TIDMLPX
RNS Number : 7970H
Lipoxen PLC
03 June 2011
Lipoxen plc
('Lipoxen' or the 'Company')
Final results for the year ended 31 December 2010
& notice of AGM
Lipoxen (AIM: LPX.L), a bio-pharmaceutical company specialising
in the development of high-value differentiated biologicals,
vaccines and siRNA delivery, announces its financial results for
the year ended 31 December 2010.
Financial Highlights
- Revenue up 234% to GBP1.57m (2009: GBP0.47m)
- Operating loss down 46.8% to GBP1.94m (2009: GBP3.64m)
- Losses before tax down 46.7% to GBP1.93m (2009: GBP3.63m)
- Loss per share down 88.5% to 1.13p (2009: 2.47p)
- GBP1.2m fundraising at 7p completed in April 2010 including
significant management contribution
- Cash balances at 31 December 2010 of GBP0.85m (2009:
GBP1.02m)
Operational Highlights
- Significant reduction in operating cash burn
- Continuing success of collaboration with Baxter Healthcare SA
with further expansion expected with receipt of $2m revenues during
the period
- Phase II (a) trials of ErepoXen(R) successfully completed by
Serum Institute of India
- First phase pre-clinical development studies completed for
H1N1 novel influenza vaccine product candidate
- Positive developments in the enhancement of IP position
Commenting on the results, Sir Brian Richards, Chairman of
Lipoxen, said: "2010 has been a key year in the re-alignment of
Lipoxen and for its notable achievements with its leading
collaborative partners. The Board of Lipoxen is confident that the
Company's technology platforms, and PolyXen(R) in particular, will
prove their potential to further enhance shareholder value through
both clinical and commercial development in 2011."
Notice of AGM
Lipoxen will hold its AGM at 12noon on 28 June 2011 at the
London Capital Club, 15 Abchurch Lane, London EC4N 7BW.
In accordance with AIM Rule 20, copies of the Report and
Accounts are being mailed to shareholders today and will be
available on the Company's website (www.lipoxen.com)
Enquiries:
Lipoxen plc +44 (0)20 7389 5015
M. Scott Maguire, Chief Executive
Officer
Singer Capital Markets (NOMAD
& Broker) +44 (0)20 3205 7500
Jeff Keating / Claes Spang
Walbrook PR +44 (0)20 7933 8780
Paul McManus paul.mcmanus@walbrookpr.com
Bob Huxford bob.huxford@walbrookpr.com
About Lipoxen
Lipoxen plc is a biopharmaceutical company focused on the
development of new and improved biologic drugs and vaccines.
Lipoxen has three proprietary patented technology platforms:
1) PolyXen - for extending the efficacy and half life of
biologic drugs
2) ImuXen - for creating new vaccines and improving existing
vaccines
3) SiRNAblate - for the delivery of siRNA
Lipoxen's technology is designed to improve the efficacy,
safety, stability, biological half-life and immunologic
characteristics of its products.
Lipoxen has multiple drug and vaccine programmes in development.
Two products are in clinical development, SuliXen, a long acting
insulin and ErepoXen, a long-acting erythropoietin (EPO). Lipoxen's
preclinical pipeline includes vaccines against HIV, multiple
sclerosis and influenza and an exclusive license deal with Baxter
Healthcare for blood coagulation drugs.
The Company has a low-risk business model and out-licenses its
proprietary technologies to biopharmaceutical companies that have
strong manufacturing and marketing capabilities. Lipoxen currently
has commercial agreements with some of the world's leading
biotechnology and pharmaceutical companies including Baxter,
Schering-Plough, the Serum Institute of India Limited, Genentech,
and Genzyme. Furthermore, Baxter, the Company's third largest
shareholder, and management led the GBP2.9 million fundraising that
the Company announced in May 2009. This fundraising was followed up
by a GBP1.2 million placing in April 2010 which was led by the
Company's management team.
Lipoxen, which was founded in 1997, trades on the AIM Market of
the London Stock Exchange under the ticker symbol LPX. More
information can be found at the Company's website:
www.lipoxen.com.
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31st DECEMBER 2010
The year ended 31st December 2010 delivered satisfactory
outcomes on a number of fronts, being, principally:
- Lipoxen was successful in raising circa GBP1.2m new capital in
April 2010, which funding was, yet again, supported by a
significant Management contribution. The Placing Price was 7 pence
per share and resulted in the issue of circa 17.5m new shares.
- Baxter Healthcare SA ("Baxter") announced the nomination of a
PSA-Factor VIII Lead Product Candidate in connection with the
continuing successful development of our joint collaboration to
develop a new, long-acting polysialylated Factor VIII therapy.
Importantly, Baxter also notified the Company in FY2010 that they
intend to expand the collaboration based on the positive results to
date on Factor VIII by applying Lipoxen's PolyXen(R) technology to
two additional drug candidates for the treatment of haemophilia A,
B and for patients with inhibitors. The Factor VIII global market
size is approximately $5bn whilst the Inhibitor and Factor IX
markets were $1.2bn and $600m respectively (Sources: Jefferies
International / Datamonitor).
- Baxter and the Company concluded negotiations on a Licence
Amendment resulting in the receipt by the Company of $2m in
revenues.
- On 15th September 2010 Lipoxen granted Baxter warrant rights
to subscribe for $2m worth of Ordinary Shares at a Strike Price of
9.02 pence per share. By subsequent agreement between the parties,
the subscription entitlement is to be based upon the foreign
exchange rate applicable on that date; accordingly, the Warrant
confers rights upon Baxter to subscribe for 14,338,430 shares for
an aggregate value of GBP1.293m.
- The Company successfully concluded its restructuring programme
in H2-2010 in line with our continuing strategy to evolve as
quickly as possible from a research-based company and into a
proprietary product development company. Pro tem, this programme
has, inter alia, resulted in a significant reduction in the
Company's gross monthly cash burn.
- Net cash outflow before financing for the year was reduced to
GBP1.3m (FY2009: GBP2.3m).
- The Operating Cash Loss for the year was reduced significantly
to GBP1.18m (FY2009: GBP3.02m) as a result of both increased
revenues (GBP1.57m-v-GBP0.47m) and reduced cash-settled operating
expenses (GBP2.75m-v-GBP3.49m).
- Serum Institute of India Limited ("Serum") successfully
completed Phase II (a) clinical trials in India on our partnered
polysialylated-EPO product ("ErepoXen(R)") and is well advanced
towards the initiation of Phase II (b) clinical trials which are
currently expected to commence in India in Q3-2011. The market
launch for this product is expected in India in late 2014.
- Lipoxen's H1N1 novel influenza vaccine product candidate
successfully completed the first phase of pre-clinical development
studies and is being positioned (subject only to the availability
of capital) to move into pre-clinical toxicology studies in Q2-2012
with the objective of commencing Phase I clinical trials in
Q4-2012/Q1-2013.
- Lipoxen was able to announce a number of positive developments
in the enhancement of the Company's IP position, including:
- A new USA patent granted for the application of our PolyXen(R)
technology via new protein engineering techniques (January
2010).
- A six territory (UK, Germany, France, Spain, Italy and
Switzerland) patent granted for Lipoxen's Polysialylated G-CSF
("StimuXen(R)") which utilises the Company's patented PolyXen(R)
technology (February 2010).
- Expansion of the Company's DNA vaccine patent allowed in the
USA to further strengthen and broaden the patent protection of
Lipoxen's ImuXen(R) technology (May 2010).
- Monofunctional PolyXen(R) technology patent allowed in the USA
conferring additional patent protection in the USA until 2025 (June
2010).
