TIDMAGY
RNS Number : 7542K
Allergy Therapeutics PLC
26 September 2016
26 September 2016
Allergy Therapeutics plc
("Allergy Therapeutics" or the "Company")
Preliminary report for the year ended 30 June 2016
- Significant progress made towards becoming a global provider
of allergy solutions -
Allergy Therapeutics plc, the fully integrated specialty
pharmaceutical company specialising in allergy vaccines, announces
preliminary results for the year ended 30 June 2016.
Highlights
-- 19% increase in revenue at constant currency to GBP51.5m (2015: GBP43.2m)*
-- 12% increase in revenue to GBP48.5m (2015: GBP43.2m)
-- Increased market share in our main European markets to 12% (2015: 10%)
-- Core business (excluding R&D) shows 11% increase in
Operating Profit to GBP4.3m (2015: GBP3.8m)
-- Ramp up on R&D investment with GBP16.2m (2015: GBP3.1m)
spent, reflecting investment in PQ registration and pipeline
-- Achieved primary endpoint for PQ Birch Phase II Study in
Europe and selected dose to be used in Phase III, starting in
2017
-- Inconclusive results of Phase II dosing study in the US for Pollinex Quattro Grass
-- Successfully raised GBP11.5m (gross) to fund new product
development and organic and inorganic growth opportunities
-- Acarovac Plus(TM) one-year study showed statistically significant improvement for patients
-- Acquisition of Virus Like Particle technology licence for the
development of a potential new injectable vaccine immunotherapy
treatment for allergy sufferers with peanut as lead project
-- Strong cash balance of GBP23.4m at year end (2015: GBP21.2m)
Manuel Llobet, Chief Executive Officer, commented: "This year
has seen many events in the allergy market. I would like to
highlight Allergy Therapeutics' revenue growth, now accounting for
12% of the share in our competitive market, and progressing well
towards our long-term strategic plans with developments across all
areas of the business. Our excellent products and outstanding team
have delivered success in product development and marketing and,
despite the requirement for our additional range-finding study, we
look forward to capitalising on opportunities to continue growing
into new markets and delivering patient-friendly, market-leading
treatments, to help patients across the allergy spectrum. We are a
thriving, visionary company, led by a self-driven team, totally
committed to transforming allergy treatments. We are passionate
about what we do and we are convinced that the best is yet to
come."
* Constant currency uses prior year weighted average exchange
rates to translate current year foreign currency denominated
revenue to give a year on year comparison excluding the effects of
foreign exchange movements. See table in financial review for an
analysis of revenue.
For further information, please contact:
Allergy Therapeutics
+44 (0) 1903 845 820
Manuel Llobet, Chief Executive Officer
Nick Wykeman, Finance Director
Panmure Gordon
+44 (0) 20 7886 2500
Freddy Crossley / Duncan Monteith, Corporate Finance
Tom Salvesen, Corporate Broking
Consilium Strategic Communications
+44 20 3709 5700
Mary-Jane Elliott / Ivar Milligan / Matthew Neal / Laura
Thornton
allergytherapeutics@consilium-comms.com
Note to editors:
About Allergy Therapeutics
Allergy Therapeutics is an international specialty
pharmaceutical company focussed on the treatment and diagnosis of
allergic disorders including immunotherapy vaccines that cure
disease. The Company sells proprietary products and third party
products from its subsidiaries in nine major European countries and
via distribution agreements in an additional ten countries.
Formed in 1999 out of Smith Kline Beecham, Allergy Therapeutics
is headquartered in Worthing, UK with MHRA-approved manufacturing
facilities. The Company employs c.420 employees and is listed on
the London Stock Exchange (AIM:AGY). For more information, please
see www.allergytherapeutics.com.
Chairman's Statement
This year has continued the Group's progress towards becoming a
global provider of allergy solutions through organic growth and
strengthening our product proposition in Europe, as well as further
research and development for the US market.
The core European business has continued to grow strongly in a
flat market, taking market share from our competitors in the
markets where we compete, validating our strong combination of high
quality, patient-friendly products and a knowledgeable and
dedicated sales and marketing team.
In the area of research and development, the Group has had an
overall positive, but mixed, year with a successful Phase II
dose-ranging study for Pollinex Quattro Birch in Germany, opening
the way for a Phase III trial for the product in Europe, which is
expected to start in early 2017. The one-year follow-up study on
Acarovac Plus concluded with patients reporting statistically
significant improvements in satisfaction scores for effectiveness
and convenience.
As announced in June, the Phase II Pollinex Quattro Grass dose
range finding study in the US did not give conclusive evidence of
an optimal dose regime. The study experimented with environmental
exposure chambers which, unlike those commonly used in the US, were
mobile, in order to optimise patient recruitment. The Company will
perform another dose-finding study, but with the design amended to
use the method that produced the successful Pollinex Quattro Birch
dosing study in Europe, subject to regulatory approval. This has,
put simply, caused a delay to our potential US market entry, yet
Pollinex Quattro Grass could still become the first licensed
seasonal subcutaneous immunotherapy (SCIT) allergy vaccine
authorised for marketing in the US, and we have the funding in
place to carry out the current, planned Phase III trial. The US
market has the potential to be worth $2 billion p.a. (Piper Jaffray
Update on the AR market, Sept. 2008. Datamonitor) for immunotherapy
treatments, such as the grass vaccine, and we remain focussed on
delivering a high-quality treatment option into the market.
During the year the Group also raised GBP11.5m (GBP11.0 net of
costs) with the placing of 41 million ordinary shares to invest in
new product development, strengthen the balance sheet and support
accretive acquisitions to accelerate growth.
The global allergy treatment market has seen some turmoil with
recent events affecting the competitive market environment in
Europe and the US, which are likely to lead to mid- to long-term
benefits for Allergy Therapeutics in terms of potential market
share in the US.
The referendum vote in the UK to leave the EU has, during the
period, had a short term beneficial financial effect for the
business in terms of the weak currency performance of the sterling
against the euro but, as noted in the risks section, the mid and
long term impact will depend on the final agreement between the UK
and the rest of the EU on such matters as trade and pharmaceutical
regulation.
In June, we welcomed Nick Wykeman to the Group as Finance
Director following his prior roles at ICI PLC and Skyepharma PLC.
As announced in March, Ian Postlethwaite, stepped down as Finance
Director after 14 years of service at Allergy Therapeutics and I
would like to take this opportunity to thank Ian for his
significant contribution to the Group.
In conclusion, I would like to thank all Allergy Therapeutics
employees for their commitment, dedication and hard work during the
year and we look forward to continued progress in executing our
clear strategy.
Peter Jensen
Chairman
23 September 2016
CHIEF EXECUTIVE OFFICER'S REVIEW
The current allergy immunotherapy market is estimated to be
$2.1bn with the potential to reach $3bn (Piper Jaffray Update on
the AR market, Sept. 2008. Datamonitor. Current $3bn potential
includes all medical costs) with changes in the US market, and it
is expected to grow at about 11% per annum until 2020 (Visiongain
2014). Allergy Therapeutics is one of the very few companies that
is well positioned to lead this market and become a global player,
with its strong position in its current main European markets of
12% and the opportunity of a share of the estimated potential US
market of $2bn (Piper Jaffray). In the developed world the way of
life has had a significant influence in the way our immune system
responds to different challenges and impacts the occurrence of a
wide variety of allergies. Nowadays, it is estimated that 20% to
30% (Jacobs, 2011) of the population suffer from allergic rhinitis,
not to mention the significant increase in other areas such as food
allergies. For patients with moderate to severe symptoms who cannot
control these using symptomatic products, we provide high-quality,
patient-friendly, aluminium-free treatment technologies for
airborne allergies that make a difference to patients and their
lives.
