Synairgen plc Preliminary results for the year ended 31 Dec 2018 (9350Q)

TIDMSNG

RNS Number : 9350Q

Synairgen plc

25 February 2019

Press release

Synairgen plc

('Synairgen' or the 'Company')

Preliminary statement of results for the year ended 31 December 2018

Southampton, UK - 25 February 2019: Synairgen (LSE: SNG), the respiratory drug discovery and development company, today announces its preliminary statement of audited results for the year ended 31 December 2018.

Operational highlights - including post period end

-- Successfully advanced inhaled interferon beta (IFN-beta) programme into the clinic for the treatment or prevention of virally-induced COPD exacerbations

-- Part 1 of SG015 clinical trial completed, showing that SNG001 was well tolerated and that antiviral biomarker analysis showed COPD patients (without viral infection) inhaling SNG001 had significantly increased antiviral activity in the lungs

-- Raised GBP2.7 million (net of expenses) in October 2018 to increase the scope of our inhaled IFN-beta clinical trial, enhancing our business development opportunity for the COPD programme

   --     Part 2 of SG015 trial commenced with 13 trial sites now active 

-- Our Australian partner, Pharmaxis, has satisfactorily completed Phase I trials and 3 month toxicology for 2 compounds, enabling it to progress the next strategic steps of the LOXL2 inhibitor programme

Financial highlights

-- Revenues for the year were GBP0.11 million (2017: GBP5.03 million, which included a non-recurring GBP5 million upfront payable by Pharmaxis)

-- Research and development expenditure for the year was GBP3.23 million (2017: GBP2.06 million) reflecting investment in the development of the IFN-beta programme

-- Loss from operations for the year ended 31 December 2018 was GBP4.13 million (2017: profit of GBP1.62 million)

-- Cash, cash equivalents and deposit balances of GBP5.33 million at 31 December 2018 (2017: GBP6.85 million). The Group remains debt free

Commenting on the Annual Results, Simon Shaw, Chairman of Synairgen said: "2018 was a year of excellent operational progress for Synairgen. We were particularly pleased to advance our inhaled IFN-beta programme into a clinical trial to treat or prevent exacerbations of COPD and to increase the scope of the trial to support future partnering activity. We were also pleased that our partner Pharmaxis announced completion of the three-month toxicology studies and await further steps in the advancement of this opportunity. We look forward to continued progress in 2019."

- Ends -

This announcement contains inside information as contained in Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR").

For further enquiries, please contact:

Synairgen plc

Richard Marsden, Chief Executive Officer

John Ward, Finance Director

Tel: + 44 (0) 23 8051 2800

finnCap

Geoff Nash, Max Bullen-Smith (Corporate Finance)

Alice Lane (Corporate Broking)

Tel: + 44 (0) 20 7220 0500

Consilium Strategic Communications (Financial Media and Investor

Relations)

Mary-Jane Elliott / Sue Stuart / Olivia Manser

[e-mail]

Tel: [phone]

Notes for Editors

About Synairgen

Synairgen is a respiratory drug discovery and development company founded by University of Southampton Professors Stephen Holgate, Donna Davies and Ratko Djukanovic. The business, focused primarily on asthma and COPD, uses its differentiating human biology BioBank platform and world-renowned international academic KOL network to discover and develop novel therapies for respiratory disease. Leveraging its scientific and clinical facilities at Southampton General Hospital, the Company uses in vitro and ex vivo models to progress opportunities into clinical development. The BioBank of human samples is used in these models to increase confidence in the likelihood of successful drug development.

Synairgen is currently conducting a two-part Phase II trial evaluating SNG001, the Company's inhaled interferon beta (IFN-beta) product. The Phase II trial, called SG015, has been designed to assess the safety of SNG001 in COPD patients and its clinical benefit in these patients when they have a cold or flu infection, a major driver of COPD exacerbations.