Business Strategy Review
I have previously reported to shareholders on the overall
strategy and business model of the Company and I think it
appropriate that these matters be revisited in consideration of the
substantial progress that was made in FY2010.
While Lipoxen has, hitherto, been dependent upon third parties
to fund essential early-stage product development, I believe that
it is now realistic to see our Company as an emergent Speciality
Pharmaceutical company with a burgeoning proprietary product
pipeline, including:
(a) Two candidates already in human clinical trials, being
ErepoXen(R) (PSA-EPO) and SuliXen(R) (PSA-Insulin) both of which
have demonstrated clinical success.
(b) Six candidates in development with Pharmsynthez ZAO
("Pharmasynthez") in Russia, of which the first two are orphan drug
candidates, being, the Multiple Sclerosis vaccine candidate
MyeloXen(R) and PulmoXen(R) (a polysialylated dornase for the
treatment of Cystic Fibrosis), together with HIVirion (a
therapeutic vaccine for the treatment of HIV); these all have shown
promise in pre-clinical studies. Pharmsynthez is now a publicly
traded company on MICEX (November 2010) and much of its future
value is vested in the Lipoxen collaborative projects.
A key feature of our successful emergence from "dependency" to
"control of our destiny" will be vested in the Company's ability to
fund the development of the most promising of these candidates
whether directly or by way of co-development arrangements. In this
regard I am able to advise shareholders that existing arrangements
with Pharmsynthez, Serum and FDS Pharma Ass. ("FDS Pharma") already
provide financial underpinning for all items noted under (a) and
(b) above.
Negotiations are currently in train for the establishment this
financial year of several new initiatives encompassing both the
co-development and future funding of a number of the Company's
proprietary product candidates. In particular, we are working to
conclude a co-development deal similar in nature and to run in
parallel with that already established in Russia with Pharmsynthez
with the same aim of achieving human proof of concept in Russian
clinical trials as the technical basis to justify the funding of
Western trials of the successful product candidates. While it is
too early to report success in these endeavours the Board is
encouraged by progress made to date and will report to shareholders
as appropriate in due course.
Business Model
The Company's underlying business model remains driven by the
nature of our proprietary platform technology IP portfolio which
confers a very much lower technical and commercial risk profile
than that of most small-to-mid-cap Life Sciences companies. Our IP
is not indication-specific; rather it is targeted at a wide
spectrum of applications in biologics and vaccines and so addresses
a potentially huge market and associated opportunity for the
creation of shareholder value.
What is of particular note is that the Company's focus has
broadened from being, primarily, an out-licensing model to now
having the realistic potential of funding in-house product
development; this is rooted in a highly positive sea-change in the
expectations of our leading collaborative partners as a direct
result of the excellent pre-clinical and clinical trial results
that have been achieved to date, including those from Pharmsynthez
in our Multiple Sclerosis vaccine and polysialylated dornase for
the treatment of Cystic Fibrosis.
Programme Update
I am pleased to set out below a brief overview of the Company's
major ongoing projects.
PSA-EPO ("ErepoXen(R)")
Serum has successfully concluded an EMA/FDA compliant Phase II
(a) trial and has embarked on planning all other necessary clinical
trials required to be completed before the product can be brought
to market. Current timing expectations are that Phase II (b)
clinical trials will commence in India in Q3-2011 and that Phase
III trials should be completed by mid-2014 with market launch in
India and its associated Developing World territories planned for
late 2014.
Lipoxen expects to commission Phase I clinical trials (in
patients) in a Western EMA/FDA clinical trial commencing in H1-2012
contingent on development funding being available, to take the
product through to market launch to fully capture the value from
this $12bn market. PSA-EPO is in the vanguard of the Company's
proprietary portfolio and, based on clinical successes to date, is
clearly a leading candidate to advance the business model as now
described.
PSA-Insulin ("SuliXen(R)")
FDS Pharma (the Company's Russian counterparty on this project)
will shortly commence Russian clinical trials for this product
candidate for a secondary indication as a treatment for Alzheimer's
disease. The planned Phase II (a) trials for the diabetes
indication (being the first clinical trial for SuliXen(R)) are also
expected to commence in H2-2011. Based on the outcome of these
trials, Lipoxen will fund Phase I EMA/FDA trials of SuliXen(R) in
FY2012.
Initial results from the Barbara Davis Institute ("BDI") have
indicated sufficient promise for BDI to invite Lipoxen to co-fund
the next stage. This matter remains under consideration by the
Company although no final decision is expected until the first
results are known from the Alzheimer's trials in Russia.
HIV vaccine with the International AIDS Vaccine Initiative
("IAVI")
This project has been extended to end-September 2011 on the
basis that Lipoxen will provide a number of new formulations which
IAVI will test in their pre-clinical model with a view to selecting
a candidate (or candidates) for further development based upon the
results.
H1N1 influenza vaccine
As reported to the market in Q4-2010, the Company has completed
its initial pre-clinical studies which delivered very encouraging
results. The Board has therefore approved the funding for the next
stage of internal studies in the expectation that Lipoxen will be
able to secure funding to carry out pre-clinical toxicology studies
prior to placing the candidate into Phase I clinical trials in
Q4-2012/Q1-2013.
siRNA Delivery
The Board has placed this potential application of our liposomal
entrapment technology on hold pending further technical
developments which will, most likely, be driven by the expansion of
the vaccine product pipeline as the Company drives to place one or
more product candidates into human clinical trials. Although the
siRNA holds a lot of promise, there are sufficient questions in the
pharmaceutical world around its future to compel the Company to
focus its resources on established and market-proven products.
Financial Summary
The financial results for the Group in the period under review
were:
2010 2009
GBP'000 GBP'000
Revenue 1,566 469
Total pre-tax losses for period 1,934 3,631
Non-cash component of total pre-tax loss 755 619
Net cash as at 31st December 851 1,018
Net asset value as at 31st December 1,987 2,248
Pence Pence
Loss per share - basic and fully diluted 1.13 2.47
Net asset value per share - basic 1.12 1.46
Net asset value per share - fully diluted 1.11 1.43
The following table summarises the broad application of funds in
the period:
2010 2010 2009 2009
Cash settled
expenses GBP'000 % GBP'000 %
R&D expense -
cash settled 1,467 53.4 2,142 61.4
Other expenses
- cash
settled 1,280 46.6 1,349 38.6
------------ ------------ ------------ ------------
Total expenses
- cash
settled 2,747 100.0 3,491 100.0
(----------------------) (====================) (----------------------) (=====================)
Non cash items
Equity settled
share option
expense 135 10
Equity settled
R&D expenses - 312
Share based
payment -
Baxter
warrants 367 -
Depreciation 253 297
------------ ------------
755 619
(----------------------) ------------
TOTAL
ADMINISTRATIVE
COSTS 3,502 4,110
(====================) (====================)
Management retains tight control over expenditure and, while the
full effects of the recently concluded laboratory restructuring
work have come through in H1-2011, shareholders need to be
cognisant that, should the Company embark upon the expansion
envisaged by the ongoing negotiations on the co-development and
funding arrangements mentioned previously, the resulting change in
the Company's business model to become a Speciality Drug Developer
will have the concomitant effect of the expansion of Lipoxen's core
infrastructure resulting in an increase in operating costs as the
Company addresses itself to the costly business of clinical
development on its own account.