This year, we have made significant progress towards our
long-term strategic plans. We are developing the Group in three key
areas:
Developing our Group in Europe, our domestic market
This year we have had a record market share gain in our
competitive markets, evolving from 10% last year to 12%. In a
market that can be considered broadly flat, this means that we have
outperformed the market by 20 points. The market share gains have
come across all our key markets reaching a growth, year on year, of
19% in constant currency (12% after the impact of exchange rate
fluctuations). In absolute terms, the main contributors to this
growth have been the German, Austrian and UK markets as well as the
Spanish market, where we have successfully completed the
integration of Alerpharma, which we acquired in 2015.
This impressive penetration is due to two key factors which are:
1) excellent products, offering our patients convenient solutions
through our unique concept of short and ultra-short course,
aluminium-free treatments and 2) excellently trained, committed and
motivated sales teams implementing the right, professional and
ethical commercial strategies.
We want to accelerate market penetration by leveraging these two
factors and so have been improving our commercial infrastructure.
We aim to be market leaders in the SCIT allergy segment by
2020.
In May, we announced positive top-line results from the Group's
European PQBirch 204 Phase II study, a multi-centre, double-blind,
placebo-controlled study designed to explore the safety and
response of different cumulative doses of Birch Modified Allergen
Tyrosine adsorbed and MPL(R) (POLLINEX(R) Quattro Birch) for birch
pollen-induced seasonal allergic rhinitis. The study randomised 371
patients into six cumulative dosing regimens plus a placebo,
evaluating the change in total symptom score (TSS) following a
conjunctival provocation test (CPT) with the aim of identifying a
recommended dose for Phase III development.
The results summary of the PQBirch 204 Phase II study programme
was as follows:
-- The primary endpoint, to demonstrate a statistically
significant (p<0.01) dose-response for the 5000 standardised
units (SU) to 27300 SU, was met. This enables prediction of the
dose to enter Phase III development
-- The study demonstrated a statistically significant
(p<0.01) dose-response for the 5000 standardised units (SU) to
27300 SU dose-range studied
-- The dose-response closely followed and extended the findings
of the previous dose-response study (PQBirch203), which studied
doses from 600SU to 13600SU
-- PQBirch continues to be well-tolerated and no safety concerns
were reported in any treatment arm. There was no significant
relationship between any adverse drug reaction exhibited and the
respective dosage of allergoid
-- Overall, adherence to the dosing regimens was approximately
94% with no relevant differences between treatment arms
The Group has reviewed the Phase II data and selected a dose
which will be used in the Phase III PQ Birch field study which is
expected to start in 2017 and will be performed in Europe.
In June, we announced findings from the exploratory US Phase II
dose-ranging study (G204) for the US Grass MATA MPL clinical
development programme. The results did not determine a recommended
dose for the Phase III trial. A further dose range finding study
will be implemented prior to proceeding into the planned pivotal
Phase III study.
Based on the successful dose response data identified in the
Phase II G203 study for the same US Grass MATA MPL programme, the
G204 trial was designed to explore higher dose regimens using the
novel technology of the mEEC (mobile environmental exposure
chamber) and optimise the recommended dose before starting the
pivotal Phase III trial (G306) to be performed in the US.
In contrast to the G203 study, the dose range finding data with
the mEEC did not allow the Group to recommend an optimised dose
regime to take into Phase III studies for the US. Consequently, and
subject to regulatory approval, we will undertake a further
dose-ranging study, reconfiguring the study design by employing the
same successful and less expensive European dose-finding trial
design with a fixed conjunctival provocation test (CPT) which
provided robust results for the optimisation of the Group's
marketed subcutaneous birch pollen product, Pollinex(R) Quattro
Birch (PQBirch). As previously disclosed, it is anticipated that
the cost of this additional study can readily be met from the
Company's available funds. The next dose range finding study is
planned to start in 2017. Allergy Therapeutics will await the
outcome of discussions with the FDA, scheduled later in 2016,
before progressing into a new Phase II trial.
As an R&D company, we understand that inconclusive results
are, occasionally, part of the process which allow us to better
understand our products; what works well and not so well and,
therefore, make the right decisions before entering into a final
Phase III trial.
Advancing our new product pipeline to boost our addressable
market.
In November 2015, we successfully completed an oversubscribed
equity issue to reinforce our pipeline and provide the Company with
more flexibility to pursue commercial opportunities, whether
organic or acquisitive. As a result of this fundraising, we have
put in place several important projects:
Acarovac Quattro. The Company is developing a state-of-the-art
product in the perennial segment of the market utilising our highly
successful Pollinex Quattro technological platform for house dust
mite, the most important allergen in this segment. The Directors
believe this product will be best-in-class, using the short course
concept based on Allergoid + MCT + the adjuvant MPL. In a market
testing initiative, we launched Acarovac Plus(TM) in Spain two
years ago as a named patient product based on Allergoid + MCT but
without the adjuvant. The product is developing well and we
recently announced the publication of a one-year follow-up study of
patients using Acarovac Plus(TM) in the peer review journal
Immunotherapy. Patients reported statistically significant
improvements in satisfaction scores after one year in relation to
overall effectiveness and convenience of the treatment.
Polyvac Peanut. Food allergy is a significant and strategically
important new area for the Group with peanut allergy treatments
alone being an $8 billion p.a. (The Journal of Allergy and Clinical
Immunology 2016. 1% of US population. EACCI Food Allergy and
Anaphylaxis Guidelines Group 2016 0.2% of Western European
Population. Management estimate of annual treatment of USD2,000)
addressable market globally. The Group has been working on proof of
concept studies using the acquired Virus Like Particles (VLP)
technology licence in the development of Polyvac Peanut, a new
injectable vaccine immunotherapy treatment for allergy sufferers.
The proof of concept work is progressing well.
Growth Acceleration. The Group is keen to increase significantly
its market share to a level where it can invest significant amounts
on R&D over the long term while continuing to improve its
margins. The current portfolio is predominantly subcutaneous and
the Group aims to be the leader in this segment of the market by
2020, reaching a market share of about 20%. The return on the
investment in sales and marketing can be seen in the very strong
growth and gain in market share.
The Company's science department has been focused on supporting
our clinical programs and also developing technologies that make a
difference. Examples of this are the Allergomics project, MCT,
Adjuvant Systems, seven published papers and 20 posters to improve
understanding of immunotherapy.
The supply operations team has done a fantastic job providing
unparalleled level of care, with more than 99% of our orders
completed on time and supporting the Group with outstanding
customer service from beginning to end. This is a clear indication
of the team's priorities which are putting patients first and total
commitment with the highest quality standards.
Outlook
The Group's management team expects revenue for 2017 to show
continued growth rates subject to a stable euro/sterling exchange
rate, with the investment in sales driving increased market share.
The cost of goods is likely to increase roughly in line with
revenue. Overheads are likely to increase significantly, reflecting
the investment in organic growth. Research and development costs
for the year are expected to be substantially less in aggregate
than 2016, with only the much smaller tolerability and dosing trial
for the US market, subject to regulatory approval, and with Europe
experiencing a similar level of investment.
The allergy immunotherapy sector continues to undergo
significant change and within this context our established and
innovative product base continues to gain traction. We have taken a
significant step forward in our strategy to become a global leading
player in the SCIT market, which would have been impossible without
the effort, dedication and commitment of our whole team. We look
forward to the future with confidence in continued growth given our
strong and expanded European presence, future product development
pipeline and geographic expansion opportunities.
Manuel Llobet
CEO
23 September 2016
Financial Review
Overview
The results for the twelve months to 30 June 2016 demonstrate
continuing profitability of the core business before R&D
expense, with an operating profit excluding R&D of GBP4.3
million (2015: GBP3.8 million). Including R&D expense of
GBP16.2 million (2015: GBP3.1 million), the Group reported an
operating loss of GBP12.0 million (2015: profit GBP0.7 million).