Core to Synairgen's business strategy is the realisation of value via licensing transactions. In August 2015 the Company entered into a collaboration with Pharmaxis to develop an oral LOXL2 inhibitor to reduce fibrosis in patients with idiopathic pulmonary fibrosis (IPF). In December 2017, the collaboration agreement was amended as Pharmaxis took on full responsibility for the programme, with Synairgen receiving a GBP5 million upfront payment and a share of at least 17% (net of allowable expenses) of any receipts from any onward licensing by Pharmaxis of the LOXL2 inhibitors in fibrotic indications.

Synairgen is quoted on AIM (LSE: SNG). For more information about Synairgen, please see www.synairgen.com

Chairman's and Chief Executive Officer's Review

Operating Review

Summary

2018 has been a year of excellent operational progress. We successfully advanced our inhaled interferon beta (IFN-beta) programme, to treat or prevent COPD exacerbations, into the clinic and, in September 2018, we raised GBP2.7 million (net of costs) to expand the number of patients to be included in our clinical trial, to increase the power of the study and enhance our chance of partnering our inhaled IFN-beta programme for COPD. In addition, our Australian partner, Pharmaxis, has completed Phase I clinical trials for the LOXL2 inhibitor programme with positive results and we now eagerly await the next steps for this product where Synairgen has a significant financial interest in its success.

Inhaled interferon beta programme

Inhaled IFN-beta progression in COPD to treat or prevent virus-induced exacerbations

We have progressed inhaled IFN-beta into COPD, where the risk that a patient will exacerbate due to a cold infection is much higher (approximately 50%(1) ) compared to asthma (<10%(2) ), with some identifiable sub-groups at higher risk than others.(3) The cost to both patient and healthcare providers of virus-induced COPD exacerbations is also substantial - in England alone, COPD is the second most common cause of unplanned hospitalisations after cardiovascular disease.(4)

We have long known that COPD represents a very substantial market for inhaled IFN-beta, addressing a large number of patients who are expensive to treat. The historical barrier to progressing into COPD was the complexity around identifying the virus-positive patients for treatment. COPD patients can suffer from bacterial infections as well as viral infections and, up until recently, distinguishing between viral and bacterial infections, at the point of assessment, was too great an obstacle to allow progression of inhaled IFN-beta into COPD clinical trials.

Our ability to progress with COPD has been enabled by the availability of a novel point of care test launched by bioMérieux. This test confirms the presence of a respiratory virus in a patient within 45 minutes of a nasal or throat swab being taken. Utilisation of this new diagnostic test means that we can be sure that every patient we treat in the COPD trial is virus positive. This will eliminate the background "noise" associated with the inclusion of patients with no viral infection in the trial and thereby reduce the required trial size, and therefore cost, to obtain meaningful results.

We are starting treatment at the onset of respiratory symptoms in virus-positive patients. At the moment, COPD patients are not encouraged to visit their GP/pulmonologist if they have a cold. This is because there are no broad spectrum antiviral therapeutic options available to limit the spread of virus to the lungs. The advent of this new diagnostic technology changes this paradigm. The bioMérieux point of care test enables rapid identification of common bacterial and viral pathogens. For the virus-positive patients, the availability of an antiviral therapy with the potential to either prevent exacerbations, or to limit their severity, would be a major breakthrough.

In Q1 2018 we commenced a two-part Phase II clinical trial in COPD patients.

Part 1 of Phase II trial

The first part of the trial was conducted to confirm the safety of inhaled IFN-beta in this patient population. Inhaled IFN-beta has been well tolerated in all of the asthma trials; COPD patients' lungs are different and it was necessary to assess safety prior to dosing patients in part two of the trial. Our target patients have typically lost approximately 40% of their lung function, their lungs are often colonised by bacteria, and their lung inflammation is driven by different factors than in asthma. During this first phase, we were pleased to ascertain that inhaled IFN-beta was well tolerated in COPD patients. We also undertook a biomarker assessment. Patients in this part of the trial were free of viral infection and inhalation of IFN-beta should activate their antiviral defences. Indeed, as reported in June 2018, the antiviral biomarkers assessed 24 hours after administration of a dose of inhaled IFN-beta were elevated. This increase in relevant biomarkers was very similar to that which we had observed in asthma. We were particularly pleased to see firstly, the robust antiviral response in these older patients' lungs that have typically been exposed to many years of cigarette smoke, and secondly, that this effect mirrored in vitro findings in COPD patients' lung cells from our models where IFN-beta is effective.