Post Balance Sheet event
Since the Balance Sheet date, the Company has negotiated a short
term unsecured loan of up to $1.15m. This loan is for a term of
seven months, bears interest (rolled up) at 0.85% per month, is
available to be drawn down in several tranches and is repayable
either in cash or by other means as may be agreed between the
parties. At the date of this Statement a net $409k has been drawn
down.
Current Trading and Going forward
At the date of this Statement I am pleased to report that the
Company has been successful in securing new grant funding of $100k
from the Bill and Melinda Gates Foundation to part-fund the early
stage pre-clinical development costs of a novel polio vaccine using
the Company's ImuXen(R) platform technology.
Significant levels of effort are being expended on a feasibility
study with a Big Pharma client on a new application of our
PolyXen(R) technology. This is an important project for the Company
as it addresses a new area of application of our IP-protected
biopolymer. It is premature to anticipate "next steps" beyond the
completion of the second phase of this project which we hope to
complete before the end of FY2011.
I have alluded hitherto to our efforts aimed at expanding the
Company's activities into that of a Specialty Drug Developer. In
other circumstances the Board would have preferred not to issue the
accompanying Financial Statements for FY2010 until it was able to
report more conclusively on the outcome of these. That said, we
are, of course, bound by the law of the land and, in particular,
the Companies Act 2006 which requires that we hold our Annual
General Meeting no later than 6 months following the end of our
Accounting Period, that is to say, in our case, by no later than
30th June 2011.
Accordingly, accompanying these Financial Statements
shareholders will find the Notice of Annual General Meeting (and
related documents) calling the next AGM at noon on Tuesday 28th
June 2011 at Oriental Room, London Capital Club, 15 Abchurch Lane,
London, EC4N 7BW.
Conclusion
The main thrust of my report this time is one of optimism that
your Company's technology platforms are proving their potential to
enhance shareholder value through clinical and commercial
development, this being especially true of the PolyXen(R)
technology for the development of new, longer-acting, more
efficacious biologic drugs.
Of course, there are many operational steps to take and many
clinical hurdles to overcome, but it is clear that FY2010 can be
seen as having been a watershed in the development of the Company
in that the achievements of the Company itself and, crucially,
those of its leading collaborative partners, have redefined the
inherent investment opportunity in a positive manner.
Finally, I wish to thank the executive management and staff for
their considerable efforts over the last 12 months and look forward
to meeting as many shareholders as are able to attend the
forthcoming Annual General Meeting.
Brian Richards
Non Executive Chairman
London: 2nd June 2011
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED 31st DECEMBER 2010
2010 2009
Note GBP GBP
REVENUE 3 1,566,261 468,579
-------------------- --------------------
ADMINISTRATIVE EXPENSES
Research and development
expenditure 1,466,887 2,453,526
Administrative expenses 2,035,412 1,656,649
-------------------- --------------------
Total 3,502,299 4,110,175
-------------------- --------------------
OPERATING LOSS 4 (1,936,038) (3,641,596)
Finance income 1,761 10,710
-------------------- --------------------
LOSS BEFORE TAXATION (1,934,277) (3,630,886)
Income tax credit 7 - 173,628
-------------------- --------------------
LOSS AND TOTAL COMPREHENSIVE
INCOME FOR THE YEAR
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT (1,934,277) (3,457,258)
================ ===============
Loss per share (pence) -
basic and fully diluted 9 (1.13)p (2.47)p
=============== ================
The Company has elected to take the exemption under section 408
of the Companies Act 2006 to not present the Parent Company
comprehensive income statement.
CONSOLIDATED BALANCE SHEET
AS AT 31st DECEMBER 2010
2010 2009
Note GBP GBP GBP
NON-CURRENT
ASSETS
Property,
plant and
equipment 10 256,208 480,582
Goodwill 11 1,061,476 1,061,476
---------------------- ----------------------
1,317,684 1,542,058
----------------------
CURRENT
ASSETS
Trade and
other
receivables 13 344,027 235,492
Cash and cash
equivalents 18 850,804 1,017,890
----------------- -------------------
1,194,831 1,253,382
CURRENT
LIABILITIES
Trade and
other
payables 14 525,700 547,717
----------------- --------------------
NET CURRENT ASSETS 669,131 705,665
---------------------- ----------------------
NET ASSETS 1,986,815 2,247,723
================ ================
EQUITY
ATTRIBUTABLE
TO EQUITY
HOLDERS OF
THE PARENT
Share capital 15 2,519,661 2,405,486
Share premium
account 26,521,349 25,057,700
JSOP shares (405,694) -
Reverse
acquisition
reserve (8,252,127) (8,252,127)
Retained
earnings (18,396,374) (16,963,336)
---------------------- ----------------------
TOTAL EQUITY 1,986,815 2,247,723
================== ==================
The financial statements were approved and authorised for issue
by the Directors on 2nd June 2011 and were signed on their behalf
by:
SCOTT MAGUIRE - Director COLIN HILL - Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31st DECEMBER 2010
2010 2009
Note GBP GBP
Cash flows from operating
activities 17 (1,313,416) (2,378,574)
Interest received 1,761 10,710
Taxation received - 173,628
-------------------- -------------------
Net cash outflow from
operating activities (1,311,655) (2,194,236)
-------------------- -------------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (29,161) (111,542)
Sale of property, plant and
equipment 1,600 -
-------------------- -------------------
Net cash used in investing
activities (27,561) (111,542)
-------------------- -------------------
Cash flows from financing
activities
Issue of equity share capital 1,172,130 2,721,603
-------------------- -------------------
Net (decrease)/increase in
cash and cash equivalents (167,086) 415,825
Cash and cash equivalents at
beginning of year 1,017,890 602,065
-------------------- -------------------
Cash and cash equivalents at
end of year 18 850,804 1,017,890
=============== ===============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31st DECEMBER 2010
Reverse
Share acquisition Retained
capital Share premium JSOP shares reserve earnings Total
GBP GBP GBP GBP GBP GBP
At 1st January
2009 2,232,790 22,508,793 - (8,252,127) (13,516,233) 2,973,223
Loss and total
comprehensive
income for
year - - - - (3,457,258) (3,457,258)
Shares issued
for cash 172,696 2,736,804 - - - 2,909,500
Share issue
expenses - (187,897) - - - (187,897)
Share-based
payments - - - - 10,155 10,155
________ _________ _________ __________ __________ _________
At 31st
December
2009 2,405,486 25,057,700 - (8,252,127) (16,963,336) 2,247,723
Loss and total
comprehensive
income for
year - - - - (1,934,277) (1,934,277)
Shares issued
for cash 87,583 1,138,576 - - - 1,226,159
Shares issued
under JSOP 26,592 385,590 - - - 412,182
Own shares
held by JSOP
Trustees - - (405,694) - - (405,694)
Share issue
expenses - (60,517) - - - (60,517)
Share-based
payments - - - - 501,239 501,239
________ _________ _________ _________ __________ _________
At 31st
December
2010 2,519,661 26,521,349 (405,694) (8,252,127) (18,396,374) 1,986,815
============= ============== ============== ================ ================ ===============
COMPANY BALANCE SHEET
AS AT 31st DECEMBER 2010
2010 2009
Note GBP GBP GBP
NON-CURRENT
ASSETS
Property,
plant and
equipment 10 160,000 320,000
Investments 12 9,045,030 9,045,030
Other
receivables 13 7,974,961 6,610,290
---------------------- --------------------
17,179,991 15,975,320
--------------------
CURRENT
ASSETS
Trade and
other
receivables 13 12,856 13,291
Cash and cash
equivalents 18 844,939 998,225
------------- -------------------
857,795 1,011,516
CURRENT
LIABILITIES
Trade and
other
payables 14 269,840 143,191
--------------- --------------------
NET CURRENT ASSETS 587,955 868,325
---------------------- --------------------
NET ASSETS 17,767,946 16,843,645
================ ================
EQUITY
ATTRIBUTABLE
TO EQUITY
HOLDERS OF
THE COMPANY
Share capital 15 2,519,661 2,405,486
Share premium
account 26,521,349 25,057,700
Retained
earnings (11,273,064) (10,619,541)
---------------------- --------------------
TOTAL EQUITY 17,767,946 16,843,645
================ ===============
The financial statements were approved and authorised for issue
by the directors on 2nd June 2011 and were signed on their behalf
by:
SCOTT MAGUIRE - Director COLIN HILL - Director
