TIDMREDX
RNS Number : 8600Z
Redx Pharma plc
20 December 2017
REDX PHARMA PLC
("Redx" or "the Company")
Final Results for the Year Ended 30 September 2017
A year of refocus
Positioned to deliver on our vision of creating first or best in
class drugs that treat significant unmet need in cancer and
fibrosis
Alderley Park, December 20 2017- Redx Pharma (AIM:REDX), the
drug discovery and development company, today announces its audited
financial results for the year ended 30 September 2017.
In an extraordinary 12 months, the Company entered
Administration in May 2017 and then, post period in November 2017,
successfully exited as a going concern. The emergent and
strengthened board and management team is now well positioned to
deliver on a refocused vision of creating first or best in class
drugs that treat significant unmet need in cancer and fibrosis. The
balance sheet (as at 2 November 2017 - see table below) consisted
of GBP13.9 million, with no liabilities nor loan facilities
(outside of those necessary for the normal course of business)
which, coupled with a reduced cost base, provides a cash runway
into early 2019.
Operational Highlights
-- Strategic Refocus initiative announced in March, which
resulted in a substantial head-count reduction
-- In March, the Company successfully completed a share placing
and subscription to raise GBP12 million
-- Iain Ross appointed non-executive Chairman on 1 May 2017,
replacing Frank Armstrong, other changes to the Board of Directors
were as follows:
o Director and Founder Peter Jackson stood down from the Board
on 31 March 2017
o Director Peter McPartland, stood down at the Company's AGM in
April 2017
o Director David Lawrence, stood down from the Board on 14
August 2017
-- On 24 May the Company entered Administration and trading in
shares on AIM suspended; Jason Baker and Miles Needham of FRP
Advisory LLP appointed Joint Administrators.
o The Company subsequently exited administration as a going
concern on 2 November (post period- see below)
-- In June, the MHRA approved the clinical trial application
(CTA) for porcupine inhibitor RXC004, for a phase 1/2a clinical
study in hard to treat cancers
o Enrolment to start in Q1 2018- This will be the first
candidate from Redx's pipeline to enter the clinic
-- In July, sold Bruton's tyrosine kinase (BTK) programme to
Loxo Oncology, Inc. (NASDAQ: LOXO) for $40 million
-- In September, poster presentation at the European Society for
Medical Oncology (ESMO) identifying a specific gastric cancer
patient sub-population sensitive to RXC004, which will allow
targeting of specific patients for clinical trials
Post Period Highlights
-- Exited Administration on 2 November 2017 with a cash balance of GBP13.9 million
o Shares resumed trading on AIM on 6 November 2017
-- Announced strategic update and refocused R&D pipeline,
consisting of two development programmes and five research
programmes
o Lead cancer asset, Phase 1 trial to start 1Q18; 1a results
estimated 2H18
-- Best-in-class potential
-- Addresses blockbuster commercial opportunity
o Lead fibrosis candidate could be first drug specifically
targeting inflammatory bowel disease (IBD) related fibrosis
-- IBD addressable market estimated to be three million
patients
-- Strengthened management team and Board of Directors
o Iain Ross appointed Executive Chairman
-- Neil Murray has stepped down as CEO and Director of the
Company
-- Search for suitably qualified CEO underway
o Dominic Jackson appointed Chief Financial Officer and
Executive Director
o Peter Presland appointed Non-Executive Director and Chair of
Audit Committee
Financial Highlights
-- Total revenue for the year GBP30.5m (2016: GBPNil)
-- Profit for the year GBP1.528m (2016: loss GBP15,521m)
-- Total operating expenditure/R&D expenditure GBP15.8m/GBP8.2m (2016: GBP16.5m/GBP8.1m)
-- Cash balance at 30 September 2017 of GBP23.8m (2016: GBP5.8m)
Iain Ross, Executive Chairman of Redx Pharma commented:
"After a very challenging period, Redx emerged from
Administration in November a stronger, leaner company led by a
strengthened management team and with a revised strategic direction
and a cash runway through to early 2019. We are now focused on the
creation of high value, first or best in class drugs that treat
significant unmet need in cancer and fibrosis.