The operating loss includes a non-cash charge of GBP2.0 million in
relation to the fair valuation of forward exchange contracts and a
non-cash credit of GBP2.4 million for the revaluation at the
balance sheet date of US dollar cash deposits. The increased
investment in clinical studies was due to the commencement of
trials related to the US programme and the European Birch Dosing
Study. The Alerpharma group acquired in June 2015 added revenue of
GBP1.7 million (2015: GBP0.2 million) and a loss after tax of
GBP0.6 million (2015: GBPnil). The Alerpharma loss included charges
relating to the restructuring of the Spanish operations. The net
loss after tax for the period was GBP13.1m (2015: profit of
GBP0.1m)
Revenue
Despite a weaker weighted average euro exchange rate against
sterling during the year compared to the prior year, revenue
increased by 12% to GBP48.5 million (2015: GBP43.2 million). The
weighted average euro exchange rate in the year was EUR1.36=GBP1
compared to EUR1.27 in the previous year; the weaker euro
negatively impacted revenue by GBP3.0 million. Although the vaccine
markets in Europe did not grow significantly, revenue at constant
currency* was 19% higher at GBP51.5 million (2015: GBP43.2 million)
as shown in the table below:
2016 2016 2016 2015 2015 2015
Germany Other Total Germany Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 28.5 20.0 48.5 27.1 16.1 43.2
Add rebates 3.9 - 3.9 2.9 - 2.9
Gross revenue 32.4 20.0 52.4 30.0 16.1 46.1
Adjustment to retranslate at prior year foreign exchange rate 2.4 0.9 3.3
Gross revenue at constant currency* 34.8 20.9 55.7 30.0 16.1 46.1
--------------------------------------------------------------- -------- ------ ------ -------- ------ ------
Revenue 28.5 20.0 48.5 27.1 16.1 43.2
Adjustment to retranslate at prior year foreign exchange rate 2.1 0.9 3.0
-------- ------ ------ -------- ------ ------
Revenue at constant currency* 30.6 20.9 51.5 27.1 16.1 43.2
* Constant currency uses prior year weighted average exchange rates to translate current year
foreign currency denominated revenue to give a year on year comparison excluding the effects
of foreign exchange movements.
-------------------------------------------------------------------------------------------------------------------
The Group has continued to grow its revenue in markets outside
Germany in order to diversify the reliance on any one market.
Revenue from Germany was 59% (2015: 63%) of total reported revenue.
The key flagship product Pollinex Quattro, which accounts for 45%
of total sales, grew strongly in the year at a double digit
constant currency growth rate. In addition to the sale of allergy
vaccines, the Group has continued to look to increase its revenue
from other products, including synbiotics. Total sales from other
products contributed GBP3.6 million for the year ended 30 June 2016
(2015: GBP3.2 million).
Revenue in Germany grew well in the year with revenue at
constant currency increasing to GBP30.5 million (2015: GBP27.1
million); an increase of 13%.
All the main European markets exhibited double digit sales
growth at constant currency with Spain (excluding Alerpharma)
showing 35%; The Netherlands 22%; Austria 25%, Italy 17% and
Germany 13%.
Gross Profit
With the increased sales, cost of sales rose to GBP14.1 million
(2015: GBP12.2 million). The gross margin was 71% (2015: 72%),
leading to a gross profit of GBP34.4 million (2015: GBP31.1
million). At constant currency, the gross margin would have risen
to 73%.
Operating Expenses
Total overheads are GBP16.1 million higher against the prior
year at GBP46.5 million (2015: GBP30.4 million) due to R&D
expenditure which increased by GBP13.1m to GBP16.2 million (2015:
GBP3.1 million) mainly in relation to the US Grass and European
PQBirch dose studies undertaken during the year.
Sales, marketing and distribution costs which were mainly
continental European, increased by GBP3.1 million to GBP20.2
million (2015: GBP17.1 million) as the Group invested in improving
its marketing and sales infrastructure. Administration expenses
fell slightly to GBP10.1 million (2015: GBP10.2 million), The major
driver behind this decrease was foreign exchange; the Company
booking a non-cash gain of GBP2.4m on its US dollar cash deposits
due to the weakening pound. (2015: GBP1.1 million loss). There was
also a loss on the re-valuation of euro assets of GBP2 million
(2015: GBP0.4 million gain). The remainder of the increase was due
to increased support costs on the Company's IT systems to comply
with new German banking requirements, acquisition fees relating to
the Alerpharma purchase and staff employment costs. Following the
year end, $10.6m of the cash balance was converted to sterling to
reduce income statement volatility.
Tax
The current year tax charge is predominately made up of
provisions for tax in the Italian and German subsidiaries. The tax
charge in the prior year relates mainly to the reversal of brought
forward deferred tax assets.
Balance Sheet
Property, plant and equipment increased by GBP0.9 million to
GBP9.7 million as a result of exchange rate fluctuations and
investment in new manufacturing plant. Goodwill increased to GBP3.3
million due solely to the stronger euro exchange rate at the
balance sheet date (2015: GBP3.0 million), whilst other intangible
assets have risen by GBP0.1 million, with an increase due to
foreign exchange changes mostly offsetting the amortisation charge
for the year.
Total current assets, excluding cash, have increased by GBP1.6
million to GBP14.2 million (2015: GBP12.6 million). The fair value
of derivative financial instruments changed from an asset of GBP0.8
million in 2015 to a liability of GBP1.2m in 2016 as the euro
strengthened following the EU referendum vote shortly before the
year end. Inventory increased by GBP1.0 million as the Group
prepares for increased sales of its products in the coming year.
Trade debtors have increased (mainly in Germany and Italy)
reflecting the increased sales in those regions. Cash and cash at
hand increased to GBP23.4m from GBP21.2m in 2015.
Retirement benefit obligations, which relate solely to the
German pension scheme, increased to GBP10.2 million (2015: GBP6.8
million). The increase in the liability was mainly driven by a fall
in the discount rate and the euro/sterling exchange rate.
Net cash used in operations amounted to GBP11.8 million (2015:
GBP3.1 million cash generated) due primarily to the significant
investment in the year in the R&D programme.
Financing
In November 2015, 41,005,500 new ordinary shares of 0.1 pence
each ("Ordinary Shares") were placed with institutional and other
investors raising proceeds of GBP11.5 million before expenses
(GBP11.0 million net) to be used to fund various projects and
opportunities.
The Group's debt on its balance sheet relates to Spain and
consists of the loans acquired as a result of the Alerpharma
acquisition (GBP1.7 million) and a new loan facility (GBP1.7
million) arranged to fund development of products in the Spanish
market. The overdraft facility was unused at 30 June 2016 but has
been renewed for a further 12 months to cover seasonal funding
requirements.
The Directors believe that the Group will have adequate
facilities for the foreseeable future and accordingly they continue
to adopt the going concern basis in preparing the full year
results.
Other matters
On 23 February 2015, the Company received notification that The
Federal Office for Economics and Export ("BAFA") had made a
decision to reverse their preliminary exemption to the increased
manufacturers rebate in Germany for the period July to December
2012. The Company was granted a preliminary exemption to the
increased rebate for this period by BAFA in 2013. The Company
recognised revenue of EUR1.4 million (GBP1.1 million at that time)
against this exemption in the year ended 30 June 2013. All other
preliminary exemptions (granted for periods up to 30 June 2012)
have previously been ratified as final by BAFA. After taking legal
advice, the Company has lodged an appeal against this decision and
is confident that the exemption will be re-instated. Therefore, as
at 30 June 2016, no provision has been recognised for the repayment
of the rebate refund of EUR1.4 million (GBP1.2 million). This
position will be kept under review.