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31st DECEMBER 2010
2010 2009
Note GBP GBP
Cash flows from operating
activities 17 (368,200) (547,513)
Interest received 1,761 7,205
------------------ -------------------
Net cash outflow from operating
activities (366,439) (540,308)
------------------ -------------------
Cash flows from investing
activities
Loan to subsidiary (958,977) (1,747,809)
Loan to JSOP Trustees (405,694) -
------------------ -------------------
Net cash used in investing
activities (1,364,671) (1,747,809)
------------------ -------------------
Cash flows from financing
activities
Issue of equity share capital 1,577,824 2,721,603
------------------ -------------------
Net (decrease)/increase in cash
and cash equivalents (153,286) 433,486
Cash and cash equivalents at
beginning of year 998,225 564,739
------------------ -------------------
Cash and cash equivalents at
end of year 18 844,939 998,225
============== ==============
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31st DECEMBER 2010
Retained
Share capital Share premium earnings Total
GBP GBP GBP GBP
At 1st January
2009 2,232,790 22,508,793 (9,957,303) 14,784,280
Loss and total
comprehensive
income for
year - - (662,238) (662,238)
Shares issued
for cash 172,696 2,736,804 - 2,909,500
Share issue
expenses - (187,897) - (187,897)
________ _________ __________ _________
At 31st
December
2009 2,405,486 25,057,700 (10,619,541) 16,843,645
Loss and total
comprehensive
income for
year - - (653,523) (653,523)
Shares issued
for cash 87,583 1,138,576 - 1,226,159
Shares issued
under JSOP 26,592 385,590 - 412,182
Share issue
expenses - (60,517) - (60,517)
________ _________ _________ _________
At 31st
December
2010 2,519,661 26,521,349 (11,273,064) 17,767,946
============= =============== ============== ==============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31st DECEMBER 2010
1. INTERNATIONAL FINANCIAL REPORTING STANDARDS
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS and in accordance with
the AIM Rules of the London Stock Exchange.
2. ACCOUNTING POLICIES
Going concern
As an early-stage development life sciences business, the Group
has incurred operating losses in the year under review,
notwithstanding that substantial clinical and technical progress
was also made in the continuing successful development of its
proprietary technologies; consequently, the Group was a net
consumer of cash.
In order to maintain the level of scientific effort required to
develop the Group's technologies and to commercialise them to such
degree as will be necessary to become a cash-generative business,
the Group will need to access new cash in addition to that
available to it at the year end; such new cash will either be
generated internally from, as yet, non-contractual feasibility and
licensing sources and/or from the raising of new capital.
The Directors have prepared a financial forecast for the period
through to 31st December 2012. The forecast includes assumptions
that the Group will generate cash inflows in this period from:
(a) the ongoing roll-out and licensing of the Group's
technologies with its existing collaborative partners;
(b) the roll-out and licensing of the Group's technologies with
new collaborative partners; and
(c) the raising of new capital.
The Group has successfully completed Phase II(a) clinical trials
on its EPO product candidate. This and other clinical and
pre-clinical successes have generated an increasing level of
commercial interest in the Group's PolyXen(R) and ImuXen(R)
platform technologies. Capital markets remain uncertain and the
Company's ability to raise new capital entirely from such sources
cannot be relied upon as it is largely dependent upon market
conditions that exist at the time of raising the funds.
While considering that platform technology applications to known
and marketed drugs confer lower commercial risks than in new drug
development, the Directors recognise that there are uncertainties
surrounding these core issues.
If the Group was to prove unable to generate these additional
cash inflows, the cash balance of circa GBP0.85m as at 31st
December 2010, together with subsequently arranged undrawn loan
facilities, would be insufficient to fund the Group's activities at
their current level for a period of twelve months from the date of
approval of these financial statements.
However, the Directors have a reasonable expectation that these
uncertainties can be managed to successful outcomes, and that,
based on that assessment, the Group will have adequate resources to
continue in operational existence for the foreseeable future. They
have therefore prepared the financial information contained herein
on a going concern basis.
The financial statements do not reflect any adjustments that
would be required to be made, with respect to either the Company or
the Group, if they were to be prepared on a basis other than the
going concern basis.
Basis of consolidation
The Group financial statements incorporate the financial
statements of the Parent Company and all of its subsidiary
undertakings. The results of subsidiary undertakings acquired or
disposed of during the year are included in the Group financial
statements from, or up to, the date of acquisition or disposal.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of the reverse acquisition over the net assets of Lipoxen Plc
at the date of the business combination. Goodwill is recognised as
an asset and is reviewed for impairment at least annually. Any
impairment is recognised immediately through the comprehensive
income statement and is not reversed.
Revenue
Revenue shown in the comprehensive income statement represents
the value of services provided during the year, exclusive of Value
Added Tax. For contracts in progress at the balance sheet date,
revenue is recognised based on the degree of completion of the
project and the agreed fee for the total project. Milestone
payments receivable for which the Group has no further contractual
duty to perform any future services are recognised on the date that
they are contractually receivable.
Intangible assets
Intangible assets acquired are shown at cost less accumulated
amortisation and impairment losses. Amortisation is charged in the
comprehensive income statement on a straight line basis over the
estimated useful lives of the intangible assets unless such lives
are considered to be indefinite. Intangible assets (excluding
development costs) created within the business are not capitalised
and such expenditure is charged in the comprehensive income
statement in the year in which it is incurred.
Property, plant and equipment
All property, plant and equipment assets are stated at cost less
accumulated depreciation.
Depreciation is provided to write off the cost less the
estimated residual value of property, plant and equipment on a
straight line basis over their estimated useful economic lives as
follows:
Laboratory equipment - 4 years
Computer equipment - 4 years
Plant - 5 years
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a contractual party to
the instrument.
Financial assets other than hedging instruments can be divided
into the following categories: loans and receivables, financial
assets at fair value through profit or loss, available-for-sale
financial assets and held-to-maturity investments. Financial assets
are assigned to the different categories by management on initial
recognition, depending on the purpose for which the investments
were acquired.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date which are
classified as non-current assets. The Group's loans and receivables
comprise 'trade debtors and other receivables' and 'cash and cash
equivalents' in the balance sheet. The Group has no other financial
assets.
Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments
issued by the Group, other than equity-settled share-based payments
which are described below, are recorded at the proceeds received
net of direct issue costs.
Trade receivables
Trade receivables are measured at initial recognition at fair
value and are subsequently measured at amortised cost less
impairment losses. Appropriate amounts for estimated irrecoverable
amounts are recognised in the comprehensive income statement when
there is objective evidence that the asset is impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, bank balances
and deposits repayable on demand.
Trade payables
Trade and other payables are measured at initial recognition at
fair value and are subsequently measured at amortised cost.
Operating lease agreements
Operating lease rentals are charged in the comprehensive income
statement on a straight line basis over the lease term.