The clinical trial application for our porcupine inhibitor,
RXC004 for hard to treat cancers was approved in June and we look
forward to moving this product into the clinic during the first
quarter of 2018. Meanwhile, our dual Rock1/2 inhibitor programme,
for the treatment of fibrosis associated with inflammatory bowel
disease, is in late stage lead optimisation and a development
candidate is due to be announced in mid 2018."
Balance Sheet at Exit from Administration 2 November 2017-
UNAUDITED
GBP'000
Assets
Non-current assets
Property, plant and equipment 190
Intangible assets 430
---------
620
Current assets
Trade and other receivables 2,217
Cash and cash equivalents 13,866
------------------------------------- ---------
Current tax 1,155
---------
17,238
Total assets 17,858
Current liabilities
Trade and other payables 4,311
Net assets 13,547
---------
Equity
Share capital 1,265
Share premium 33,263
Share based compensation 880
Capital redemption reserve 1
Retained deficit (21,862)
---------
Equity attributable to shareholders 13,547
---------
For further information, please contact:
Redx Pharma Plc T: +44 1625
469 918
Iain Ross, Executive Chairman
Cantor Fitzgerald Europe (Nominated T: +44 20
Advisor & Broker) 7894 7000
Phil Davies
WG Partners LLP (Joint Broker) T: +44 20
3705 9330
Claes SpÄng/ Chris Lee/ David
Wilson
FTI Consulting T: +44 20
3727 1000
Simon Conway/Stephanie Cuthbert
About Redx Pharma
Redx Pharma discovers and develops proprietary, small molecule
drugs to address areas of high unmet medical need in cancer and
fibrosis. In cancer, Redx pursues targeted therapies where a
biomarker can potentially be used for selecting those patients that
are most likely to benefit from therapy, and/or drugs that are
designed to disrupt cancer resistance pathways. In fibrosis, the
Company is focused on developing treatments that will stop and
reverse the formation of fibrotic tissue. In both therapeutic areas
Redx's aim is to develop drugs whose profile suggests they will be
best in class, if not first in class.
Chairman's Statement
"Re-focused; science based, commercially driven and financially
sound"
Dear Shareholder,
2017 has not been a good year for the shareholders of Redx
Pharma plc and the value of your investment has reduced
significantly. Having said this it has been an extraordinary year,
which none of us working for, associated with, or invested in Redx
Pharma plc will ever forget.
THE ART OF THE POSSIBLE
After being appointed Chairman on 1 May 2017, three weeks later,
Redx Pharma plc was put into Administration by a major long-term
creditor. I was as surprised as anybody at the turn of events.
However, having worked our way through the five-month period in
Administration, supported by a strong management team and excellent
advisers, I am pleased to report that your Company has emerged from
Administration stronger, leaner and 'fit for purpose' across all
facets of the business. It is a very unusual situation whereby a
public company goes into Administration and then emerges again as a
viable entity and it is a testament to all those involved that we
accomplished this and made "the impossible - possible".
This has not, however, been a pleasant experience. Sacrifices
have had to be made and some tough decisions taken, and as a
result, the Group, whilst under the control of the Administrators,
had no choice but to sell off one of the internal development
programmes to raise the necessary cash to allow the business to
exit Administration as a 'going concern'.
NEW LEADERSHIP
The Company exited Administration after the period under review,
so in November 2017, the Board has been re-structured such that six
of the seven directors who were in place at the start of the
financial year under review are no longer with the business.
Upon exit from Administration, Dominic Jackson and Peter
Presland joined the Board as Chief Financial Officer ("CFO") and
independent Non-Executive Director respectively. Both bring strong
financial and City experience.
Peter Presland will chair the Audit, Risk and Disclosure
Committee and Bernd Kirschbaum, who remains on the Board, will
continue to chair the Remuneration and Scientific committees.
Following the resignation of the former CEO, Dr Neil Murray, a
search has been initiated for a new, suitably qualified CEO and
until such time as the new incumbent is appointed, I will take on
the role of Interim Executive Chairman and work with the senior
management team to progress the development of the business as a
whole.