Part 2 of Phase II trial

Completion of part one enabled the commencement of part two of the trial. In part two, COPD patients without infection are screened and entered into a waiting phase. We are building this pool of 'waiting patients' to approximately 200 patients. Patients then contact the trial site as soon as they develop a cold or COPD symptoms which are suspected to be caused by a virus. Upon arrival at the trial site, patients are tested to determine whether they have a respiratory virus; those that are positive are treated with either inhaled IFN-beta or placebo for 14 days.

In October 2018 we completed a placing which raised GBP2.7 million (net of costs), primarily to increase the COPD trial size from 80 patients to 120 patients in order to be able to focus on clinical endpoints, to enhance the chance of obtaining a positive result, and ultimately to partner the programme when the trial is completed.

The trial is progressing well and we have now initiated 13 trial sites, all in the UK. As at 15 February 2019, 181 patients have been screened and 133 patients have been entered into the 'pool', waiting to develop virus symptoms, ahead of the confirmatory virus testing. In the first three months of the trial (up to 11 January), 22 patients developed symptoms and were tested for a respiratory virus; 3 out of the 22 tested positive and were subsequently dosed. This reflected the mild start to the respiratory virus season as reported by Public Health England (PHE). In the subsequent five weeks to 15 February, PHE reported an uplift in influenza like illness (an indication of the impact of respiratory viruses on healthcare system) and this has been reflected in an uplift in the number of patients dosed in our trial. Since 11 January a further 30 patients have been tested, of whom 15 were virus positive and dosed. The virus test has therefore proved its value, particularly during the late autumn and early winter, screening out patients who, historically, may have been dosed based on their symptoms, but who had no potential to gain from an antiviral. The following viruses have been detected: enterovirus/rhinovirus; RSV; coronavirus; human metapneumovirus; and influenza. The milder start to this virus season means that we now expect the trial to continue into the 2019/2020 virus season.

Size of market opportunity

COPD is a common disease which consumes substantial healthcare resources, particularly in the non-summer months. COPD patients will typically have one to two colds per year. Each cold carries a risk of exacerbation of approximately 50%. In the USA, the average cost of a hospitalisation following a visit to the Emergency Department for a COPD patient is $29,000.(5) Pathogen testing at the onset of an exacerbation is being recommended to reduce unnecessary antibiotic prescribing for viral exacerbations. The need for a broad spectrum antiviral therapy is substantial. We expect considerable interest from potential partners for this programme and have commenced a dialogue with several large pharma companies.

LOXL2 inhibitor programme

In collaboration with Pharmaxis we identified and progressed a LOXL2 inhibitors programme from the pre-clinical stage through to commencement of a Phase I clinical trial. Initially the collaboration was focussed on idiopathic pulmonary fibrosis (IPF), an area of expertise for Synairgen.

Over the two years of the collaboration, our interactions with potential large pharma partners led to an expansion of the programme to also embrace other fibrotic diseases, including non-alcoholic steatohepatitis (NASH, a type of liver fibrosis), heart fibrosis, and kidney fibrosis. In December 2017 we elected to pass responsibility for the further development and commercialisation of these compounds to Pharmaxis, who were better placed to conduct research in the non-lung fibrotic arena, in return for GBP5 million and a share of at least 17% (net of allowable expenses) of any receipts from any onward licensing by Pharmaxis of the LOXL2 inhibitors in fibrotic indications.

During 2018, Pharmaxis successfully completed Phase I trials for two compounds, and showed best in class inhibition of the LOXL2 enzyme in these clinical trials. Post period-end (17 January 2019), Pharmaxis announced that the 3 month toxicology studies had been successfully completed for both compounds, allowing them to progress the next strategic steps for the programme. We continue to track Pharmaxis' progress with great interest.