Research and development costs
Research and development costs are written off to the
comprehensive income statement as incurred, except that development
expenditure incurred on an individual project is carried forward
when its future recoverability can be reasonably regarded as
assured. Any expenditure carried forward is amortised in line with
the expected future sales from the related project.
Foreign currencies
Monetary assets and liabilities in foreign currencies are
translated into sterling at the rate ruling at the balance sheet
date. Transactions in foreign currencies are translated into
sterling at the rate of exchange ruling at the date of the
transaction. Exchange differences are taken into account in
arriving at the operating loss.
Pension costs
Company contributions to money purchase pension schemes are
written off to the comprehensive income statement as incurred.
Share based payments
Share options granted to employees are valued at the date of
grant using the Black-Scholes option pricing model and are charged
to the comprehensive income statement over the vesting period of
the option. A corresponding credit is recognised in the retained
earnings reserve.
Shares issued under the Joint Share Ownership Plan ("JSOP")
which vest immediately are valued at the date of grant using the
Black-Scholes option pricing model. JSOP shares issued with share
price targets are valued at the date of grant using a Monte Carlo
simulation approach as this allows the fair value to reflect the
interaction of the Black-Scholes formula and the performance
targets. These amounts are charged to the comprehensive income
statement over the expected period to vesting of the shares. A
corresponding credit is recognised in the retained earnings
reserve.
Warrants to subscribe for new equity in the Company have been
valued at the date of grant using the Black-Scholes option pricing
model. The excess of this amount over the consideration received
for the grant has been charged to the comprehensive income
statement. A corresponding credit is recognised in the retained
earnings reserve.
Equity
Share capital is determined using the nominal value of shares
that have been issued.
The share premium account includes any premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issue of shares are deducted from the share
premium account, net of any related income tax benefits.
The JSOP shares reserve arises when the Company issues equity
share capital under its Joint Share Ownership Plan, which is held
in trust by the Group's Guernsey Special Purpose Trust. The
interests of the Trust are consolidated into the Group's financial
statements and the relevant amount treated as a reduction in
equity.
The reverse acquisition reserve arises on the restatement of the
equity structure shown in the consolidated financial statements
from that of Lipoxen Technologies Limited immediately after the
deemed acquisition of Lipoxen Plc to reflect the equity structure
of the legal Parent Company.
Taxation
The tax expense recognised in the comprehensive income statement
represents the sum of the current and deferred tax.
The tax expense is based on the taxable profit for the year.
Taxable profit differs from the profit as reported in the
comprehensive income statement because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Tax income arises from the UK legislation regarding the
treatment of certain qualifying research and development costs,
allowing for the surrender of tax losses attributable to such costs
in return for a tax rebate.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised.
New and amended standards
The Group has early-adopted IAS 24 (revised) 'Related party
disclosures', which clarifies and simplifies the definition of a
related party.
Standards and interpretations that became effective for the
first time during the year have not had a material impact on the
financial statements. No impact is expected from any other
standards or interpretations which have been endorsed by the
European Union and are available for early adoption, but which have
not been adopted.
Critical accounting judgements and key sources of estimation
uncertainty
In the process of applying the Group's accounting policies,
management makes estimates and assumptions that have an effect on
the amounts recognised in the financial statements. Although these
estimates are based on management's best knowledge of current
events and actions, actual results may ultimately differ from those
estimates.
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are those relating to:
(a) the future recoverability of goodwill, and the corresponding
review of goodwill for impairment (see Note 11);
(b) the percentage of completion by FDS Pharma of its
obligations under the agreement of October 2005 for the provision
of manufacturing and clinical development services (see Note
13);
(c) the expense recognised in the comprehensive income statement
in respect of share options and JSOP shares granted to employees
(see Notes 15 and 16); and
(d) the share based payment expense recognised in the
comprehensive income statement arising from the grant of warrant
rights to Baxter International Inc. (see Note 15).
3. SEGMENTAL ANALYSIS
The revenue and loss before tax are attributable to the one
principal activity of the Group.
The net assets of the Group at 31st December 2010 and 31st
December 2009 are wholly attributable to the principal activity.
The Group comprises one operating segment for reporting purposes.
Management measures performance and allocates resources based on
the results of this one segment only.
An analysis of turnover (by location of customer) is given
below:
2010 2009
GBP GBP
United States 1,442,152 270,084
Europe 124,109 109,006
Rest of World - 89,489
------------------- -------------------
1,566,261 468,579
=============== ===============
An analysis of the Group's total assets by location is given
below:
2010 2009
GBP GBP
United Kingdom 1,826,815 1,927,723
India 160,000 320,000
------------------- -------------------
1,986,815 2,247,723
=============== ===============
The following customers accounted for greater than 10% of the
Group's revenues:
2010 2009
GBP GBP
Customer 1 1,423,499 179,492
Customer 2 - 89,489
Customer 3 - 81,506
Customer 4 - 67,935
4. OPERATING LOSS
Operating loss is stated after charging:
2010 2009
GBP GBP
Depreciation of owned property, plant and
equipment 253,535 296,932
Operating lease payments:
- land and buildings 48,000 48,000
Net loss on foreign currency translation 15,511 7,837
Research and development costs - cash
settled 1,466,887 2,141,801
Research and development costs - equity
settled - 311,725
Share option and JSOP expense - equity
settled 134,726 10,155
Share based payment expense - Baxter
warrants 366,513 -
=============== ===============
The operating lease payments relate to office accommodation. The
Company has not entered into a formal agreement for the use of this
accommodation and the arrangement may be terminated without notice
at any time. There are therefore no future lease payments under
non-cancellable operating leases.
5. AUDITOR'S REMUNERATION
Services provided by the Company's auditor
2010 2009
GBP GBP
Fees payable to the Company's auditor for
the audit of the Parent Company and
consolidated financial statements 4,000 3,500
Fees payable to the Company's auditor and
their associates for other services:
- audit of the Company's subsidiary pursuant
to legislation 30,750 30,000
- other services pursuant to legislation 7,000 6,500
=============== ===============
6. PARTICULARS OF EMPLOYEES
The average number of staff employed by the Group during the
financial year was:
2010 2009
No No
Office and management 4 4
Research 18 19
--------------- ---------------
22 23
=========== ===========
The aggregate payroll costs of the above (excluding the share
option expense) were:
Group: 2010 2009
GBP GBP
Wages and salaries 1,124,950 1,430,258
Social security costs 128,778 169,342
Other pension costs 67,222 74,970
------------------- -------------------
1,320,950 1,674,570
=============== ===============
Company: 2010 2009
GBP GBP
Wages and salaries 143,000 143,000
Other pension costs 11,200 11,200
------------------- -------------------
154,200 154,200
=============== ===============
Key management personnel received compensation as follows:
Group: 2010 2009
GBP GBP
Salaries and short-term employment
benefits 714,029 1,004,180
Post-employment benefits 50,320 57,513
Share-based payments 128,555 2,429
------------------- -------------------
892,904 1,064,122
=============== ===============
Company: 2010 2009
GBP GBP
Salaries and short-term employment
benefits 143,000 143,000
Post-employment benefits 11,200 11,200
------------------- -------------------
154,200 154,200
=============== ===============
Key management comprises the directors of the Company, those
Directors of the subsidiary who are not also Directors of the
Parent Company, together with the Company's senior scientific
staff.
The remuneration of the Directors was as follows:
Salaries and
short-term Share-based Pension Total Total
benefits payments contributions 2010 2009
GBP GBP GBP GBP GBP
Sir Brian
Richards - - - - -
Scott
Maguire 299,709 75,253 24,000 398,962 324,000
Colin W.