A NEW MODUS OPERANDI
Over the period, there has been a fundamental shift in the way
in which the business operates and I, along with the other
Directors and the senior management team, have reviewed all facets
of the business, including the financial systems, controls and
procedures; reviewed and focused the Research & Development
("R&D") portfolio; and taken on advice from stakeholders and
advisers. This has resulted in the adoption of a number of changes
to the Group to ensure a more focused approach, with an emphasis on
financial rigour, throughout the organisation.
During the year under review, the Group had already begun to
focus the pipeline of development projects and to reduce the
in-house headcount and resources. However, as a result of going
into Administration, this process was further accelerated, and we
now have a more focused research and development pipeline, which
consists of two prioritised development programmes and five other
programmes in research.
At the time of exit from Administration, the Group had GBP13.9m
of cash, with no loan facilities nor liabilities - outside of those
necessary for the normal course of business - which when coupled
with a reduced cost base, provides a cash runway through to early
2019(1) .
It should be noted that this does not include any potential
income from partnering/collaborations and/or the sale or
out-licensing of non-core assets. Therefore, with the reduction in
the cost base already implemented, coupled with making further
progress in refining our discovery portfolio, I remain confident
that our cash together with our partnering initiatives will enable
us to achieve our medium-term objectives. In saying this, your
Board fully recognises the obligation to take the utmost care in
the use of shareholder funds, and we will not hesitate to extend
the cash runway through realising further cost savings by
eliminating unnecessary expenditure if the circumstances
dictate.
During the period under review, Redx's lead programme, RXC004, a
potential best-in-class porcupine inhibitor, progressed through
pre-clinical development and in June 2017 the clinical trial
application (CTA) was approved by the MHRA for a phase 1/2a
clinical study that will include hard-to treat cancers such as
gastric, pancreatic and biliary. This marked the culmination of a
huge effort by the Redx team and our clinical development advisers,
Novella Clinical, and as a result, it is anticipated that this drug
will enter the clinic in Q1 2018. In addition, in September 2017
the Group presented a poster at the European Society for Medical
Oncology (ESMO) identifying a specific gastric cancer patient
sub-population sensitive to RXC004, which will allow us to target
specific patients for the clinical trials.
In addition, over the last 12 months, Redx has developed
considerable expertise in understanding the molecular mechanisms
underlying fibrosis and the druggable targets on which to focus.
The Group has several active programmes in this area with the lead
programme being a potential first-in-class ROCK inhibitor where the
targeted indication is fibrosis arising from Inflammatory Bowel
Disease (IBD). A development candidate from this programme is due
to be announced in mid 2018.
The Group intends to out-license its non-core assets and with
the assets that we have prioritised, will have no hesitation in
forming relevant collaborations to secure third party validation,
thereby increasing the probability of success.
Financial overview
Redx's financial position has significantly improved with cash
of GBP23.8m as at 30 September 2017 compared to GBP5.8m at the
previous year end due to the successful sale of the BTK asset for
GBP30.5m. In addition, the Group has no borrowings following
settlement of the GBP2.0m loan from Liverpool City Council and
agreements with all other creditors.
The Group generated operating income of GBP30.5m again due to
the sale of the BTK asset. Other income of GBP1.3m for the year
ended 30 September 2017 was down compared to GBP2.3m in the
previous year due to the reduction in grants receivable following
settlement of the RGF Grant funding. The Company issued 32.9m
shares pursuant to two share placings raising in total GBP12.4
million and the issue of share options.
Going forward, the Group will benefit from a better cash
position with lower ongoing costs following a major reorganisation,
active cost management as well as reduced ongoing financial costs.
Redx is therefore well placed to invest in its ongoing and now
proven R&D platform.
(1.) Independent working capital report prepared by Crowe Clark
Whitehill for the Company and Administrators supports a minimum of
12 months working capital
CORPORATE GOVERNANCE
The new Board of Directors is committed to maintaining the
highest standards of transparency, ethics and corporate governance,
whilst also providing leadership, controls and strategic oversight
to ensure that the Group delivers value to all shareholders. Each
Director brings independence of character and judgment to the role.
