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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mereo Biopharma Group Plc | LSE:MPH | London | Ordinary Share | GB00BZ4G2K23 | ORD GBP0.003 (REG S) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 26.50 | 26.00 | 27.00 | 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
TIDMMPH
RNS Number : 3696N
Mereo BioPharma Group plc
08 August 2017
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Mereo BioPharma Group plc
("Mereo" or the "Company" or the "Group")
Unaudited interim results for the period ended 30 June 2017
Strong progress across all programmes, top line data for Acumapimod and BGS 649 expected within the next 6 months
London, 8 August 2017 - Mereo BioPharma Group plc (AIM: MPH), a clinical stage, UK-based, biopharmaceutical company focused on rare and specialty diseases, is pleased to announce its unaudited interim results for the six months ended 30 June 2017.
Operational highlights
BPS-804
-- Initiation of ASTEROID, a Phase 2b, potentially pivotal study of BPS-804 in 120 adult patients with the orphan disease osteogenesis imperfecta (OI), (brittle bone disease) in the US and Europe. Top-line data expected in mid-2018
-- Accepted onto the Adaptive Pathway process by the EMA -- Initiation of the paediatric programme expected towards the end of 2017
BGS-649
-- Expected completion of enrolment (268 patients) in the coming weeks, of a Phase 2b dose-confirmation study for the treatment of hypogonadotropic hypogonadism (HH) in obese men
-- Top-line data expected Q1 2018
-- Independent Data Monitoring Committee recommended in March the continuation of all three dosing arms following a blinded interim review of safety and efficacy data from 93 patients who had completed at least one month of treatment
-- Follow-on six-month Phase 2b safety extension study recruiting well with approximately 65-70% of patients opting to continue treatment
Acumapimod
-- Successful completion of enrolment of 282 patients into AETHER, a Phase 2 dose-ranging study for treatment of patients with acute exacerbations of COPD (AECOPD)
-- Top-line data expected Q4 2017
Corporate
-- Increased intellectual property protection across the portfolio, with new patent applications being pursued and allowance and grant of additional patents for all three products in the US, EU and elsewhere
-- Further strengthened operational team
o Richard Jones appointed CFO and Executive Director in January 2017
o Jerome Dauvergne appointed Head of Pharmaceutical Development in May 2017
o Additional hires in clinical development bring total current headcount to 28
-- Continued assessment of strong pipeline of additional new product opportunities in orphan and rare diseases from large pharmaceutical and large biotechnology companies
Financial highlights
-- Raised GBP15m (gross) via a placing of new shares.
o Subsequent conversion of GBP1.4 million of a loan note held by Novartis resulting in a balance of loan note as at 30 June 2017 of GBP2.3 million
-- Loss after tax of GBP22.7 million (2016: GBP14.7 million) or 34 pence per ordinary share (2016: 59 pence per ordinary share)
-- Net cash and investment balance of GBP56.6 million at 30 June 2017, includes a net cash movement of GBP3.0 million after net operating and investing outflows of GBP11.3 million and gross financing inflows of GBP14.3 million
-- Total development spend of GBP21.4 million (2016 GBP11.1 million) reflecting increased clinical development activity in the period, including the commencement of the Phase 2b study for BPS-804
-- New GBP20 million debt facility agreed with Silicon Valley Bank and Kreos Capital both having significant experience in the sector
o GBP10 million of this facility is expected to be drawn down shortly
o Funds received will increase operational and development flexibility
Dr Denise Scots-Knight, Chief Executive Officer of Mereo BioPharma Group plc commented:
"During the period we continued to make strong progress in the development of our portfolio and look forward to delivering the top-line data on our two Phase 2 studies for AECOPD and hypogonadotropic hypogonadism within the next six months. Our orphan candidate for OI is one of a small number of programmes that has been selected by the EMA for the Adaptive Pathway process. Through this we hope to accelerate the access of BPS-804 for patients in Europe. The phase 2b study in adult patients is recruiting and the paediatric study is expected to start at the end of the year. We also continue to seek and actively evaluate a number of opportunities in rare and orphan diseases to expand and further diversify our product portfolio. We remain focussed on building a leading commercial business in rare and orphan diseases."
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About Mereo
Mereo BioPharma is an innovative biopharma company established to address the development and financial challenges faced by an increasing number of large pharma and biotech companies. Mereo focuses on developing and optimising the value of novel medicines acquired from large pharma and biotech designed to address significant unmet medical needs in rare and specialty disease areas.
Mereo is comprised of a strong team with broad operational capabilities and the financial resources to conduct comprehensive clinical studies. The Company plans to build a rare and orphan commercial business combined with plans to partner products where appropriate.