Nicolas Wykeman
Finance Director
23 September 2016
Consolidated Income Statement
for the year ended 30
June 2016
Year Year Year Year
to to to to
30 30 30 June 30
June June June
2016 2016 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000
Note
-------------------------------- ----- --------- ---------- --------- ---------
Revenue 3 48,509 43,230
Cost of sales (14,070) (12,179)
-------------------------------- ----- --------- ---------- --------- ---------
Gross profit 34,439 31,051
Sales, marketing and
distribution costs (20,223) (17,060)
Administration expenses
- other (10,094) (10,218)
Research and development
costs (16,223) (3,121)
-------------------------------- ----- --------- ---------- --------- ---------
Administration expenses (26,317) (13,339)
Other income 150 73
-------------------------------- ----- --------- ---------- --------- ---------
Operating (loss)/ profit (11,951) 725
Finance income 6 180 147
Finance expense 5 (293) (218)
-------------------------------- ----- --------- ---------- --------- ---------
(Loss)/ Profit before
tax (12,064) 654
Income tax (1,008) (546)
-------------------------------- ----- --------- ---------- --------- ---------
(Loss)/ Profit for the
period (13,072) 108
-------------------------------- ----- --------- ---------- --------- ---------
(Loss)/ Earnings per
share 7
Basic (pence per share) (2.29p) 0.02p
Diluted (pence per share) (2.29p) 0.02p
Consolidated Statement
of Comprehensive Income
for the year ended 30
June 2016
Year Year
to to
30 30
June June
2016 2015
GBP'000 GBP'000
(Loss)/Profit for the
period (13,072) 108
Items that will not be
reclassified subsequently
to profit or loss:
Remeasurement of net
defined benefit liability (1,688) (932)
Remeasurement of investments
- retirement benefit
assets (16) 8
Deferred tax- freehold (43) -
land and buildings
Revaluation gains - freehold 119 -
land and buildings
Items that may be reclassified
subsequently to profit
or loss:
Exchange differences
on translation of foreign
operations (744) (119)
Total comprehensive loss (15,444) (935)
================================ ===== ========= ========== ========= =========
Consolidated Balance Sheet 30 June 30 June
2016 2015
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 9,667 8,750
Intangible assets - goodwill 3,271 2,980
Intangible assets - other 2,084 2,020
Investments - retirement
benefit asset 4,045 3,160
Total non-current assets 19,067 16,910
Current assets
Inventories 8 7,692 6,747
Trade and other receivables 6,514 5,060
Cash and cash equivalents 23,406 21,199
Derivative financial instruments - 783
---------------------------------------- ----- ---------- ---------
Total current assets 37,612 33,789
---------------------------------------- ----- ---------- ---------
Total assets 56,679 50,699
---------------------------------------- ----- ---------- ---------
Liabilities
Current liabilities
Trade and other payables (11,045) (7,169)
Current borrowings 9 (295) (251)
Derivative financial instruments (1,180) -
Total current liabilities (12,520) (7,420)
Net current assets 25,092 26,369
---------------------------------------- ----- ---------- ---------
Non-current liabilities
Retirement benefit obligations (10,174) (6,755)
Deferred taxation liability (334) (298)
Non-current provisions (257) (211)
Other non-current liabilities - (113)
Long term borrowings 9 (3,070) (1,433)
---------------------------------------- -----
Total non-current liabilities (13,835) (8,810)
---------------------------------------- ----- ---------- ---------
Total liabilities (26,355) (16,230)
---------------------------------------- -----
Net assets 30,324 34,469
======================================== ===== ========== =========
Equity
Capital and reserves
Issued share capital 10 599 556
Share premium 102,392 91,463
Merger reserve - shares
issued by subsidiary 40,128 40,128
Reserve - EBT - 67
Reserve - share based payments 741 591
Revaluation reserve 1,254 1,178
Foreign exchange reserve (884) (140)
Retained earnings (113,906) (99,374)
---------------------------------------- ----- ---------- ---------
Total equity 30,324 34,469
======================================== ===== ========== =========
These financial statements were approved by the Board of
Directors and authorised for issue on 23 September 2016 and signed
on its behalf by
Manuel Llobet Nicolas Wykeman
Chief Executive Officer Finance Director
Registered number: 05141592
ALLERGY THERAPEUTICS PLC
Consolidated Statement of Changes in Equity
Issued Share Merger Reserve Reserve Reserve - Foreign Retained Total
Capital premium reserve - - - share convertible Revaluation exchange earnings equity
shares shares based loan note reserve reserve
issued by held in payment
subsidiary EBT
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2014 420 67,716 40,128 67 465 3,652 1,178 (21) (98,530) 15,075
Exchange differences
on translation of
foreign operations - - - - - - - (119) - (119)
Remeasurement of net
defined benefit
liability - - - - - - - - (932) (932)
Remeasurement of
investments -
retirement benefit
assets - - - - - - - - 8 8
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
Total other
comprehensive income - - - - - - - (119) (924) (1,043)
Profit for the period
after tax - - - - - - - - 108 108
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
Total comprehensive
income - - - - - - - (119) (816) (935)
Transactions with
shareholders
-Convertible loan
note - - - - - - - - (86) (86)
Conversion of loan
note to equity 42 3,832 - - - (3,652) - - (222) -
Share based payments - - - - 406 - - - - 406
Shares issued 94 20,909 - - - - - - - 21,003
Share issue costs - (994) - - - - - - (994)
Transfer of lapsed
options to retained
earnings - - - - (280) - - - 280 -
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
At 30 June 2015 556 91,463 40,128 67 591 - 1,178 (140) (99,374) 34,469
========= ======== =========== ======== ======== ============ ============= ========= ========== =========
Exchange
differences on
translation of
foreign operations - - - - - - - (744) - (744)
Remeasurement of net
defined benefit
liability - - - - - - - - (1,688) (1,688)
Deferred tax (Land
and buildings) - - - - - - (43) - - (43)
Valuation gain taken
to equity (Land and
Buildings) - - - - - - 119 - - 119
Remeasurement of
investments -
retirement benefit
assets - - - - - - - - (16) (16)
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
Total other
comprehensive income - - - - - - 76 (744) (1,704) (2,372)
Loss for the period
after tax - - - - - - - - (13,072) (13,072)
--------- -------- ----------- -------- -------- ------------ ------------- --------- ---------- ---------
Total comprehensive
income - - - - - - 76 (744) (14,776) (15,444)
Share based payments - - - - 327 - - - - 327
Shares issued 43 11,441 - - - - - - - 11,484
Share issue costs - (512) - - - - - - - (512)
Transfer of lapsed
options to retained
earnings - - - - (177) - - - 177 -
Transfer of EBT
reserve to retained
earnings - - - (67) - - - - 67 -
At 30 June 2016 599 102,392 40,128 - 741 - 1,254 (884) (113,906) 30,324
========= ======== =========== ======== ======== ============ ============= ========= ========== =========
Consolidated Cash Flow Statement
Year Year
to to
30 June 30 June
2016 2015
As restated
GBP'000 GBP'000
Note
--------------------------------------- --- ----- --------- ------------
Cash flows from operating activities
(Loss)/Profit before tax (12,064) 654
Adjustments for:
Finance income 6 (180) (147)
Finance expense 5 293 218
Non cash movements on defined
benefit pension plan 295 290
Depreciation and amortisation 1,666 1,293
Charge for share based payments 327 406
Movement in fair valuation of
derivative financial instruments 1,963 (438)
Foreign exchange revaluation
on US dollar cash deposits (2,394) 1,118
(Increase) in trade and other
receivables (368) (448)
(Increase) in inventories (585) (424)
(Decrease) / increase in trade
and other payables (497) 1,079
-------------------------------------------- ----- --------- ------------
Net cash (used)/ generated by
operations (11,544) 3,601
Bank loan fees and interest
paid (388) (304)
Income tax 93 (174)
-------------------------------------------- -----
Net cash (used)/ generated by
operating activities (11,839) 3,123
Cash flows from investing activities
Interest received - 65
Investments (260) (275)
Acquisition of Alerpharma Group - (2,653)
Cash acquired on acquisition
of Alerpharma Group - 1,301
Payments for intangible assets - (13)
Payments for property plant
and equipment (1,232) (1,091)
Net cash used in investing activities (1,492) (2,666)
Cash flows from financing activities
Proceeds from issue of equity
shares (net of issue costs) 10,967 20,079
Repayment of borrowings (86)
Proceeds from borrowings 1,658 -
Net cash generated by financing
activities 12,539 20,079
-------------------------------------------- ----- --------- ------------
Net (decrease)/ increase in
cash and cash equivalents (792) 20,536
Effects of exchange rates on
cash and cash equivalents 2,999 (1,366)
Cash and cash equivalents at
the start of the period 21,199 2,029
-------------------------------------------- ----- --------- ------------
Cash and cash equivalents at
the end of the period 23,406 21,199
============================================ ===== ========= ============
Cash at bank and in hand 23,406 21,199
Bank overdraft - -
----------------------------- ------- -------
Cash and cash equivalents
at the end of the period 23,406 21,199
----------------------------- ------- -------
ALLERGY THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006.