Financial Review

Statement of Comprehensive Income

The loss from operations for the year ended 31 December 2018 was GBP4.13 million (2017: profit GBP1.62 million). Revenues for the year amounted to GBP0.11 million (2017: GBP5.03 million). 2017 included a non-recurring GBP5 million payable by Pharmaxis as consideration for the change in collaboration terms. The 2018 revenue comprised fee for service work in relation to the LOXL2 programme. Research and development expenditure for the year amounted to GBP3.23 million (2017: GBP2.06 million), and was focussed almost entirely on the IFN-beta Phase II clinical trial in COPD and associated pharmaceutical development costs.

Other administrative costs for the year amounted to GBP1.01 million (2017: GBP1.35 million), with the decrease being attributable to lower staff bonus costs and reduced legal costs. Interest receivable increased on account of higher average cash balances held and the increase in base rate. The tax credit increased from GBP0.13 million in 2017 to GBP0.80 million in 2018. The 2017 credit was at lower levels than preceding years because the Group was in profit and this limited the amount of research and development tax credit which could be claimed. The loss after tax for 2018 was GBP3.30 million (2017: profit of GBP1.76 million) and the basic loss per share amounted to 3.47p (2017: basic earnings per share of 1.93p).

Statement of Financial Position and cash flows

At 31 December 2018, net assets amounted to GBP6.03 million (2017: GBP6.56 million), including cash and bank deposits of GBP5.33 million (2017: GBP6.84 million).

The principal elements of the GBP1.51 million decrease over the year ended 31 December 2018 (2017: GBP2.08 million increase) in cash and bank deposits were:

   --      Cash used in operations: GBP3.89 million (2017: GBP1.45 million generated from operations); 
   --      Research and development tax credits received: GBP0.07 million (2017: GBP0.62 million); 

-- Capital expenditure on property, plant and equipment: GBP0.39 million (2017: GBP0.01 million); and

   --      Share issue proceeds (net of costs): GBP2.67 million (2017: GBPnil). 

The other significant changes in the statement of financial position were:

-- The net book value of property, plant and equipment increased from GBP0.01 million to GBP0.37 million at 31 December 2018. This was due to the purchase of 13 bioMérieux multiplex PCR virus detection machines (one for each clinical trial site) at a total cost of GBP0.36 million. The remainder of the capital expenditure was for laboratory and IT equipment;

-- Current tax receivable increased from GBP0.07 million to GBP0.80 million on account of the higher R&D tax credit as discussed above;

-- Trade and other receivables decreased from GBP0.63 million to GBP0.22 million on account of amounts receivable from Pharmaxis reducing by some GBP0.45 million;

-- Trade and other payables decreased from GBP1.10 million to GBP0.78 million. The major driver behind this reduction is the lack of bonus accrual at 31 December 2018; and

-- Share capital and share premium increased from GBP0.91 million and GBP25.77 million to GBP1.09 million and GBP28.26 million respectively, an aggregate increase of GBP2.67 million on account of the fundraising in October 2018 whereby 18.00 million shares of 1p each were issued at a premium of 15p primarily to fund the enlarged Phase II trial. Costs of the issue amounted to GBP0.21 million, which were taken to the share premium account.

Outlook

Operationally we are wholly focussed on our inhaled IFN-beta programme in COPD and engaging with potential partners for this programme in advance of Phase II data availability. We are pleased that Pharmaxis have announced completion of the three month toxicology studies which were necessary to progress partnering discussions in disease areas which are of great interest to large pharma. We continue to assess new opportunities to complement our existing COPD programme.

References

1. Johnston NW, et al. Colds as predictors of the onset and severity of COPD exacerbations International Journal of COPD 2017:12: 839-848

2. (i) Aviragen Therapeutics presentation Directing Next Generation Direct-Acting Antivirals May 2017. (ii) Synairgen analysis of INEXAS trial results, dated 27 September 2017 (https://www.synairgen.com/wp-content/uploads/2018/06/ifnb-press-release-final-26-sept-002.pdf)

3. Wilkinson TMA, et al. A prospective, observational cohort study of the seasonal dynamics of airway pathogens in the aetiology of exacerbations in COPD Thorax 2017;0:1-9. Doi:10.1136/thoraxjnl=2016-209023