Mereo's initial portfolio consists of three mid-late stage clinical assets that were acquired from Novartis in July 2015 each with proof of concept data in the indication that Mereo is now developing. BPS-804 is being developed for the treatment of osteogenesis imperfecta (brittle bone disease); acumapimod (BCT-197), is being developed to treat inflammation in patients with an AECOPD; and BGS-649 is a once-weekly oral novel therapy that restores the patient's own testosterone in men with hypogonadotropic hypogonadism. In H1 2016 the Company initiated a Phase 2 study with acumapimod and a Phase 2b study with BGS-649. Mereo recently announced commencement of the first potentially pivotal trial for BPS-804 and completion of enrolment of the acumapimod Phase 2 study. Additional product opportunities, from a range of large pharmaceutical and biotechnology companies, are under active evaluation and these are focussed on orphan and rare diseases.
Chairman and CEO's statement
Introduction
The Group's strategy is to build a portfolio of rare and orphan disease products acquired from pharmaceutical companies and to develop these through regulatory approval and subsequent commercialisation.
Products for use in orphan indications represent an attractive development and commercialisation opportunity for the Company, since they typically require smaller clinical trials and, due to the lack of existing treatments, can often be fast-tracked to the market. Development of orphan products often involves close co-ordination with patient organisations and a limited number of treatment sites allowing for relatively easy identification of the patient population and a small sales infrastructure.
For our speciality programmes the Group plans to partner or sell the products upon completion of additional clinical studies. This may be following dose-ranging optimisation for example a Phase 2 or Phase 2b or, in certain cases, following the Phase 3 studies required for product approval and registration.
We have made significant progress across all of our existing programmes in the first half of 2017. We also completed a successful fundraising specifically to expand the development of our orphan drug programme, BPS-804 for OI, in the paediatric population. The availability of this product to patients has potentially been accelerated in Europe following acceptance into the Adaptive Pathway process.
We are also continuing to review a range of opportunities from large pharmaceutical and biotechnology companies to expand our existing portfolio of assets, which is an important component of our business model.
Business Overview
BPS-804
BPS-804 is a treatment for OI, also known as brittle bone disease. We have made significant progress across regulatory, clinical and manufacturing operations with this product including initiating a potentially pivotal Phase I2b trial during the period, the ASTEROID study (www.asteroidstudy.com).
Following the grant of Orphan Drug Designation in the US and EU last year, BPS-804 was accepted into the European Medicine Agency's (EMA) Adaptive Pathways programme during the period. The adaptive pathway approach is part of the EMA's efforts to improve timely access for patients to new medicines through the use of biomarker driven studies, primarily in areas of high unmet medical need. Since being accepted into the Adaptive Pathway we have had a regular dialogue with the EMA and this will continue as we seek a conditional marketing approval in Europe based on the outcome of the adult Phase 2b study.
The ASTEROID study is in 120 adult patients with OI with a novel bone scanning biomarker, using High Resolution peripheral Quantitative Computed Tomography (HRpQCT) to measure the primary end point. We anticipate announcing the primary top line data during 2018, which will be based on six months treatment. The patients in the study will continue to be treated for an additional six months with a further HRpQCT measurement taken following 12 month's total treatment.
We will submit a Paediatric Investigator Plan (PIP) to the Paediatric committee of the European Medicines Agency (PDCO), and plan to commence the paediatric study around the end of 2017.
BGS-649
BGS-649 is a once a week oral treatment for hypogonadotropic hypogonadism (HH) in obese men, that restores a patient's own testosterone. It is a novel aromatase inhibitor that inhibits conversion of the patients' own testosterone to oestradiol, thereby increasing testosterone levels. We initiated a Phase 2b dose optimisation study in 268 patients during the first six months of 2016. Enrolment is nearing completion with top-line data expected in early 2018, a slight delay from our original expectations of Q4 2017. A six-month extension study in 120 patients to confirm the safety of long term treatment is well underway and is enrolling well with approximately 65-70% of patients opting to continue treatment.
Earlier this year we announced a positive outcome to a blinded interim review of the safety and efficacy of the Phase 2b study based on 93 patients who had received at least one month's treatment. The Independent Data Monitoring Committee (IDMC) recommended to continue with all three dosing arms.
BGS-649 is highly differentiated from the current products on the market (and those in development) which are based on treatment with exogenous testosterone. Whilst we do not anticipate Mereo commercialising BGS-649, in order to maximise shareholder value we believe we are well placed to continue its development into Phase 3. We will look to clarify the regulatory path to registration for approval in 2018.
Acumapimod
Acumapimod is an oral inhibitor of p38 MAP kinase that is aimed at treating the inflammation associated with Acute Exacerbations of Chronic Obstructive Pulmonary Disease (AECOPD). The standard of care for AECOPD has changed little in the past 20 years despite the fact that the acute exacerbations are responsible for 62.5% of all hospital admissions relating to COPD.
Earlier this year we announced the completion of enrolment of AETHER, a Phase 2 dose optimisation study in 282 patients which is exploring two different dosing regimens versus placebo (on top of standard of care) in patients undergoing an acute exacerbation of their COPD. The study aims to demonstrate the most biologically active dose regime of acumapimod based on a primary end point of forced expiratory volume in one second (FEV1). We expect to announce preliminary top-line data from this study in Q4 2017.