Whist the financial information included in this announcement
has been prepared in accordance with EU adopted IFRS, this
announcement itself does not contain sufficient information to
comply with EU adopted IFRS. Statutory accounts for the year ended
30 June 2015 have been delivered to the Registrar of Companies and
those for the year to 30 June 2016 will be delivered following the
Company's annual general meeting. The auditors have reported on
those accounts. Their reports were unqualified and did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under section 498(2) or
(2) Companies Act 2006 or equivalent preceding legislation.
Allergy Therapeutics is a specialty pharmaceutical company
focused on allergy vaccination.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
in issue as adopted by the European Union ('EU') and with those
parts of the Companies Act 2006 that are relevant to the Group
preparing its accounts in accordance with EU adopted IFRS.
Allergy Therapeutics plc is the Group's parent company. The
Company is a limited liability company incorporated and domiciled
in England. The address of Allergy Therapeutics plc's registered
office and its principal place of business is Dominion Way,
Worthing, West Sussex and its shares are listed on the Alternative
Investment Market (AIM).
The comparative figures for the 12 months ended 30 June 2015 in
the cash flow statement have been restated to properly reflect the
treatment of the foreign exchange differences on the Group's US
dollar cash deposits. Whilst the net cash generated by operations
has increased by GBP1.1m to GBP3.6m, there is no overall change in
the total net movement on cash and cash equivalents for the year
(GBP19.2m). The effects of exchange rates on cash and cash
equivalents has decreased by GBP1.1m to GBP1.4m.
The consolidated financial statements for the year ended 30 June
2016 (including comparatives) have been prepared under the
historical cost convention except for land and buildings and
derivative financial instruments which have been measured at fair
value. They were approved and authorised for issue by the Board of
Directors on 23 September 2016.
New standards adopted
There are no IFRS or IAS interpretations that are effective for
the first time in this financial period that have had a material
impact on the Group.
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group in the 30 June 2016 financial statements
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. Not all of
these have yet been adopted by the EU. The Group has not adopted
any of these pronouncements early. The new standards, amendments
and interpretations that are expected to be relevant to the Group's
financial statements are as follows:
IFRS 9 Financial Instruments (effective 1 January 2018)
This IFRS replaces IAS 39 and addresses the usefulness for users
of financial statements by simplifying the classification and
measurement requirements for financial instruments. Management are
currently assessing the detailed impact on the Group's financial
statements.
IFRS 15 Revenue from Contracts with Customers (issued in May
2014 and effective 1 January 2018)
IFRS 15 supersedes current revenue recognition guidance
including IAS 18, Revenue, and specifies how and when entities
recognise revenue as well as requiring such entities to provide
users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based
five-step model to be applied to all contracts with customers.
IFRS 16 Leases (effective 1 January 2019)
IFRS 16 removes the current distinction between an operating and
finance lease, introducing consistent requirements for all leases
similar to the current finance lease accounting.
Management anticipate that the above pronouncements will be
adopted in the Group's financial statements in line with the
effective dates stated above. Management are currently assessing
their detailed impact on the Group's financial statements.
Other new standards and interpretations have been issued but are
not expected to have a material impact on the Group's financial
statements.
Going concern
Operating loss in the period was GBP12.0 million (2015: profit
GBP0.7 million); net cash outflow from operations was GBP11.5
million (2015: inflow GBP3.6 million). The primary cause of the
operating loss and cash outflow is the increased R&D
expenditure which has been funded from the 2015 share placing which
raised GBP20.0 million for the US R&D programme. Excluding
R&D the Group would have reported an operating profit of GBP4.3
million (2015: GBP3.8 million). The Directors do not consider the
current operating loss to be a cause for concern.
The Group has prepared detailed budgets, including cash flow
projections, for the period to 30 September 2017. These projections
include assumptions on the trading performance of the operating
business and the continued availability of the existing overdraft
facilities. After making appropriate enquiries, which included a
review of the annual budget, by considering the cash flow
requirements for the foreseeable future and the effects of sales
and other sensitivities on the Group's funding plans, the Directors
continue to believe that the Group will have adequate resources to
continue in operational existence for the foreseeable future and
accordingly have applied the going concern principle in drawing up
the financial statements. In reaching this view, the Directors have
considered and prioritised the actions that could be taken to
offset the impact of any shortfall in operating performance.
2. ACCOUNTING POLICIES (extract)
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented unless otherwise
stated.
Consolidation
The Group's financial statements consolidate those of the parent
company and all of its subsidiaries drawn up to 30 June 2016. The
parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated on the
date control ceases.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated
except for unrealised losses if they show evidence of
impairment.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring accounting policies used into
line with those used in the Group.
The Group applies the acquisition method in accounting for
business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group, which
includes the fair value of any liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as
incurred.
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree's financial
statements prior to the acquisition. Assets acquired and
liabilities assumed are measured at their acquisition-date fair
values.
Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the excess of the sum of a)
fair value of consideration transferred, b) the recognised amount
of any non-controlling interest in the acquiree and c)
acquisition-date fair value of any existing equity interest in the
acquiree, over the acquisition-date fair values of identifiable net
assets. If the fair values of identifiable net assets exceed the
sum calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately.
Goodwill
Goodwill arising from business combinations is the difference
between the fair value of the consideration paid and the fair value
of the assets and liabilities and contingent liabilities acquired.
It is initially recognised as an intangible asset at cost and is
subject to impairment testing on an annual basis or more frequently
if circumstances indicate that the asset may have been impaired.
Details of impairment testing are described in the accounting
policies.
Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where they
satisfy the definition of an asset and be identifiable. The cost of
such intangible assets is their fair value at the acquisition
date.
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
are amortised over their useful economic life as follows
Trade names 15 years
Customer relationships 5 years
Know-how and patents 10 years
Distribution agreements 15 years/ period of
contract
Externally acquired intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses.
Intangible assets are amortised over their useful economic life
as below and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for intangible
assets is reviewed at least at each financial year end.
Computer software 7 years
Other intangibles 15 years
Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset is
accounted for by changing the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets is recognised in the
consolidated income statement in the expense category consistent
with the function of the intangible asset in either administration
costs or marketing and distribution costs.