4. Department of Health. An Outcomes Strategy for Chronic Obstructive Pulmonary Disease (COPD) and Asthma in England. Published July 2011

5. Singh JA, et al. Utilization due to chronic obstructive pulmonary disease and its predictors: a study using the U.S. National Emergency Department Sample (NEDS). Respiratory Research 2016; 17:1

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2018

 
 
 
 
                                                                     Year                   Year 
                                                                 ended 31               ended 31 
                                                                 December               December 
                                                                     2018                   2017 
                                               Notes               GBP000                 GBP000 
 Revenue                                                              105                  5,025 
 
 Research and development expenditure                             (3,232)                (2,061) 
 Other administrative expenses                                    (1,005)                (1,349) 
--------------------------------------------  ------  -------------------  --------------------- 
 Total administrative expenses                                    (4,237)                (3,410) 
 
 (Loss)/Profit from operations                                    (4,132)                  1,615 
 Finance income                                                        36                     14 
 (Loss)/Profit before tax                                         (4,096)                  1,629 
 
 Tax                                               2                  795                    132 
 (Loss)/Profit and total comprehensive 
  (loss)/income for the period attributable 
  to equity holders of the parent                                 (3,301)                  1,761 
                                                      ===================  ===================== 
 
 (Loss)/Earnings per ordinary share                3 
 Basic (loss)/earnings per share 
  (pence)                                                         (3.47)p                  1.93p 
 Diluted (loss)/earnings per share 
  (pence)                                                         (3.47)p                  1.87p 
 
 

Consolidated Statement of Changes in Equity

for the year ended 31 December 2018

 
                                    Share         Share    Merger  Retained 
                                  capital       premium   reserve   deficit      Total 
                                   GBP000        GBP000    GBP000    GBP000     GBP000 
 
At 1 January 2017                     914        25,771       483  (22,483)      4,685 
Recognition of share-based 
 payments                               -             -         -       113        113 
Profit and total comprehensive 
 income for the year                    -             -         -     1,761      1,761 
                                 --------  ------------  --------  --------  --------- 
At 31 December 2017                   914        25,771       483  (20,609)      6,559 
Issue of ordinary shares              180         2,700         -         -      2,880 
Transaction costs in respect 
 of share issue                         -         (209)         -         -      (209) 
Recognition of share-based 
 payments                               -             -         -        98         98 
Loss and total comprehensive 
 loss for the year                      -             -         -   (3,301)    (3,301) 
                                 --------  ------------  --------  --------  --------- 
At 31 December 2018                 1,094        28,262       483  (23,812)      6,027 
                                 ========  ============  ========  ========  ========= 
 

Consolidated Statement of Financial Position

as at 31 December 2018

 
 
                                        31 December   31 December 
                                               2018          2017 
                                             GBP000        GBP000 
 Assets 
 Non-current assets 
 Intangible assets                               29            45 
 Property, plant and equipment                  374            12 
                                     --------------  ------------ 
                                                403            57 
                                     --------------  ------------ 
 Current assets 
 Inventories                                     56            56 
 Current tax receivable                         795            71 
 Trade and other receivables                    216           633 
 Other financial assets - bank 
  deposits                                       50         2,000 
 Cash and cash equivalents                    5,284         4,845 
                                     --------------  ------------ 
                                              6,401         7,605 
 
 Total assets                                 6,804         7,662 
                                     --------------  ------------ 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                     (777)       (1,103) 
                                     --------------  ------------ 
 Total liabilities                            (777)       (1,103) 
                                     --------------  ------------ 
 
 Total net assets                             6,027         6,559 
                                     ==============  ============ 
 
 Equity 
 Capital and reserves attributable 
  to equity holders of the parent 
 Share capital                                1,094           914 
 Share premium                               28,262        25,771 
 Merger reserve                                 483           483 
 Retained deficit                          (23,812)      (20,609) 
                                     --------------  ------------ 
 Total equity                                 6,027         6,559 
                                     ==============  ============ 
 
 
 