We plan to open discussions with potential partners for acumapimod in 2018 following complete analysis of the Phase 2 data.
New Product Opportunities
The Group continues to seek opportunities to acquire additional products to continue to expand and grow our existing product portfolio with the aim of becoming a leading player in the development and commercialisation of novel therapies for rare and speciality diseases and in line with our stated long-term goal of having between five and seven products under development.
During the period, we have seen strong interest from a range of pharmaceutical companies to partner with us and as a result we have reviewed a significant number of new product opportunities. We remain in active discussion on a number of these opportunities which are focussed on rare and orphan diseases with robust data packages and a strong scientific rationale in the indication of interest.
Financial Review
During the period, R&D expenditure rose by GBP10.3 million to GBP21.4 million compared to the same period in 2016 largely due to the commencement of the BPS-804 study in addition to the ongoing costs associated with the BGS-649 and acumapimod programmes. After accounting for administrative expenses of GBP5.0 million (2016: GBP7.0 million), together with the positive impact of R&D tax credits and interest, the net loss for the period was GBP22.7 million (2016 GBP14.7 million).
The loss per share for the period was 34 pence (2016: 59 pence). Adjusted loss per share after taking account of certain non-cash and one-off items (see note 4) was 28 pence per share (2016: 42 pence). On a proforma basis, taking account of the issue of shares in the respective periods, proforma adjusted loss per share was 27 pence (2016: 16 pence).
The Group started the year with net cash of GBP53.6m. In April 2017, a cash placing was completed that raised GBP15 million (gross) and GBP14.3 million net of expenses. Taken together with the net operating outflows of GBP11.6 million, and investing inflows of GBP0.3 million, the net cash and investments at the end of the period were GBP56.6 million. Of this, GBP4.5 million (2016 GBPnil) was classified as short-term investments as it represented bank term deposits with a maturity of between three months and a year, with the balance of GBP52.1 million being classified as cash and short-term deposits.
Following the cash placing, Novartis converted GBP1.4 million of a convertible loan note. At the period end, and after accounting for this conversion together with interest in the period, the loan balance was GBP2.3 million. This loan is convertible at any time up to 2(nd) March 2021 at which date any amounts unconverted will be redeemable.
On 7 August 2017 the Group finalised a new GBP20 million debt facility with Silicon Valley Bank and Kreos Capital, both having significant experience in the sector. It is expected that GBP10 million of this facility will be drawn down shortly with the balance available until 30 April 2018 with certain conditions. The funds will be used to increase our operational and development flexibility.
The terms are typical for facilities of this type and include an interest only period to 30 September 2018, a thirty-month capital and interest repayment period thereafter, a competitive high single digit headline interest rate and customary security over all assets of the Mereo Group. On first drawdown, the Company will issue warrants giving the lenders the right to subscribe for shares representing 11% of the value of the drawn amount which is currently equivalent to approximately 0.5% of the issued share capital of the group. These warrants, when issued, will be capable of exercise until 7(th) August 2027. Additional warrants may be issued, with similar terms, conditional on a further drawdown, over shares representing 11% of the value of the subsequent drawdown.
With our existing strong cash position, together with the initial drawdown from our new debt facility, Mereo has a strong balance sheet and significant funding to continue to support the ongoing development activities of the Group and our general corporate overheads beyond the next major milestones for each of its current programmes.
Outlook
We have made significant progress during the two years since we launched Mereo with the acquisition of our first three products from Novartis. Our early focus was on the recruitment of high calibre individuals with expertise in clinical development, clinical operations, manufacturing and intellectual property. Combined with the robust clinical and preclinical data and CMC packages we acquired from Novartis, this enabled us to make rapid progress in moving these products through the clinic, and to developing the regulatory strategy for each of the programmes. We are delighted with progress to date. We now look forward to delivering key data points from all three programmes at the end of 2017 and into 2018 and to continuing to develop the pathway for approval of our orphan products.