Internally generated intangible assets
An internally generated intangible asset arising from
development (or the development phase) of an internal project is
recognised if, and only if, all of the following have been
demonstrated:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale
-- the intention to complete the intangible asset and use or sell it
-- the ability to use or sell the intangible asset
-- how the intangible asset will generate probable future economic benefits
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally generated intangible asset can be
recognised, research and development expenditure is charged to the
consolidated income statement in the period in which it is
incurred.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses. Amortisation shall
begin when the asset is available for use, i.e. when it is in the
location and condition necessary for it to be capable of operating
in the manner intended by management.
Amortisation of all intangible assets is calculated on a
straight line basis over the useful economic life using the
following annual rates:
Manufacturing know-how 15 years
Non-competing know-how 4 years
Other intangibles 15 years
These periods were selected to reflect the assets' useful
economic lives to the Group.
The cost of amortising intangible assets is included within
administration expenses in the consolidated income statement.
Revenue recognition
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for goods
supplied and services provided, net of statutory rebates paid in
Germany and excluding value added tax. Revenue is recognised upon
the performance of services or transfer of risk to the
customer.
Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions have been satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods, which is generally when the
customer has physically received the goods.
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold which is again when the customer has
physically received the goods.
-- the amount of revenue can be measured reliably.
-- it is probable that the economic benefits associated with the
transaction will flow to the Group, and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Where the Group provides services to new distributors, which
mainly include marketing and customer information, in exchange for
an up-front lump sum fee, revenue is recognised in line with these
services being delivered. Services are fair valued and pro-rated to
agree to the total fee receivable. Where there is an on-going
responsibility to provide services, the balance relating to those
services is recognised in future periods as the service is
performed.
Part of the Group's overseas sales are made through distributors
and agents.
Arrangements for sales through distributors
For all distributor arrangements, the distributor is invoiced at
the time of delivery and title to the product passes upon full and
final settlement of the invoice to which the delivery relates. The
distributor has full discretion over the setting of the final
selling price to the end customer and is responsible for all
customer returns of product.
It is considered that the significant risks and rewards of
ownership of the product are transferred to the distributor at the
point of delivery and therefore revenue is recognised at this point
in accordance with IAS 18.
Where the Group sells to distributors at initially low margin
and there is further consideration receivable by the group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances, the deferred consideration is accrued at a discounted
value at the point of delivery.
Arrangements for sales through agents
For all agreements with agents, the agent places orders with the
Group and goods are then shipped to them. The Group however, holds
title to these products until they are sold on to a third party.
The selling price to the end user is set by the relevant Government
body and the agent receives a fixed percentage of this selling
price. The agent notifies the Group monthly on stock levels and
this is reconciled to a statement which generates an invoice for
payment by the agent. The Group is responsible for any customer
returns of product.
It is considered that the significant risks and rewards of
ownership of the product are not transferred from the Group until
the agent has sold the product to a third party and therefore
revenue on these sales is recognised only at this point by the
Group in accordance with IAS 18.16.
Statutory Rebates
In Germany, pharmaceutical companies are required to pay a
manufacturer's rebate to the government as a contribution to the
cost of medicines paid for by the State and private health funds.
This is similar to a sales tax and the rebate is therefore treated
as a deduction from revenue in accordance with IAS18.8.
Rebates have been in the region of 6% (inclusive of VAT).
However, in 2010 the German government increased the rate to 16%.
In certain circumstances, companies could apply for an exemption
from the rebate increase, for limited periods at a time. If the
application for the exemption is successful, a preliminary
exemption is normally granted to be converted to a final exemption
at a later date when audited financial statements are
available.
Allergy Therapeutics plc has been successful in obtaining
preliminary exemptions up to 30 June 2012, which have been
subsequently confirmed as final.
Revenue is recognised initially net of the full rebate, as at
that stage it is not considered probable that any refund of the
rebate will be received. When the preliminary exemption is granted,
it is considered probable, based on our past experience, that the
rebate refund will be received. Therefore, as it is probable that
the economic benefits will flow to Allergy Therapeutics Plc, in
accordance with IAS 18.14(d), revenue is adjusted at that time.
As of April 2014, the Rebate has been set at 7%.
Inventories
Inventory is carried at the lower of cost or net realisable
value. The costs of raw materials, consumables, work in progress
and finished goods are measured by means of weighted average cost
using standard costing techniques. The cost of finished goods and
work in progress comprises direct production costs such as raw
materials, consumables, utilities and labour, and production
overheads such as employee costs, depreciation, maintenance and
indirect factory costs. Standard costs are reviewed regularly in
order to ensure relevant measures of utilisation, production lead
time and appropriate levels of manufacturing expense are reflected
in the standards.
Net realisable value is calculated based on the selling price in
the normal course of business less any costs to sell.
Research & Development Investment Credits
Investment credits are directly related to the Group's
qualifying research and development expenditure and have a monetary
value that is independent of the Group's tax liability. Such
investment credits are dealt with in other income in the
consolidated income statement.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. These judgements and
estimates are based on management's best knowledge of the relevant
facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the
financial statements. Information about such judgements and
estimation is contained in the accounting policies and/or the Notes
to the financial statements and the key areas are summarised
below:
Judgements in applying accounting policies
a) Capitalisation of development costs requires analysis of the
technical feasibility and commercial viability of the project
concerned. Capitalisation of the costs will be made only where
there is evidence that an economic benefit will accrue to the
Group. To date no development costs have been capitalised and all
costs have been expensed in the income statement as research and
development costs. Costs expensed in the year amounted to GBP16.2
million (2015: GBP3.1 million).
b) Where the Group sells to distributors at initially low margin
and there is further consideration receivable by the group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances, the deferred consideration is accrued at a discounted
value at the point of delivery.
The Directors considered the following points in applying this
accounting treatment:
Although a significant portion of the sales price is received
upon a further sale to an end customer, substantially all the risks
and rewards of ownership are passed to the distributor when the
goods are shipped, and the distributor is acting as principal (not
merely as agent) when arranging to resell the goods. The Directors
have reached this conclusion because;
i. The group does not have any continued managerial involvement
in the distributor's onward sale of goods;
ii. The distributor does not have the right to return any goods.
More information on the reasoning behind the treatment of sales
to distributors can be found in the 'Sale of goods' accounting
policy description.
c) Land and buildings are carried at valuation and are re-valued
with sufficient regularity so that the carrying amount and the fair
value are not materially different. The Italian freehold property
was revalued in June 2016 by independent valuers. The Italian
freehold property was revalued to fair value at the reporting date
based on this valuation. The freehold property in Spain was
revalued in June 2015. The Directors do not consider an impairment
provision to be required in respect of the freehold property in
Spain.
d) The Group had been awarded a provisional exemption to the
increased statutory rebate charge in Germany for the period July to
December 2012 by BAFA. Revenue of GBP1.1 million (equivalent of
EUR1.4 million) was recognised in the year ended 30 June 2013 in
relation to this exemption and the refund from the German
authorities was subsequently collected. In February 2015, the
provisional exemption was withdrawn by BAFA. The Group has lodged
an appeal and, following legal advice, believe that the exemption
will be re-instated. While the Group is confident that the
exemption will be confirmed, there is a possibility that this will
not happen. If the exemption is not confirmed, then the Group will
ultimately have to repay EUR1.4 million (GBP1.2 million) with a
corresponding impact on net income and net assets.