Consolidated Statement of Cash Flows

for the year ended 31 December 2018

 
                                                     Year       Year 
                                                 ended 31   ended 31 
                                                 December   December 
                                                     2018       2017 
                                                   GBP000     GBP000 
 
 Cash flows from operating activities 
 (Loss)/Profit before tax                         (4,096)      1,629 
 Adjustments for: 
 Finance income                                      (36)       (14) 
 Depreciation                                          24          7 
 Amortisation                                          16         17 
 Share-based payment charge                            98        113 
                                                ---------  --------- 
 Cash flows from operations before changes 
  in working capital                              (3,994)      1,752 
 Increase in inventories                                -        (1) 
 Decrease/(Increase) in trade and other 
  receivables                                         426      (548) 
 (Decrease)/Increase in trade and other 
  payables                                          (326)        243 
                                                ---------  --------- 
 Cash (used in)/generated from operations         (3,894)      1,446 
 Tax credit received                                   71        621 
                                                ---------  --------- 
 Net cash (used in)/generated from operating 
  activities                                      (3,823)      2,067 
                                                ---------  --------- 
 
 Cash flows from investing activities 
 Interest received                                     27         19 
 Purchase of property, plant and equipment          (386)        (6) 
 Decrease/(Increase) in other financial 
  assets                                            1,950      (339) 
                                                ---------  --------- 
 Net cash generated from/(used in) investing 
  activities                                        1,591      (326) 
                                                ---------  --------- 
 
 Cash flows from financing activities 
 Proceeds from issuance of ordinary shares          2,880          - 
 Transaction costs in respect of share 
  issue                                             (209)          - 
 Net cash generated from financing activities       2,671          - 
                                                ---------  --------- 
 
 Increase in cash and cash equivalents                439      1,741 
 Cash and cash equivalents at beginning 
  of the year                                       4,845      3,104 
                                                ---------  --------- 
 Cash and cash equivalents at end of the 
  year                                              5,284      4,845 
                                                =========  ========= 
 

Notes

   1.             Basis of preparation 

The financial information of the Group set out above does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2018 has been extracted from the Group's audited financial statements which were approved by the Board of directors on 22 February 2019 and will be delivered to the Registrar of Companies for England and Wales in due course. The financial information for the year ended 31 December 2017 has been extracted from the Group's audited financial statements for that period which have been delivered to the Registrar of Companies for England and Wales. The reports of the auditors on both these financial statements were unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International

Financial Reporting Standards ('IFRSs') as adopted by the European Union, this announcement does not itself contain sufficient information to comply with those IFRSs. This financial information has been prepared in accordance with the accounting policies set out in the December 2018 report and financial statements.

   2.             Tax 

The tax credit of GBP795,000 (2017: GBP132,000) relates to research and development tax credits in respect of the year ended 31 December 2018.

   3.             (Loss)/Earnings per ordinary share 

Basic (loss)/earnings per share ('LPS' or 'EPS') is calculated by dividing the (loss)/profit attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares in issue during the year.

For diluted earnings per share, the weighted number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary shares, being share options where the exercise price is less than the average market price of the Company's ordinary shares during the year and where performance conditions have been met or, in the case of options where the performance period is not completed, are being met.

Where there is a loss (as for the year ended 31 December 2018), the loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore antidilutive under the terms of IAS 33.

The losses/earnings and number of weighted average number of shares used in the calculations are as follows:

 
                                                  2018                               2017 
                             Losses   Shares       LPS       Earnings   Shares             EPS 
                             GBP000      000     pence         GBP000      000           pence 
 
 Basic (loss)/earnings 
  per share                 (3,301)   95,263    (3.47)          1,761   91,363            1.93 
 Effect of additional 
  shares under option             -        -      -                 -    2,873          (0.06) 
                           --------  -------  --------  -------------  -------  -------------- 
 Diluted (loss)/earnings 
  per share                 (3,301)   95,263    (3.47)          1,761   94,236            1.87 
                           --------  -------  --------  -------------  -------  -------------- 
 

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February 25, 2019 02:00 ET (07:00 GMT)