Hill 140,000 38,620 11,200 189,820 151,200
Professor
Gregory
Gregoriadis 85,320 - - 85,320 85,320
Dr Dmitry D.
Genkin - - - - -
Firdaus J.
Dastoor - - - - -
Igor
Nikolaev - - - - -
________ _______ ______ _______ _______
Total 525,029 113,873 35,200 674,102 560,520
============== =========== ========== =========== ============
The charge in 2009 comprised salaries and short-term benefits of
GBP525,320 and pension contributions of GBP35,200.
The number of Directors who accrued benefits under Company
pension schemes was as follows:
2010 2009
No No
Money purchase schemes 1 1
=============== ===============
In addition to the above, the Group was charged the following
amounts by Directors or by companies controlled by Directors for
the provision of consultancy services:
2010 2009
GBP GBP
Sir Brian Richards 81,250 60,000
Dr Dmitry Genkin 3,000 3,000
Igor Nikolaev 3,000 3,000
=============== ===============
7. INCOME TAX CREDIT
(a) Analysis of credit in the period
2010 2009
GBP GBP
Current tax:
UK corporation tax based on the results
for the year at 28% (2009 - 28%) - (173,628)
------------------- -------------------
Current tax for the period - (173,628)
=============== ===============
(b) Factors affecting the tax credit for the year
The tax assessed for the year does not reflect a credit
equivalent to the loss on ordinary activities multiplied by the
standard rate of corporation tax of 28% (2009 - 28%).
2010 2009
GBP GBP
Loss on ordinary activities before
tax (1,934,277) (3,630,886)
================ ===============
Loss on ordinary activities
multiplied by the standard rate of
corporation tax (541,598) (1,016,649)
Effects of:
Expenses not deductible for tax
purposes - 45
Unrelieved tax losses arising in
the year 541,598 1,016,604
Surrender of qualifying research
and development costs for tax
rebates - (173,628)
-------------------- -------------------
Current tax for the period - (173,628)
================ ===============
The Group has corporation tax losses available for offset
against future profits of the same trade of GBP17,400,000 (2009 -
GBP15,800,000). The deferred taxation asset not provided for in the
accounts due to the uncertainty that future taxable profits will be
available to allow recovery of the asset is approximately
GBP4,950,000 (2009 - GBP4,450,000).
8. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY
The loss dealt with in the accounts of the Parent Company was
GBP653,523 (2009 - GBP662,238).
9. EARNINGS PER SHARE
The calculation of loss per share is based on the loss of
GBP1,934,277 (2009 - GBP3,457,258) and on the number of shares in
issue, being the weighted average number of shares in issue during
the period of 170,581,718 ordinary 0.5p shares (2009 - 140,230,091
ordinary 0.5p shares). There is no dilutive effect of share options
on the basic loss per share.
10. PROPERTY, PLANT AND EQUIPMENT
Laboratory Computer
Group Plant equipment equipment Total
GBP GBP GBP GBP
COST
At 1st
January
2009 800,000 507,576 45,830 1,353,406
Additions - 82,972 28,570 111,542
--------------- ------------------- ----------------- -----------------
At 1st
January
2010 800,000 590,548 74,400 1,464,948
Additions - 21,568 7,593 29,161
Disposals - (10,680) - (10,680)
---------------- ------------------- ----------------- -----------------
At 31st
December
2010 800,000 601,436 81,993 1,483,429
============ ============= ============ =============
DEPRECIATION
At 1st
January
2009 320,000 333,682 33,752 687,434
Charge for
the year 160,000 121,996 14,936 296,932
--------------- ----------------- -------------- ----------------
At 1st
January
2010 480,000 455,678 48,688 984,366
Charge for
the year 160,000 80,587 12,948 253,535
Disposals - (10,680) - (10,680)
--------------- ----------------- --------------- ---------------
At 31st
December
2010 640,000 525,585 61,636 1,227,221
============ ============= ============ ============
NET BOOK
VALUE
At 31st
December
2010 160,000 75,851 20,357 256,208
============ ============= =========== ===========
At 31st
December
2009 320,000 134,870 25,712 480,582
============ ============= =========== ===========
Laboratory Computer
Company Plant equipment equipment Total
GBP GBP GBP GBP
COST
At 1st
January
2009 800,000 - - 800,000
Additions - - - -
-------------- --------------- ------------- --------------
At 1st
January
2010 800,000 - - 800,000
Additions - - - -
-------------- --------------- ------------- --------------
At 31st
December
2010 800,000 - - 800,000
=========== =========== ========== ===========
DEPRECIATION
At 1st
January
2009 320,000 - - 320,000
Charge for
the year 160,000 - - 160,000
-------------- --------------- ------------- --------------
At 1st
January
2010 480,000 - - 480,000
Charge for
the year 160,000 - - 160,000
-------------- --------------- ------------- ---------------
At 31st
December
2010 640,000 - - 640,000
=========== =========== ========== ============
NET BOOK
VALUE
At 31st
December
2010 160,000 - - 160,000
=========== =========== ========== ============
At 31st
December
2009 320,000 - - 320,000
=========== =========== ========== ============
11. GOODWILL
Group
GBP
COST
At 1st January 2009, 1st January 2010
and 31st December 2010 1,061,476
================
Goodwill arising on consolidation represents the excess of the
cost of the reverse acquisition over the net assets of Lipoxen Plc
at the date of the business combination.
The reverse acquisition of Lipoxen Plc provided Lipoxen
Technologies Limited with access to the AIM market to enable it to
raise funds to finance the ongoing development of its technology.
This access to capital markets does not satisfy the criteria for
separate recognition as an intangible asset as set out in IAS 38:
Intangible assets, and is therefore treated as goodwill in these
financial statements.
The Group tests annually for impairment or more frequently if
there are indications that goodwill might be impaired. The
impairment review has been carried out on the Group as a whole.
As primarily a research and development Group, the use of
discounted cash flow or similar tools is not appropriate given the
inherent risks and uncertainties in the sector and the long
timespans involved. Instead the Board look at longer term
indicators of impairment.
Since the date of the previous impairment review the Group has
made further technical progress in the development of its PSA
biopolymer and nanoparticle technologies in both preclinical and
clinical trials. The revenue generating capacity of the Group has
been enhanced through this progress.
In assessing the impairment, the recoverable amount has been
determined as the fair value less cost to sell by reference to the
Group's market capitalisation on AIM.
Consequently, it is the view of the Board that no impairment of
the carrying value of the Group's goodwill or other assets has
occurred during the year.
12. INVESTMENTS
Company Group companies
GBP
COST
At 1st January 2009, 1st January 2010 and 31st December
2010 9,045,030
================
The Company owns the whole of the issued share capital of
Lipoxen Technologies Limited, a company incorporated in England and
Wales engaged in research into drug delivery systems.
It is the view of the Board that no impairment of the carrying
value of the Company's investment has occurred during the year.