Dr Peter Fellner Dr Denise Scots-Knight Chairman Chief Executive Officer
7(th) August 2017
Consolidated statement of comprehensive loss
for the six months ended 30 June 2017
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Notes GBP GBP GBP
----------------------------------- ------ ------------- ------------- -------------
Research and development
expenses 4 (21,406,625) (11,121,516) (24,562,502)
Administrative expenses (5,040,586) (7,010,126) (11,616,816)
----------------------------------- ------ ------------- ------------- -------------
Operating loss (26,447,211) (18,131,642) (36,179,318)
Net finance income 199,443 8,794 195,141
Net foreign exchange (Loss)/gain (1,040,139) 1,225,578 2,262,626
Loss before tax (27,287,907) (16,897,270) (33,721,551)
Taxation 4,545,613 2,170,849 5,331,271
----------------------------------- ------ ------------- ------------- -------------
Loss for the period, attributable
to equity holders of the
parent (22,742,294) (14,726,421) (28,390,280)
----------------------------------- ------ ------------- ------------- -------------
Other comprehensive income
for the period, net of tax - - -
----------------------------------- ------ ------------- ------------- -------------
Total comprehensive (loss) for the period, net of tax and attributable to the equity holders of the parent (22,742,294) (14,726,421) (28,390,280) ----------------------------------- ------ ------------- ------------- ------------- Basic and diluted loss per share for the period 5 (0.34) (0.59) (0.63) ----------------------------------- ------ ------------- ------------- ------------- Non-GAAP measure Adjusted loss per share 5 (0.28) (0.42) (0.51) ----------------------------------- ------ ------------- ------------- ------------- Proforma adjusted loss per share 5 (0.27) (0.16) (0.36) ----------------------------------- ------ ------------- ------------- -------------
Consolidated balance sheet
as at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Notes GBP GBP GBP
------------------------------ ------ ------------- ------------- -------------
Assets
Non-current assets
Property, plant and
equipment 168,263 189,191 173,869
Intangible assets 25,812,941 25,812,941 25,812,941
------------------------------ ------ ------------- ------------- -------------
25,981,204 26,002,132 25,986,810
------------------------------ ------ ------------- ------------- -------------
Current assets
Prepayments 2,138,355 749,377 1,102,146
R&D tax credits 4,545,613 3,117,530 5,331,271
Other receivables 485,170 713,791 767,009
Short-term investments 4,500,000 - -
Cash and short-term
deposits 52,075,455 70,177,639 53,577,571
63,744,593 74,758,337 60,777,997
------------------------------ ------ ------------- ------------- -------------
Total assets 89,725,797 100,760,469 86,764,807
------------------------------ ------ ------------- ------------- -------------
Equity and liabilities
Equity
Issued capital 7 211,813 193,022 193,022
Share premium 7 116,708,428 100,073,792 99,975,399
Other capital reserves 7 13,374,992 10,534,362 12,667,562
Accumulated losses (56,259,160) (19,915,382) (33,579,241)
------------------------------ ------ ------------- ------------- -------------
Total equity 74,036,073 90,885,794 79,256,742
------------------------------ ------ ------------- ------------- -------------
Non-current liabilities
Provisions 1,816,000 1,102,836 1,172,424
Convertible loan 6 1,943,748 2,957,009 3,126,526
------------------------------ ------ ------------- ------------- -------------
3,759,748 4,059,845 4,298,950
------------------------------ ------ ------------- ------------- -------------
Current liabilities
Trade and other payables 11,929,976 5,814,830 3,209,115
------------------------------ ------ ------------- ------------- -------------
Total liabilities 15,689,724 9,874,675 7,508,065
------------------------------ ------ ------------- ------------- -------------
Total equity and liabilities 89,725,797 100,760,469 86,764,807
------------------------------ ------ ------------- ------------- -------------
Consolidated statement of cash flows
for the six months ended 30 June 2017
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Notes GBP GBP GBP
----------------------------------------------------------- ------ ------------- ------------- -------------
Operating activities
Loss before tax (27,287,907) (16,897,270) (33,721,551)
Adjustments to reconcile
loss before tax to net
cash flows from operating
activities:
* Depreciation and impairment of property, plant and
equipment 17,469 16,651 32,940
- Share-based payment
expense 1,999,009 4,360,818 6,494,018
* Provision for social security contributions on
employee share options 643,576 961,525 1,031,109
- Interest received (268,913) (19,042) (374,906)
- Interest on convertible
loan 69,470 10,248 179,765
Working capital adjustments:
- Increase in receivables (754,370) (813,220) (1,219,202)
- Increase / (decrease)
in payables 8,720,861 1,837,313 (768,402)
- Tax received 5,331,270 - 946,681
----------------------------------------------------------- ------ ------------- ------------- -------------
Net cash flows from operating
activities (11,529,535) (10,542,977) (27,399,548)
----------------------------------------------------------- ------ ------------- ------------- -------------
Investing activities
Purchase of property,
plant and equipment (11,863) (1,325) (3,467)
Disposal of property,
plant and equipment - - 1,175
Interest received 268,913 19,042 374,906
