,796)
___________________________________________________________________________
Net cash (outflow)/inflow from (6,318,742) 3,287,837 678,668
operating activities
___________________________________________________________________________
10.Reconciliation of net cash flow to movement in funds
Unaudited Unaudited Audited
half half full
year year year
to to to
31/3/200 31/3/2002 30/9/200
3 2
# # #
(Decrease)/increase in cash in
period (298,187) 839,113 2,022,280
Movement in short term
deposits (5,832,000) 941,000 (243,000)
Movement in borrowings 471,012 (69,652) 582,173
________________________________________________________________
Change in net funds resulting
from cash flows (5,659,175) 1,710,461 2,361,453
Finance leases transferred on
deemed disposal of CBM - - 296,629
________________________________________________________________
Movement in net funds (5,659,175) 1,710,461 2,658,082
Opening net funds 7,558,416 4,900,334 4,900,334
________________________________________________________________
Closing net funds 1,899,241 6,610,795 7,558,416
================================================================
11.Analysis of net funds
30/09/2002 Cash flow 31/03/2003
# # #
Cash at bank and in hand 370 1,450 1,820
Bank overdraft (448,013) (299,637) (747,650)
_______________________________________________________________
(447,643) (298,187) (745,830)
Short term deposits 9,748,000 (5,832,000) 3,916,000
Unsecured loans (133,039) 38,486 (94,553)
Finance leases due within
one year (895,306) 121,489 (773,817)
Finance leases due in more
than one year (713,596) 311,037 (402,559)
_______________________________________________________________
7,558,416 (5,659,175) 1,899,241
_______________________________________________________________
12.Post balance sheet events
On 15th April 2003 the Group completed the sale of its Icodextrin
manufacturing business to Baxter Healthcare Limited for a cash
consideration of #6.5m plus the valuation of stock as shown in a
completion statement. After the settlement of finance leases on
certain fixed assets included in the disposal and a payment to
PCRAF to re-purchase its entitlement to participate in the net
contribution generated by sales of Icodextrin to Baxter, the
proceeds of the disposal net of expenses are estimated at #5.1m.
The disposal will give rise to an exceptional profit estimated at
#4.1m in the consolidated profit and loss account for the year to
30th September 2003.
On 29th May 2003 the Group sold five million of its holding of
six million shares in CBM at a price of 80p per share. This
disposal generated proceeds net of commissions of #3.9m and will
give rise to an exceptional profit of approximately #1.5m in the
consolidated profit and loss account for the year to 30th
September 2003.
13. Preparation of interim financial statements
The interim financial statements have been prepared on the basis
of the accounting policies set out in the Group's 2002 statutory
accounts and are not audited. The foregoing financial information
does not amount to full accounts within the meaning of Section
240 of the Companies Act 1985 (as amended). The financial
information in respect of the year to 30th September 2002 has
been abridged from the full Group accounts, which included an
Auditors' report which, whilst unqualified, contained a
modification referring to uncertainty regarding going concern and
which have been delivered to the Registrar of Companies. The
Auditors' report did not contain a statement under either section
237(2) or section 237(3) of the Companies Act 1985.
14. Dividend
The Directors have not declared an interim dividend.
Copies of this interim report are being sent to all shareholders
and are also available to the public at the Company's registered
office, 17 Hanover Square, London, W1S 1HU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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