13. TRADE AND OTHER RECEIVABLES
Group Company
2010 2009 2010 2009
GBP GBP GBP GBP
Due in more
than one
year:
Receivables
from
subsidiaries - - 7,569,267 6,610,290
Provision for
impairment - - - -
Loan to JSOP
Trustees - - 405,694 -
__________ __________ ___________ __________
- - 7,974,961 6,610,290
================ ================ ================== ================
Due within
one year:
Trade
receivables 210,184 94,789 - -
Provision for
impairment - - - -
________ ________ ________ __________
210,184 94,789 - -
Other
receivables 46,267 54,806 9,671 10,148
Prepayments
and accrued
income 87,576 85,897 3,185 3,143
-------------------- -------------------- ---------------------- --------------------
344,027 235,492 12,856 13,291
================ ================ ================== ================
In October 2005, Lipoxen Technologies Limited entered into an
agreement with its then major shareholder, FDS Pharma Ass ("FDS"),
under which 15,000,000 ordinary shares were allotted in
consideration for the provision by FDS of manufacturing and
clinical development services. As per a Novation Agreement between
FDS, Lipoxen Technologies Limited and the Company dated 16th
January 2006, the agreement provides for the allotment of up to
10,174,340 ordinary shares in Lipoxen Plc upon achievement of
certain future milestones to the financial value of $2,670,764 as
approved by shareholders at the Extraordinary General Meeting of
the Company held on 16th January 2006. An amount of GBPNil (2009 -
GBP311,725) has been written off to the comprehensive income
statement in the year in respect of services provided in the year
by FDS.
The carrying amount of the trade receivables is denominated in
currencies as follows:
2010 2009
GBP GBP
Pounds sterling 95,455 94,789
US dollars 29,051 -
Euros 85,678 -
__________ _________
210,184 94,789
================ ===============
Trade receivables are considered to be impaired if they are more
than three months overdue at the date of approval of the financial
statements. At 31st December 2010 trade receivables of GBPNil (2009
- GBPNil) were impaired and provided against.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above. Neither
the Group nor the Company holds any collateral as security.
It is the view of the Board that no impairment of the carrying
value of the Company's trade and other receivables has occurred
during the year.
14. TRADE AND OTHER PAYABLES
Group Company
2010 2009 2010 2009
GBP GBP GBP GBP
Trade
payables 182,663 109,099 142,877 20,468
Social
security
and
other
taxes 36,537 43,002 - -
Other
payables 598 200 - 200
Accrued
expenses 221,944 387,868 126,963 122,523
Deferred
income 83,958 7,548 - -
-------------------- -------------------- -------------------- --------------------
525,700 547,717 269,840 143,191
================ ================ ================ ================
15. SHARE CAPITAL
Authorised share capital:
2010 2009
GBP GBP
673,300,000 Ordinary shares of 0.5p each 3,366,500 3,366,500
16,335,000,000 Deferred shares of 0.01p
each 1,633,500 1,633,500
-------------------- --------------------
5,000,000 5,000,000
================ ================
Allotted, called up and fully paid:
2010 2009
No GBP No GBP
Ordinary shares
of 0.5p each 177,232,254 886,161 154,397,230 771,986
Deferred shares
of 0.01p each 16,335,000,000 1,633,500 16,335,000,000 1,633,500
------------------- -------------------
2,519,661 2,405,486
============== ==============
On 1st April 2010 the Company issued 17,516,546 ordinary shares
of 0.5p each by way of a placing at a price of 7.0p per share,
raising cash of GBP1,226,159 (before expenses of issue of
GBP60,517).
On 10th June 2010 the Company issued 5,318,478 ordinary shares
under the terms of the Company's newly established JSOP at a price
of 7.75p per share. GBP6,488 was subscribed in cash by the
beneficiaries and GBP405,694 was advanced to the Trustees of the
Plan in order that the shares were issued fully paid. To this
extent the transaction was effectively cash neutral to the
Company.
The estimated fair values of the JSOP shares granted, and the
vesting conditions applying to the grants, are as follows:
Vesting conditions Number of Fair value
shares per share
Vested immediately 614,575 3.1543p
Vest when share price exceeds 20p 1,567,967 2.8290p
Vest when share price exceeds 40p 1,567,967 1.9480p
Vest when share price exceeds 100p 1,567,969 0.8270p
The fair value of JSOP shares granted with immediate vesting,
estimated using the Black-Scholes option-pricing model, is based on
the following assumptions:
2010
Share price 7.38p
Exercise price 11.00p
Expected volatility 60.00%
Expected life 5 years
Expected dividend yield Nil
Risk free interest rate 2.40%
===============
The expected volatility is determined by using as a base the
share price movements recorded since the share placing on AIM on
16th January 2006.
JSOP shares issued with share price targets are valued at the
date of grant using a Monte Carlo simulation approach using the
assumptions set out above as this allows the fair value to reflect
the interaction of the Black-Scholes formula and the performance
targets.
In September 2010 the Company granted Baxter International Inc.
("Baxter") warrant rights entitling Baxter to subscribe for up to
$2 million of new equity in the Company from the date that
authority to issue sufficient number of shares is available to 30th
June 2015 at an exercise price of 9.02p. The fair value of these
warrants, estimated using the Black-Scholes option-pricing model,
is based on the following assumptions:
2010
Share price 8.50p
Exercise price 9.02p
Expected volatility 60.00%
Expected life 1.75 years
Expected dividend yield Nil
Risk free interest rate 2.40%
===============
Since the year end the Company and Baxter have agreed to fix the
exchange rate at which the number of shares issuable under the
warrant is to be determined at US$1.5464: GBP1. The consequence of
this is that if the warrant is exercised in full the number of
ordinary shares in the Company to be issued will be 14,338,430.
The rights attached to the deferred shares are as follows:
(a) no entitlement to any dividend;
(b) on a winding-up, an entitlement to receive an amount equal
to the nominal value of each share, but only after an amount of
GBP50,000,000 per share has been paid to the holders of the issued
and fully paid ordinary 0.5p shares;
(c) no right to attend or vote at a general meeting; and
(d) an obligation to permit the Company to transfer the shares
to such person as the Company may determine, without receiving any
payment.
16. SHARE OPTIONS
Movements in the number of share options in issue during the
year were as follows:
Weighted Weighted
average average
exercise exercise
Number price Number price
2010 2010 2009 2009
At 1st
January 9,177,219 6.0565p 9,833,030 6.7910p
Granted 3,594,192 10.4088p - -
Exercised - - (339,145) 0.7371p
Expired (400,000) 47.7500p (316,666) 34.5750p
------------------- -------------------
At 31st
December 12,371,411 5.9729p 9,177,219 6.0565p
=============== ===============
The weighted average fair value of options granted, estimated
using the Black-Scholes option-pricing model, was 3.654p. The
estimated fair values are based on the following weighted average
assumptions:
2010
Share price 7.2806p
Exercise price 10.4088p
Expected volatility 60.00%
Expected life 5 years
Expected dividend yield Nil
Risk free interest rate 2.40%
===============
The expected volatility is determined by using as a base the
share price movements recorded since the share placing on AIM on
16th January 2006.