----------------------------------------------------------- ------ ------------- ------------- -------------
Net cash flows received
/ (used) in investing activities 257,050 17,717 372,614
----------------------------------------------------------- ------ ------------- ------------- -------------
Financing activities
Proceeds from issue of
ordinary shares 7 15,000,000 67,888,820 67,888,820
Transaction costs on issue
of shares (729,631) (2,897,470) (2,995,864)
Proceeds from issue of
convertible loan 6 - 3,463,563 3,463,563
Short-term investments (4,500,000) - -
----------------------------------------------------------- ------ ------------- ------------- -------------
Net cash flows from financing
activities 9,770,369 68,454,913 68,356,519
----------------------------------------------------------- ------ ------------- ------------- -------------
Net (decrease) / increase
in cash and cash equivalents (1,502,116) 57,929,653 41,329,585
Cash and cash equivalents
at the beginning of the
period 53,577,571 12,247,986 12,247,986
----------------------------------------------------------- ------ ------------- ------------- -------------
Cash and cash equivalents
at the end of the period 52,075,455 70,177,639 53,577,571
----------------------------------------------------------- ------ ------------- ------------- -------------
Consolidated statement of changes in equity
for the six months ended 30 June 2017
Other
Issued Share capital
capital premium reserves
(note (note (note Accumulated Total
7) 7) 7) losses equity
GBP GBP GBP GBP GBP
--------------------------- --------- ------------ ------------- ------------- -------------
As at 1 January
2016 59,221 26,212,880 21,660,105 (12,188,961) 35,743,245
Loss for the period - - - (14,726,421) (14,726,421)
Issue of share
capital 107,709 67,781,111 - - 67,888,820
Share-based payments - - 4,360,818 - 4,360,818
Issuance of shares
to be issued 26,092 15,977,271 (16,003,363) - -
Equity element
of convertible
loan (note 6) - - 516,802 - 516,802
Share capital reduction - (7,000,000) - 7,000,000 -
Transaction costs
on issuance of
share capital - (2,897,470) - - (2,897,470)
--------------------------- --------- ------------ ------------- ------------- -------------
At 30 June 2016
- unaudited 193,022 100,073,792 10,534,362 (19,915,382) 90,885,794
--------------------------- --------- ------------ ------------- ------------- -------------
Loss for the period - - - (13,663,859) (13,663,859)
Share-based payments - - 2,133,200 - 2,133,200
Transaction costs
on issuance of
share capital - (98,393) - - (98,393)
--------------------------- --------- ------------ ------------- ------------- -------------
At 31 December
2016 - audited 193,022 99,975,399 12,667,562 (33,579,241) 79,256,742
--------------------------- --------- ------------ ------------- ------------- -------------
Loss for the period - - - (22,742,294) (22,742,294)
Issue of share
capital (note 7) 15,127 14,984,873 - - 15,000,000
Share-based payments - - 1,999,009 - 1,999,009
Issuance of shares
to be issued 1,764 1,081,135 (1,082,899) - -
Conversion of convertible
loan (note 6) 1,900 1,396,654 (208,680) 62,375 1,252,249
Transaction costs
on issuance of
share capital (note
7) - (729,633) - - (729,633)
--------------------------- --------- ------------ ------------- ------------- -------------
At 30 June 2017
- unaudited 211,813 116,708,428 13,374,992 (56,259,160) 74,036,073
--------------------------- --------- ------------ ------------- ------------- -------------
Notes to the interim report
1. Corporate information
The interim condensed consolidated financial statements of Mereo BioPharma Group plc and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2017 were authorised for issue in accordance with a resolution of the Directors on 7 August 2017. Mereo BioPharma Group plc (the "Company" or the "parent") is a public limited company incorporated and domiciled in the United Kingdom and whose shares are publicly traded on the AIM Market of the London Stock Exchange. The registered office is located at Fourth Floor, 1 Cavendish Place, London W1G 0QF.
The Group is principally engaged in the research and development of novel pharmaceuticals.
2. Basis of preparation
The interim condensed consolidated financial statements for the six month period ended 30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the statutory financial statements, and should be read in conjunction with the Group's financial statements as at 31 December 2016.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's consolidated financial statements for the year ended 31 December 2016, except for the new accounting polices described in note 3 below. The financial information is presented in Sterling.
These condensed half-yearly financial statements are unaudited and do not constitute statutory accounts of the Group as defined in section 434 of the Companies Act 2006.
The financial information for the year ended 31 December 2016 has been extracted from the Group's published financial statements for that year, and a copy of the statutory accounts for that financial year has been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
3. Summary of changes or new significant accounting policies
3.1 Cash and short-term deposits
Cash and short-term deposits in the balance sheet comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
3.2 Short-term investments
Cash on deposit for terms greater than three months are recognised at fair value in the balance sheet..