Board and Committee meetings are characterised by robust
constructive debate, based upon high-quality reporting from
management, and the Board will keep its performance and core
governance principles under regular review.
OUTLOOK - FOCUS, REALISM and RESULTS
In the next 12 to 18 months the Group expects to see further
validation of its view of the pre-eminence of its discovery
capability. The strategy will be to continue to focus on creating
potentially 'first in class' or 'best-in-class' drugs. The
intention is to ensure that the programmes will be highly valued by
the market and pharmaceutical industry alike.
The Board will aim to create value through organic growth, but
also will remain alert to external opportunities to accelerate the
development of the business, including forming validating
partnerships with third-parties. Currently Management is in
discussions with third-parties in respect of partnerships and the
licensing of non-core assets. However in the absence of value
generating partnerships/collaborations being secured in a timely
fashion your Board will not hesitate to seek to raise additional
funds from shareholders and the investment community should they be
required to take our programmes through to significant inflection
points.
The mantra for business going forward must be Focus, Realism and
Results.
The Group will focus on the key assets. Having made some tough
decisions and having let a number of people leave the business, the
cost base is under control. Prudent financial management will
continue to be a key driver and accordingly, the Board will not
hesitate to terminate programmes which prove to be non-viable, or
to make further cost cuts should the need arise.
Realism and professionalism will be key to forming any
validating partnerships and the way in which the business is
managed going forward.
Results should be transparent, measurable and time-related and,
as a consequence, the Board have established clear timelines for
achieving partnering and pipeline objectives in order to achieve a
sustainable increase in market value.
BOARD COMMITMENT
Recently, upon exiting Administration, I made the following
statement, which I would like to re-iterate in this Annual Report
on behalf of the Board.
"...The new Board takes the view that the long-term success of
the Company will depend on leveraging scientific excellence to
build a diversified portfolio of high-quality, pre-clinical and
clinical-stage pharmaceutical assets that will be prized by both
potential investors and partners. Only by so doing can we
reasonably hope to grow the long-term value of the business. We
return to the market with multiple "shots on goal" with two
prioritised development programmes and five other programmes in
research.
We are not complacent and recognise that the Company's long-term
future and viability will depend upon our ability to achieve timely
and realistic goals. We do not underestimate the need to regain
credibility and profile in the sector and with you, our
shareholders. We have a scientifically and commercially experienced
management team with a track record of success, working with Key
Opinion Leaders to ensure we progress our programmes optimally.
We have defined a clear strategy for the Company and we
recognise drug development is invariably a capital-intensive
business, and any company that pursues new therapies for diseases
as challenging as cancer and fibrosis is required to make
significant investments boldly in order to have any chance of
success. Your Board fully recognises the obligation this imposes
upon us to take the utmost care in the use of shareholder funds,
and we will not be afraid to terminate programmes that cease to be
competitive and to realise further cost savings by eliminating
unnecessary expenditure..."
On behalf of the Board I would like to thank Neil Murray, David
Lawrence and Norman Molyneux for their significant and valuable
contributions to the business over a number of years and to wish
them success in the future.
Finally, I want to recognise the management and staff who are
taking this business forward and congratulate them on their efforts
and resilience during this time of change and transition. I would
also like to thank the shareholders as a whole for their support
and patience over what has been an extraordinary period in the
Group's history.
At Redx we believe we have a world-beating discovery capability,
and with a newly focused and committed team and a targeted
commercial partnership strategy, we see the next few years as
exciting ones for the Group and its shareholders. I look forward to
reporting further progress over the next few months, including the
appointment of a new CEO and further announcements in respect of
the development of the pipeline.
Iain Ross
Executive Chairman
19 December 2017
Operational Review
The principal activities of the business continue to be the
discovery and development of proprietary, small molecule drugs to
address areas of high, unmet medical need.
In March 2017 the Company completed a share placing and
subscription to raise GBP12m gross. As part of this, Lanstead
Capital LP agreed to subscribe for 11,500,000 subscription shares.
Further information regarding this transaction can be found in note
8.