Sources of estimation uncertainty
a) Depreciation rates are based on estimates of the useful lives
and residual values of the assets involved. There is inherent
uncertainty in the useful lives of assets, which means that they
are constantly reviewed by management.
b) Estimates of future profitability are required for the
decision whether or not to carry forward a deferred tax asset.
c) Determining whether goodwill is impaired requires an
estimation of the value in use of the cash generating unit to which
the goodwill has been allocated. This value in use calculation
requires an estimation of the future cash flows expected to arise
from the cash generating unit and a suitable discount rate in order
to calculate the present value.
d) Inventory standard costs are reviewed regularly in order to
ensure relevant measures of utilisation, production lead time and
appropriate levels of manufacturing expense are reflected in the
standards.
e) In relation to the accrued additional revenue due from
distributors referred to in the Judgements section (point (b)
above); there is some uncertainty that the additional revenue will
crystallise as it is dependent on a further sale by the
distributor. The Directors consider that the additional
consideration can be measured reliably because it is based on a
fixed list price, and our past experience indicates that the
distributor will sell the vaccines.
The Directors have assessed that the accrued consideration of
GBP0.1 million is recoverable and will crystallise in future
periods and has been carried forward in prepayments and accrued
income (2015: GBP0.1m).
f) The Group operates equity-settled share based compensation
plans for remuneration of its employees comprising Long Term
Incentive Plan (LTIP) schemes. Employee services received in
exchange for the grant of any share based compensation are measured
at their fair values and expensed over the vesting period. The fair
value of this compensation is dependent on whether the provisional
share awards will ultimately vest, which in turn is dependent on
future events which are uncertain. The Directors use their judgment
and experience of previous awards to estimate the probability that
the awards will vest, which impacts the fair valuation of the
compensation.
3. REVENUE
An analysis of revenue by category is set out in the table
below:
2016 2015
GBP'000 GBP'000
Sale of goods 48,468 43,205
Rendering of services 41 25
48,509 43,230
======== ========
Rendering of services relates to the supply of services to a new
distributor to assist them in setting up operations in their
territory.
4. SEGMENTAL REPORTING
The Group's operating segments are reported based on the
financial information provided to the Executive Directors, who are
defined as the Chief Operating Decision-Maker (CODM), to enable
them to allocate resources and make strategic decisions.
The CODM reviews information based on geographical market
sectors and assesses performance at an EBITDA (operating profit
before interest, tax, depreciation and amortisation) and operating
profit level. Management have identified that the reportable
segments are Central Europe (which includes the following operating
segments; Germany, Austria, Switzerland and The Netherlands),
Southern Europe (Italy and Spain), the UK and Rest of World.
For all material regions that have been aggregated, management
consider that they share similar economic characteristics. They are
also similar in respect of the products sold; types of customer;
distribution channels; and regulatory environments.
Revenue by segment
Revenue Inter Total Revenue Inter Total
from External Segment Segment from Segment Segment
Customers Revenue Revenue External Revenue Revenue
Customers
2016 2016 2016 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Central
Europe
Germany 28,484 28,484 27,137 27,137
Other 6,688 6,688 5,997 5,997
--------------- --------- --------- ----------- --------- ---------
35,172 35,172 33,134 33,134
--------------- --------- --------- ----------- --------- ---------
Southern
Europe
Italy 4,741 4,741 4,593 4,593
Spain 4,590 4,590 2,295 2,295
Other 229 229 - -
--------------- --------- --------- ----------- --------- ---------
9,560 9,560 6,888 6,888
--------------- --------- --------- ----------- --------- ---------
UK 1,856 17,862 19,718 1,054 22,900 23,954
Rest of
World 1,921 1,921 2,154 2,154
--------------- --------- --------- ----------- --------- ---------
48,509 17,862 66,371 43,230 22,900 66,130
=============== ========= ========= =========== ========= =========
Revenues from external customers in all segments are derived
principally from the sale of a range of pharmaceutical products
designed for the immunological treatment of the allergic
condition.
Rest of World revenues include sales through distributors and
agents in several markets including Czech and Slovak Republics,
Canada and South Korea. These include rendering of services
revenues (Note 3). Inter-segment revenues represent sales of
product from the UK to the operating subsidiaries. The price is set
on an arms-length basis which is eliminated on consolidation.
The CODM also reviews revenue by segment on a budgeted constant
currency basis, to provide relevant year on year comparisons.
The following revenue table is based on a budget currency rate
of EUR 1.40: GBP1.00 which was the rate used in the 2016
budget.
Revenue Revenue
from from
External External
Customers Customers
2016 2015
GBP'000 GBP'000
Central Europe
Germany 27,699 28,719
Other 6,439 6,193
----------- -----------
34,138 34,912
Southern Europe 9,302 7,290
UK 1,851 1,053
Other 1,921 2,158
----------- -----------
47,212 45,413
=========== ===========
The Group has no customers which individually account for 10% or
more of the Group's revenue.
Depreciation and amortisation by segment
2016 2015
GBP'000 GBP'000
Central Europe 167 139
Southern Europe 404 143
UK 1,095 1,011
-------- --------
1,666 1,293
======== ========
EBITDA by segment
2016 2015
Allocated EBITDA GBP'000 GBP'000
Central Europe 407 (452)
Southern Europe (325) (93)
UK (10,367) 2,563
--------- --------
Allocated EBITDA (10,285) 2,018
Depreciation and amortisation (1,666) (1,293)
--------- --------
Operating (loss)/ profit (11,951) 725
Finance income 180 147
Finance expense (293) (218)
--------- --------
Profit before tax (12,064) 654
========= ========
Total assets by segment
2016 2015
GBP'000 GBP'000
Central Europe 12,119 8,692
Southern Europe 7,627 5,450
UK 59,585 58,809
----------- -----------
79,331 72,951
Inter-segment assets (2,432) (2,691)
Inter-segment investments (20,220) (19,561)
----------- -----------
Total assets per Balance Sheet 56,679 50,699
=========== ===========
Included within Central Europe are non-current assets to the
value of GBP2,523,000 (2015: GBP2,343,000) relating to Goodwill and
within Southern Europe assets to the value of GBP2,942,000 (2015:
GBP2,521,000) relating to freehold land and buildings. There were
no material additions (excluding foreign exchange differences) to
non-current assets in any country except the UK where non-current
asset additions totalled GBP1,433,000.
Total liabilities by segment
2016 2015
GBP'000 GBP'000
Central Europe (14,956) (9,779)
Southern Europe (6,658) (4,164)
UK (7,119) (4,874)
--------- ---------
(28,733) (18,817)
Inter-segment liabilities 2,378 2,587
--------- ---------
Total liabilities per Balance Sheet (26,355) (16,230)
========= =========
5. FINANCE EXPENSE
2016 2015
GBP'000 GBP'000
Interest on borrowing facility 57 27
Net interest expenses on defined benefit
liability 171 191
Other interest and charges 65 -
-------- --------
293 218
======== ========
6. FINANCE INCOME
2016 2015
GBP'000 GBP'000
Bank interest 90 22
Interest on investment assets 50 82
Other finance income 40 43
----------- -----------
180 147
=========== ===========
Other finance income relates to the unwinding of the discount on
accrued revenue.
7. EARNINGS PER SHARE
2016 2015
GBP'000 GBP'000
(Loss)/ Profit after tax attributable
to equity shareholders (13,072) 108
Shares Shares
'000 '000
Issued ordinary shares at start
of the period 545,848 409,867
Ordinary shares issued in the period
Issued ordinary shares at end of
the period 43,311 135,981
--------- --------
589,159 545,848
--------- --------
Weighted average number of ordinary
shares for the period 570,344 475,197
Potentially dilutive share options - 23,045
--------- --------
Weighted average number of ordinary
shares for diluted earnings per
share 570,344 498,242
Basic earnings per ordinary share/(loss)
(pence) (2.29p) 0.02p
Diluted earnings per ordinary share/(loss)
(pence) (2.29p) 0.02p
========= ========
The diluted loss per share does not differ from the basic loss
per share as the exercise of share options would have the effect of
reducing the loss per share and is therefore not dilutive under the
terms of IAS 33.