Options outstanding at 31st December 2010 were exercisable as
follows:
Effective Number Exercise
date of grant granted price Exercise period
17/01/06 48,837 22.1145p Until 23/12/11
17/01/06 71,904 41.7226p Until 28/07/12
17/01/06 406,974 0.7371p Until 25/05/14
17/01/06 759,684 0.7371p Until 25/10/14
17/01/06 101,743 0.7371p Until 11/05/15
17/01/06 141,084 0.7371p Until 29/09/15
17/01/06 6,200,250 1.0000p Until 15/01/16
17/01/06 205,000 1.0000p Until 17/01/16
24/03/06 175,000 29.5000p Until 23/03/16
24/03/06 175,000 29.5000p Between 17/01/09 and 23/03/16
24/03/06 25,000 29.5000p Until 29/02/16
24/03/06 25,000 29.5000p Between 01/03/09 and 29/02/16
17/10/06 101,743 0.7371p Until 17/10/16
15/03/07 107,500 35.0000p Until 14/03/17
Between various dates in 2009
15/03/07 42,500 35.0000p and 14/03/17
Between various dates in 2010
15/03/07 65,000 35.0000p and 14/03/17
19/03/07 12,500 35.7500p Until 18/03/17
19/03/07 12,500 35.7500p Between 19/03/10 and 18/03/17
09/08/07 50,000 46.6000p Until 08/08/17
09/08/07 50,000 46.6000p Between 25/12/10 and 08/08/17
10/06/10 2,870,492 11.0000p Until 09/06/20
Once share price exceeds 20p
10/06/10 74,566 11.0000p until 09/06/20
Once share price exceeds 40p
10/06/10 74,566 11.0000p until 09/06/20
Once share price exceeds 100p
10/06/10 74,568 11.0000p until 09/06/20
19/10/10 500,000 6.7500p Until 18/10/20
-----------------
12,371,411
=============
17. RECONCILIATION OF LOSS BEFORE TAXATION TO NET CASH OUTFLOW
FROM OPERATING ACTIVITIES
Group 2010 2009
GBP GBP
Loss before taxation (1,934,277) (3,630,886)
Adjustments for:
Equity-settled share options 134,726 10,155
Equity-settled research and
development - 311,725
Share based payment expense -
Baxter warrants 366,513 -
Depreciation 253,535 296,932
Profit on disposal of property,
plant and equipment (1,600) -
Investment income (1,761) (10,710)
-------------------- --------------------
(1,182,864) (3,022,784)
(Increase)/decrease in receivables (108,535) 571,342
(Decrease)/increase in payables (22,017) 72,868
-------------------- -------------------
Net cash outflow from operating
activities (1,313,416) (2,378,574)
================ ================
Company 2010 2009
GBP GBP
Loss before taxation (653,523) (662,238)
Adjustments for:
Depreciation 160,000 160,000
Investment income (1,761) (7,205)
-------------------- --------------------
(495,284) (509,443)
Decrease/(increase) in receivables 435 (468)
Increase/(decrease) in payables 126,649 (37,602)
-------------------- --------------------
Net cash outflow from operating
activities (368,200) (547,513)
================ ================
18. FINANCIAL INSTRUMENTS
Financial assets and liabilities were held as follows:
Group Company
2010 2009 2010 2009
Assets GBP GBP GBP GBP
Loans and
receivables:
Receivables
from
subsidiaries - - 7,569,267 6,610,290
Loan to JSOP
Trustees - - 405,694 -
Trade
receivables 210,184 94,789 - -
Cash and cash
equivalents 850,804 1,017,890 844,939 998,225
-------------------- -------------------- -------------------- --------------------
Total
financial
assets 1,060,988 1,112,679 8,819,900 7,608,515
================ ================ ================ ================
Liabilities
Financial
liabilities
measured at
amortised
cost:
Trade
payables 182,663 109,099 142,877 20,468
Accrued
expenses 221,944 387,868 126,963 122,523
Deferred
income 83,958 7,548 - -
------------------- -------------------- -------------------- --------------------
Total
financial
liabilities 488,565 504,515 269,840 142,991
================ ================ ================ ================
The Group is engaged in the development of drug delivery systems
and proprietary products in the fields of protein drugs, vaccines
and oncology. Whilst it is therefore exposed to some financial risk
this is significantly less than a trading company which has
significant receivables, payables and inventories.
The Directors consider that the carrying value of the financial
assets and financial liabilities approximates their fair value.
The credit risk and foreign currency risk of trade receivables
are considered in Note 13.
Cash and cash equivalents comprise cash on hand of GBP283 and
balances at bank of GBP850,521, of which GBP802,630 is held in a US
dollar denominated account. Whilst the bank balances are held with
a reputable financial institution, the maximum exposure to credit
risk is the carrying value of the balances as disclosed above.
A 5% increase or decrease in the US dollar/sterling exchange
rate would have increased or decreased the reporting sterling
carrying amount of the US bank balance by approximately
GBP40,000.
The trade payables are considered to have a maturity date of 3
months or less.
Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency exchange rates.
The Group monitors its foreign currency risk through cash flow
forecasting and currency is held in foreign currency bank accounts
only to the extent that it is required for clinical development
purposes.
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with it will fluctuate due to
changes in market interest rates.
The Group has financial assets in the form of trade receivables
and cash and cash equivalents. These are considered to be short
term liquid assets and as a result the exposure to interest rate
risk is not considered to be significant.
On this basis no sensitivity analysis has been prepared on the
grounds that there would not be a material impact on either the
carrying values of the respective assets, the net loss for the year
or the equity at the end of the period.
Liquidity risk
The Group maintains sufficient cash and cash equivalents.
Management reviews cashflow forecasts to determine whether the
Group has sufficient cash reserves to continue with its research
and development activities. The Group has no significant financial
liabilities and no borrowings.
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern and to provide a
means of attracting investors. The Group has no debt and does not
therefore have a strategy in terms of maintaining a certain debt to
equity ratio. Rather capital is managed with a view to generating
further cash and cash equivalents which can be used in the
furtherance of the Group's aims and objectives.
19. RELATED PARTY TRANSACTIONS
FDS Pharma ("FDS") - substantial shareholder
In October 2005, Lipoxen Technologies Limited entered into an
agreement with its then major shareholder, FDS, under which
15,000,000 ordinary shares were allotted in consideration for the
provision by FDS of manufacturing and clinical development
services. The agreement provides for certain milestone payments
which may be settled either by the issue of further shares in
Lipoxen Plc or by specified cash amounts. An amount of GBPNil (2009
- GBP311,725) has been written off to the comprehensive income
statement in the year in respect of services provided in the year
by FDS.
Sales of services to FDS in the year amounted to GBPNil (2009 -
GBP89,489). At 31st December 2010, the balance owed by FDS to the
Company and the Group was GBP89,489. This amount has subsequently
been received.
Directors
The Group and Company was charged the following amounts by
Directors or by companies controlled by Directors for the provision
of consultancy services:
2010 2009
GBP GBP
Sir Brian Richards 81,250 60,000
Dr Dmitry Genkin 3,000 3,000
Igor Nikolaev 3,000 3,000
At 31st December 2010, the balance owed to Dr Genkin by the
Company and the Group was GBP5,204.
Lipoxen Technologies Limited - subsidiary
The Company charged a management charge of GBP120,000 (2009 -
GBP120,000) to the subsidiary during the year. The Company
continued to advance monies to the subsidiary during the year to
fund the ongoing development of the Group's technology. The balance
receivable from the subsidiary at 31st December 2010 was
GBP7,569,267 (2009 - GBP6,610,290).
20. POST BALANCE SHEET EVENT
Since the Balance Sheet date, the Company has negotiated a short
term unsecured loan of up to $1.15m. This loan is for a term of
seven months, bears interest (rolled up) at 0.85% per month, is
available to be drawn down in several tranches and is repayable
either in cash or by other means as may be agreed between the
parties. At the date of this Statement a net $409k has been drawn
down.
21. GENERAL INFORMATION
Lipoxen Plc and its subsidiary, Lipoxen Technologies Limited,
are principally engaged in the development of drug delivery systems
and proprietary products in the fields of protein drugs, vaccines
and oncology. Lipoxen Plc, a public limited company incorporated
and domiciled in England and Wales, is the Group's ultimate parent
company. The address of the registered office and the principal
place of business is The London BioScience Innovation Centre, 2
Royal College Street, London NW1 0NH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFSARRIFIIL
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