Again, in March 2017, a strategic refocusing and restructuring
of the Group was announced. The restructuring was completed in May
2017. The costs associated with it have been separately disclosed
in note 7.
Following the Company entering Administration in May 2017, the
entire focus thereafter was to take the steps necessary to bring
the Company out of Administration on a 'going concern' basis with a
minimum of 12-months working capital. During this period, the
Directors worked with the Administrators to resolve all creditor
claims and as a consequence the BTK programme assets were sold to
Loxo Oncology for US$40m on 31 July 2017. Concurrently the Group
progressed the development of its pipeline assets as outlined
within this report. The Group will continue to focus upon
transitioning its programmes into the clinic as appropriate and
balance its resources to enable a steady flow of projects through
the research pipeline.
Entering Administration triggered a clawback claim for RGF grant
funding previously received within the Group. This matter is
further disclosed in note 6, and noted in the Key Performance
indicators below.
At the year end the Directors reviewed the loan to Redag Crop
Protection Limited and derecognised it as an asset as detailed in
note 9.
Redx Pharma plc and Redx Oncology Limited exited Administration
post year end on 2 November 2017.
Key Performance Indicators
The Group's key performance indicators include a range of
financial and non-financial measures. Details about the progress of
our research programs (non-financial measures) are included
elsewhere in this Operational Review, and below are the other
indicators (financial) considered pertinent to the business.
2017 2016 2015 2014
GBPm GBPm GBPm GBPm
Cash at year
end 23.8 5.8 9.4 2.9
------------------------ ------- ------- ------- -------
In March 2017 the Company raised GBP12m (gross)
from a share placing and subscription. In
August 2017 the Group sold its BTK asset
for $40m. Post year end GBP6.1m was used
to settle RGF grant funding clawbacks. Full
details of cash usage can be found in the
Consolidated Statement of Cash Flows.
Total operating
expenditure 15.8 16.5 11.4 10.1
Expected to fall further in 2018 with a full
year of benefit from the reduced headcount
following the reorganisation and cost saving
initiatives.
R & D expenditure 8.2 8.1 5.1 4
The Group's continuing focus is to maximise
the amount of operating expenditure spent
on research and development activities.
Cash
Flow 18.0 (3.7) 6.5 1.9
Reflecting both the share issue and BTK programme
sale within the year. Post year end GBP6.1m
was used to settle RGF grant funding clawbacks.
Pipeline Progress
The Redx pipeline has continued to advance over the last year.
Its lead programme, RXC004, a potential best-in-class porcupine
inhibitor, will enter the clinic in Q1 2018 following the recent
approval by the MHRA and Ethics Review Committee for a phase 1/2a
study that will include patients with hard-to-treat cancers. A dual
ROCK1/2 inhibitor programme (acquired from the private Belgian
company, Amakem in March 2017 for the treatment of fibrosis
associated with inflammatory bowel disease (IBD) is in late stage
Lead optimisation with a first in class development candidate due
to be announced in mid 2018. The Directors believe pipeline
progress to be the most significant non-financial Key Performance
indicator.
Oncology
Porcupine program
During the financial year, the Group announced that the clinical
trial application (CTA) for its lead asset, porcupine inhibitor
RXC004, was approved by the MHRA and Ethics Review Committee for a
phase 1/2a clinical study that will include hard-to-treat cancers
such as gastric, pancreatic and biliary. This is one of the
significant opportunities that Redx intends to target with this
drug, and expects to start the 1a portion of the study (which will
be in cancer "all comers") in Q1 2018. On this timeline, the Group
anticipates initial safety and tolerability results from the study
during H2 2018, and believes RXC004 has the potential to be used as
a biomarker-guided, targeted therapy in hard-to-treat cancers and
as a combination partner in immuno-oncology treatment paradigms
with checkpoint inhibitors. Together these are multi-billion-dollar
addressable markets. Redx expects to see an increase in the number
of potentially interested partners once safety data is available
from the phase 1/2a trial.