2016 2015
Number Number
Of Shares Of Shares
Weighted average number of ordinary
shares in issue 570,344 475,197
Potentially dilutive share options
Weighted average number of diluted
ordinary shares 18,885 23,045
---------- ----------
589,229 498,242
---------- ----------
8. INVENTORIES
2016 2015
GBP'000 GBP'000
Raw materials and consumables 1,604 1,675
Work in progress 3,142 2,937
Finished goods 2,946 2,135
-------- --------
7,692 6,747
======== ========
The value of inventories measured at fair value less cost to
sell was GBP425,000 (2015: GBP334,000).
The movement in the value of inventories measured at fair value
less cost to sell during the year gave rise to a charge of
GBP91,000 which was expensed to the consolidated income
statement.
9. BORROWINGS
2016 2015
GBP'000 GBP'000
Due within one year
Bank Loans 295 251
295 251
-------- --------
2016 2015
GBP'000 GBP'000
Due in more than one year
Bank Loans 3,070 1,433
3,070 1,433
-------- --------
There is an overdraft facility provided by The Royal Bank of
Scotland Plc which has a variable limit during the year up to a
maximum of GBP7 million. Interest on the overdraft is at the bank's
base rate plus a fixed margin of 2.50%. The facility is secured in
favour of The Royal Bank of Scotland Plc by means of debentures
granted by the Company and its principal subsidiaries and share
pledge agreements relating to Bencard Allergie GmbH, Allergy
Therapeutics Italia SRL and Allergy Therapeutics Iberica SL. The
overdraft facility is due for renewal in May 2017. The overdraft
was unused at 30 June 2016 (2015: Nil).
As part of the acquisition of Alerpharma SA, the group acquired
loans totalling EUR2,386,000 (GBP1,684,000). The loans are secured
by way of a charge on land and buildings owned by Alerpharma Group
SA.
Capital Repayments Due
Interest rate <1Year 1-5 Years >5 Years
GBP'000 GBP'000 GBP'000
Bank Inter
(1) 3 month Euribor + 0.55% 121 442 -
Bank Inter
(2) 1 month Euribor + 5.0% 39 154 182
Santander 12 month Euribor +
(1) 2.5% 111 460 28
Tecnoalcala Interest Free 24 97 48
Santander
(2) Fixed rate of 2.5% - 1,054 605
-------- ---------- ---------
295 2,207 863
-------- ---------- ---------
During the year, Allergy Therapeutics Iberica SL took out a new
loan with Santander for EUR2m at a fixed rate of 2.5% for a term of
7 years with a 2-year capital repayment delay. A warranty with
regard to this new loan was provided by Allergy Therapeutics
plc.
10. ISSUED SHARE CAPITAL
2016 2016 2015 2015
Shares GBP'000 Shares GBP'000
Authorised share
capital
Ordinary shares
of 0.10p each
1 July and 30 June 790,151,667 790 790,151,667 790
Deferred shares
of 0.10p each
1 July and 30 June 9,848,333 10 9,848,333 10
Issued and fully
paid
Ordinary shares
of 0.10p
At 1 July 545,847,919 546 409,866,831 410
Issued during the
year:
Share options exercised 2,305,089 2 188,500 -
Conversion of convertible
loan - - 41,674,938 42
Share placing 41,005,500 41 94,117,650 94
At 30 June 589,158,508 589 545,847,919 546
============ ======== ============ ========
Issued and fully
paid
Deferred shares
of 0.10p
At 1 July 9,848,333 10 9,848,333 10
Issued during the - - - -
year
At 30 June 9,848,333 10 9,848,333 10
============ ======== ============ ========
Issued share capital 599,006,841 599 555,696,252 556
============ ======== ============ ========
The deferred shares have no voting rights, dividend rights or
value attached to them.
Share options were exercised in the year with proceeds of
GBP2,000 (2015: GBP34,000).
In April 2012, Allergy Therapeutics plc issued a convertible
loan note to a major investor, CFR Pharmaceuticals SA (CFR). The
loan agreement stated that the loan of GBP4,042,469 would be repaid
on 20 April 2014 or an earlier date advised by the note holder
(with at least 15 business days' notice). On the repayment date,
the loan had to be repaid and on the same date the note holder had
to purchase 41,674,938 shares at a fixed price of 9.7p per share.
Interest is payable at a rate of 3% per annum during the term of
the notes.
The Directors concluded that the repayment of the principal and
the mandatory investment were linked such that in substance this
represents the conversion of the loan into a fixed number of
shares, and hence the loan note was split into a liability and an
equity component. The liability component of GBP222,000 represented
the present value of the interest payments on the loan, with the
balance of GBP3,820,000 treated as equity.
Before the conversion date of the loan, CFR and Allergy
Therapeutics plc mutually agreed to amend the agreement to defer
the repayment date until 31 March 2015. The only substantive effect
of this amendment was the agreement to pay further interest of
GBP135,000 over the remaining period of the loan. This is
effectively a loss on the remeasurement of the debt. As this was
incurred with an equity shareholder, it was treated as a
transaction with owners and dealt with directly in the statement of
changes in equity (2015: GBP86,000, 2014: GBP49,000).
On 31 March 2015 the convertible loan was repaid and on the same
date 41,674,938 shares at a fixed price of 9.7p per share were
issued to the note holder in accordance with the loan
agreement.
On 31 March 2015 94,117,650 new ordinary shares of 0.1 pence
each were placed with institutional and other investors at a fixed
price of 22.1p per share, raising GBP20 million net for the purpose
of investing in a number of US clinical studies.
On 17 November 2015, 41,005,500 new ordinary shares of 0.1 pence
each were placed with institutional and other investors at a fixed
price of 28p per share, raising GBP11 million net for the purpose
of investing in new product development.
11. CONTINGENT LIABILITIES
Allergy Therapeutics (UK) Ltd, a subsidiary of Allergy
Therapeutics plc, has given a guarantee in lieu of deposits for
leases on cars and rented office space of Bencard Allergie GmbH.
The amount as at 30 June 2016 was EUR107,426; GBP89,099(2015:
EUR107,426; GBP75,839).
A cross-guarantee exists between Allergy Therapeutics (Holdings)
Ltd, Allergy Therapeutics (UK) Ltd, Bencard Allergie GmbH, Allergy
Therapeutics Italia srl. and Allergy Therapeutics Iberica SL. in
which the liabilities of each entity to the Royal Bank of Scotland
Plc are guaranteed by all the others.
On 23 February 2015, the Company received notification that The
Federal Office for Economics and Export ("BAFA") had made a
decision to reverse their preliminary exemption to the increased
manufacturers rebate in Germany for the period July to December
2012. The Company was granted a preliminary exemption to the
increased rebate for this period by BAFA in 2013. The Company
recognised revenue of EUR1.4m (GBP1.1m at that time, now GBP1.2m)
against this exemption in the year ended 30 June 2013. All other
preliminary exemptions (granted for periods up to 30 June 2012)
have previously been ratified as final by BAFA. After taking legal
advice, the Company has lodged an appeal against this decision and
is confident that the exemption will be re-instated. Therefore, as
at 30 June 2016, no provision has been recognised for the repayment
of the rebate refund. This position will be kept under review.
The European Commission has concluded its investigation into
whether the exemption of pharmaceutical manufacturers from the
increase in rebates in Germany constitutes state aid. The European
Commission has determined that the exemptions do not constitute
state aid. Subsequent to this announcement, the Group has been
advised that an appeal has been lodged at the EU Court against this
decision. If successful, and the exemptions are determined to be
illegal state aid, then the exemption refunds may have to be
repaid. The maximum sum to be repaid would be approximately GBP5m
(including the GBP1.2m referred to above); however, the Group
considers this to be an unlikely outcome and consequently has not
recognised any provision as a result.
12. ULTIMATE CONTROL
There is no overall ultimate controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LAMMTMBATTAF
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