4. Segment information
For management purposes, the Group is organised into business units based on its products and has three reportable segments, as follows:
-- Respiratory Unit, which develops drugs to treat respiratory diseases
-- Endocrinology Disorders Unit, which develops drugs to treat endocrine disorders
-- Orphan Diseases Unit, which develops drugs to treat various orphan diseases
Endocrinology Orphan
Six months Respiratory Disorders Diseases Total
ended 30 June Unit Unit Unit segments Unallocated Consolidated
2017 unaudited GBP GBP GBP GBP GBP GBP
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Expenses
Development (5,676,646) (7,126,694) (8,321,725) (21,125,065) (281,560) (21,406,625)
Administrative (1,546,600) (1,507,691) (1,554,801) (4,609,092) (431,494) (5,040,586)
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Segment operating
loss (7,223,246) (8,634,385) (9,876,526) (25,734,157) (713,054) (26,447,211)
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Assets
Tax credit 1,219,998 1,534,361 1,791,254 4,545,613 - 4,545,613
Intangible
assets 4,310,761 9,886,356 11,615,824 25,812,941 - 25,812,941
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Endocrinology Orphan
Six months Respiratory Disorders Diseases Total
ended 30 June Unit Unit Unit segments Unallocated Consolidated
2016 unaudited GBP GBP GBP GBP GBP GBP
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Expenses
Development (4,241,623) (4,116,677) (2,449,412) (10,807,712) (313,804) (11,121,516)
Administrative (1,543,854) (1,591,431) (1,656,843) (4,792,128) (2,217,998) (7,010,126)
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Segment operating
loss (5,785,477) (5,708,108) (4,106,255) (15,599,840) (2,531,802) (18,131,642)
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Assets
Tax credit 867,486 844,539 458,824 2,170,849 - 2,170,849
Intangible
assets 4,310,761 9,886,356 11,615,824 25,812,941 - 25,812,941
------------------- ------------ -------------- ------------ ------------- ------------ ---------------
Endocrinology Orphan
Year ended Respiratory Disorders Diseases Total
31 December 2016 Unit Unit Unit segments Unallocated Consolidated
audited GBP GBP GBP GBP GBP GBP
------------------- ------------- -------------- ------------ ------------- ------------ -------------
Expenses
Development (9,733,421) (9,431,758) (4,804,117) (23,969,296) (593,206) (24,562,502)
Administrative (2,747,085) (2,787,307) (3,076,405) (8,610,797) (3,006,019) (11,616,816) ------------------- ------------- -------------- ------------ ------------- ------------ ------------- Segment operating loss (12,480,506) (12,219,065) (7,880,522) (32,580,093) (3,599,225) (36,179,318) Assets Tax credit 2,102,469 2,094,259 1,134,543 5,331,271 - 5,331,271 Intangible assets 4,310,761 9,886,356 11,615,824 25,812,941 - 25,812,941 ------------------- ------------- -------------- ------------ ------------- ------------ -------------
5. Loss per share
Basic loss per share is calculated by dividing the loss attributable for the period to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
As net losses from continuing operations were recorded in the period, the dilutive potential shares are anti-dilutive for the diluted loss per share calculation.
For the six months to 30 June 2017 and 2016
30 June 2017 unaudited 30 June 2016 unaudited
---------------------- ----------------------------------- -----------------------------------
Loss Weighted Loss Loss Weighted Loss
GBP shares per GBP shares per
number share number share
Group GBP GBP
---------------------- ------------- ----------- ------- ------------- ----------- -------
IFRS - basic and
diluted (22,742,294) 67,218,820 (0.34) (14,726,421) 24,914,940 (0.59)
Adjusted - basic
and diluted (19,059,570) 67,218,820 (0.28) (10,458,853) 24,914,940 (0.42)
Proforma adjusted
- basic and diluted (19,059,570) 70,604,176 (0.27) (10,458,853) 64,340,798 (0.16)
---------------------- ------------- ----------- ------- ------------- ----------- -------
For the year to 31 December 2016
Year ended 31 December
2016 audited
---------------------- -----------------------------------
Loss Weighted Loss
GBP shares per
number share
Group GBP
---------------------- ------------- ----------- -------
IFRS - basic and
diluted (28,390,280) 44,789,893 (0.63)
Adjusted - basic
and diluted (22,956,976) 44,789,893 (0.51)
Proforma adjusted
- basic and diluted (22,956,976) 64,340,798 (0.36)
----------------------------- ------------- ----------- -------
The Company operates share option schemes which could potentially dilute basic earnings per share in the future. There exist within equity at 30 June 2017 864,988 shares (31 December 2016: 1,453,520 shares, 30 June 2016: 1,453,520 shares) to be issued which also have the potential to dilute basic earnings per share in the future (see note 7).
As set out in note 9, on 7(th) August 2017 the group finalised a new GBP20 million debt facility with GBP10 million due to be drawn down shortly. On first drawdown, warrants giving the lenders the right to subscribe for shares will be issued with the number of warrants based on 11% of the drawn amount at a subscription price based on the average mid-market price of the ordinary shares over the prior 10 day period. These warrants, when issued, will be capable of exercise from issue to 7(th) August 2027. Additional warrants, conditional on a further drawdown, may be issued in future.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of this interim report.
The adjusted loss is calculated after adding back non-recurring items and share-based payment charges as illustrated in the table below.
The adjusted loss per share is calculated using the weighted average number of ordinary shares in issue during the period.
The adjusted proforma loss per share for the six months to 30 June 2017 is calculated using the number of ordinary shares in issue following the placement on 4 April 2017 (that is it assumes the placement took place on 1 January 2017 in respect of the number of shares in issue to enable better comparison in future years). The adjusted proforma loss per share for the year ended 31 December 2016 and six months ended 30 June 2016 is calculated using the number of ordinary shares in issue following the admission to the AIM market of the London Stock Exchange (that is it assumes the admission took place on 1st January 2016 in respect of the number of shares in issue to enable better comparison in future years).
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
------------------------------- ------------- ------------- -------------
Group
Loss for the period (22,742,294) (14,726,421) (28,390,280)
Share-based payments 1,999,009 4,360,818 6,494,018
Provision for social security
on share options 643,576 961,525 1,031,109
Non-capitalised IPO costs - 45,000 45,000
Corporate finance costs - 125,803 125,803
Net loss / (gain) on foreign
exchange 1,040,139 (1,225,578) (2,262,626)
------------------------------- ------------- ------------- -------------
Adjusted loss (19,059,570) (10,458,853) (22,956,976)
------------------------------- ------------- ------------- -------------
6. Convertible loan note
On 3 June 2016, the Company created 3,463,563 GBP1 unsecured convertible loan notes ("Notes") in favour of Novartis Pharma AG ("Novartis"). The Notes attract an interest rate of 4% per annum payable annually and accruing daily and constitute direct, unsecured obligations of the Company ranking ahead of any other unsecured obligations of the Company.
On 26 April 2017 Novartis converted GBP1,398,552 of the Notes into 632,829 ordinary shares at the fixed conversion price of GBP2.21 per share. Under the terms of the Notes, Novartis also received 588,532 bonus shares. Novartis holds GBP2,065,011 principal value of Notes at 30 June 2017.
Under the revised terms of the Notes, the loan is subordinated to the Silicon Valley Bank and Kreos Capital loan such that Novartis shall be entitled, at any time up to the repayment of the forgoing loan, being 2(nd) March 2021, to serve a conversion notice on the Company to convert all or some only of the outstanding Notes into fully paid ordinary shares at a conversion price of GBP2.21 per share. To the extent the Notes are not converted at that date, the outstanding principal amount of the Notes, together with any accrued and unconverted interest, is redeemable. Upon conversion of any Notes, in addition to the relevant number of conversion shares, Novartis is entitled to receive an additional number of ordinary shares in the Company equal to the number of conversion shares into which such Notes are to convert, multiplied by 0.93, up to a maximum aggregate number of 864,988 such bonus shares.
The value of the debt component of the Notes at 30 June 2017 was calculated as GBP1,943,748 (30 June 2016: GBP2,957,009). The value of the debt component at 31 December 2016 was GBP3,126,526. The cash flows attached to the Note up to the Maturity Date were calculated and discounted at an appropriate venture debt rate of 10%.
The value of the equity component of the outstanding Notes at 30 June 2017 was GBP308,123 (30 June 2016: GBP516,802). The value of the equity component of the Notes at 31 December 2016 was GBP516,802.
7. Issued capital and reserves
Six Six
months months Year
to 30 to 30 ended
June June 31 December
2017 2016 2016
unaudited unaudited audited
-------------------------------------- ----------- ----------- --------------
GBP GBP GBP
-------------------------------------- ----------- ----------- --------------
Ordinary share capital
Balance at beginning of year/period 193,022 59,221 59,221
Issuances in the period 18,791 133,801 133,801
-------------------------------------- ----------- ----------- --------------
Nominal share capital at end of
year/period 211,813 193,022 193,022
-------------------------------------- ----------- ----------- --------------
Ordinary shares issued and fully
paid
At 1 January 2017 64,340,798
Issued on 4 April 2017 for placing
for cash 5,042,017
Issuance on 26 April 2017 for
conversion of Novartis loan 632,829
Issued on 26 April 2017 for Novartis
bonus shares 588,532 -------------------------------------- ----------- ----------- -------------- At 30 June 2017 70,604,176 -------------------------------------- ----------- ----------- -------------- Nominal value at 30 June 2017 (GBP) 0.003 Issued capital at 30 June 2017 (GBP) 211,813 -------------------------------------- ----------- ----------- -------------- Ordinary shares issued and fully paid At 1 January 2016 19,740,296 Issued on 9 June 2016 for private financing round 39,464,540 Issued on 9 June 2016 for private placement 5,135,962 ---------------------------------------------- ------------ At 30 June 2016 and 31 December 2016 64,340,798 ---------------------------------------------- ------------ Nominal value at 30 June 2016 and 31 December 2016 (GBP) 0.003 Issued capital at 30 June 2016 and 31 December 2016 (GBP) 193,022 ---------------------------------------------- ------------
Since 1 January 2017, the following alterations to the Company's share capital have been made:
-- Under a placement dated 4 April 2017, issue and allotment of 5,042,017 ordinary shares of GBP0.003 in nominal value in the capital of the Company on 4 April 2017 at a price of GBP2.975 per share.
-- On 26 April 2017, conversion by Novartis Pharma AG ("Novartis") of GBP1,398,552 of Notes dated 3 June 2016 into 632,829 ordinary shares ("Conversion Shares") at the fixed conversion price of GBP2.21 per share. Under the terms of the Notes, Novartis also received 588,532 ordinary shares.
GBP
---------------------------------------------- ------------
Share premium
At 1 January 2017 99,975,399
Issued on 4 April 2017 for placing for cash 14,984,873
Issuance on 26 April 2017 for conversion
of Novartis loan 1,396,654
Issuance on 26 April 2017 for Novartis bonus
shares 1,081,135
Transaction costs for issued share capital (729,633)
At 30 June 2017 unaudited 116,708,428
---------------------------------------------- ------------
GBP
------------------------------------------------- ------------
Share premium
At 1 January 2016 26,212,880
Issuance of share capital for private financing
round on 9 June 2016 72,423,315
Issuance of share capital for private placement
on 9 June 2016 11,335,068
Transaction costs for issued share capital (2,897,470)
Share capital reduction on 21 March 2016 (7,000,000)
------------------------------------------------- ------------
At 30 June 2016 unaudited 100,073,793
------------------------------------------------- ------------
Transaction costs for issued share capital (98,394)
At 31 December 2016 audited 99,975,399
------------------------------------------------- ------------
Other capital reserves
GBP
------------------------------------------------- ------------
At 1 January 2017 12,667,562
Share-based payments expense during the period 1,999,009
Shares to be issued - reduction due to shares
released on 26 April 2017 (1,082,899)
Equity component of convertible loan instrument
- reduction due to conversion on 26 April
2017 (208,680)
------------------------------------------------- ------------
At 30 June 2017 unaudited 13,374,992
------------------------------------------------- ------------
GBP
------------------------------------------------- -------------
At 1 January 2016 21,660,105
Share-based payments expense during the period 4,360,818
Shares to be issued - reduction due to shares
released on 9 June 2016 (16,003,363)
Equity component of convertible loan instrument 516,802
------------------------------------------------- -------------
At 30 June 2016 unaudited 10,534,362
------------------------------------------------- -------------
Share-based payments expense during the period 2,133,200
------------------------------------------------- -------------
At 31 December 2016 audited 12,667,562
------------------------------------------------- -------------
Share-based payments
The Group has three current share option schemes under which options to subscribe for the Company's shares have been granted to certain Executives, and employees. In addition, the Group has an historic share option scheme under which options have been granted to certain Executives, Non-executives and employees.
2017
The total charge for the six months to 30 June 2017 in respect of all share option schemes was GBP1,999,099.
2016
Of the GBP4,360,818 share-based payment expense in the 6 months to 30 June 2016, GBP298,836 is an accelerated charge relating to 500,000 share options which were cancelled on 9 June 2016.
Shares to be issued
2017
On 26(th) April 2017, 1,221,361 shares were issued to Novartis Pharma AG in respect of the Notes conversion. At 30 June 2017 there remain 864,988 shares to be issued.
2016
Of the 44,600,502 ordinary shares issued on 9 June 2016, 8,697,480 shares were issued to Novartis Pharma AG. At 30 June 2016 and 31 December 2016 there remained 1,453,520 shares to be issued.
8. Related party disclosures
Transactions between the parent and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Novartis holds 13,767,841 shares in the Company at 30 June 2017 (30 June 2016 and 31 December 2016: 12,546,480). Novartis holds GBP2,065,011 principal value of Notes at 30 June 2017 (30 June 2016 and 31 December 2016: GBP3,463,563). On 3 June 2016, the Group issued 3,463,563 GBP1 unsecured convertible loan notes ("Notes") to Novartis and received GBP3,463,563 from Novartis in consideration (note 6).
On the 26 April 2017 Novartis converted GBP1,398,552 of the Notes into 632,829 ordinary shares at the fixed conversion price of GBP2.21 per share. Under the terms of the Notes, Novartis also received 588,532 ordinary shares.
9. Events after the reporting period
On 7(th) August 2017 the group finalised a new GBP20m secured debt facility repayable by 1(st) March 2021. It is expected that GBP10m of this facility will be drawn down shortly with the balance available until 30(th) April 2018 upon satisfaction of certain conditions. The funds will be used to increase our operational and development flexibility.
The terms are typical for facilities of this type and include an interest only period to 30 September 2018, a thirty-month capital and interest repayment period thereafter, a competitive high single digit headline interest rate and customary security over all assets of the Mereo group. As part of this facility, warrants to subscribe for shares will be issued to the syndicate on first drawdown with a value equivalent to 11% of the drawn amount. These warrants, when issued, will be capable of exercise until 7(th) August 2027 at an exercise price based on the average price of the ordinary shares over the 10 day period prior to the draw down. Additional warrants may be issued, with similar terms, conditional on a further drawdown, over shares representing 11% of the value of the subsequent drawdown.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIFIRTDITIID
(END) Dow Jones Newswires
August 08, 2017 02:12 ET (06:12 GMT)
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