Porcupine is a key enzyme in the oncogenic Wnt signalling
pathway. This pathway is implicated in a range of hard-to-treat
cancers with poor prognosis such as pancreatic, biliary and gastric
cancers. The Group's Porcupine inhibitor, RXC004, is a potent
inhibitor of this enzyme and pathway, leading to strong tumour
growth inhibitory effects in a variety of cancer models. Redx has
also shown that RXC004, when administered together with an immune
checkpoint inhibitor (anti-PD-1) has a synergistic immune system
modifying effect. Initial clinical studies with RXC004 will be as a
monotherapy, but we have included a combination therapy expansion
arm together with a checkpoint inhibitor in our clinical study
design.
Other Pipeline Projects
Redx has several other compounds in pre-clinical profiling. The
Group is in lead generation with its programme developing
allosteric inhibitors of the protein tyrosine phosphatase, SHP2.
Competitive phosphatase inhibitors that directly bind the catalytic
site of the enzyme carry the risk of hitting too many vital
phosphatases at the same time. Therefore, Redx is focused on this
more indirect method of achieving inhibition in order to ensure
specificity. As phosphatases are largely unexploited as
pharmacological targets, Redx has an opportunity to be at the
forefront of drug development in this area. The Group also has an
on-going collaboration with AstraZeneca on an un-named target and a
Pan-Raf inhibitor programme in Lead optimisation.
Fibrosis
Fibrosis is an internal scarring process, which can occur in
response to injury, where excess connective tissue is deposited in
an organ or tissue, thereby impairing its function. Most chronic
inflammatory diseases will result in fibrosis, with progressive
injury resulting in organ failure. Fibrotic disease can occur in
nearly any tissue in the body and contributes to 45%(2) of deaths
in the developed world. Solid organ fibrosis can occur as a result
of many different diseases, for example inflammatory bowel disease
(IBD). Current therapeutic options are limited for these chronic
and often life-threatening diseases.
Redx's experienced team of scientists has considerable expertise
in understanding the molecular mechanisms underlying fibrosis and
hence which druggable targets to focus on. Redx are developing
cutting edge therapies that aim to stop and reverse the formation
of fibrotic tissue. By targeting pathways involved in the
progression of these devastating diseases, these drugs are designed
to be disease modifying rather than simply providing symptomatic
relief.
Developing the first drug specifically designed to treat
fibrosis related to inflammatory bowel disease (IBD)
The Group's lead programme is a potential first-in-class "soft"
Rho Kinase (ROCK) 1/2 dual inhibitor where the targeted indication
is fibrosis arising from IBD. The drug is designed to work only at
the site of action in the gastrointestinal tract and degrades
quickly, once absorbed, though enzyme-mediated metabolism in blood
plasma avoiding systemic exposure, which we believe will provide a
clean safety window over cardiovascular (CV) side effects seen in
this target class. This differentiates Redx from other competitor
dual ROCK 1/2 inhibitors which circulate in the bloodstream and
have known CV safety risks. A development candidate is due to be
announced in mid 2018. It is estimated that the direct cost to the
US healthcare system of IBD is up to $28bn [Mehta, F; Am. J. Manag.
Care. 2016; 22: S51-60], suggesting that a drug for treating (or
preventing) fibrosis for this condition could have blockbuster
potential. Redx recognised the potential for this drug and acquired
it from Amakem, a Belgian private company.
Other Fibrosis Projects
Idiopathic pulmonary fibrosis (IPF) is the target indication for
the Group's porcupine inhibitors, which are currently being
profiled in animal models of this disease. Redx also have a ROCK2
selective inhibitor lead optimisation stage programme looking at
kidney fibrosis associated with diabetes, and believe the
identification of a selective ROCK2 inhibitor will avoid the
cardiovascular effects seen with systemically acting dual ROCK1/2
inhibitors whilst retaining the beneficial anti-fibrotic effects of
ROCK2 inhibition. This research complements the Group's lead 'soft'
ROCK 1/2 inhibitor programme for IBD since both programmes exploit
the anti-fibrotic potential of ROCK inhibition with complementary
differentiated approaches to provide a favourable safety profile
for the selected indication.
(2) Bollong M. et al, Small molecule-mediated inhibition of
myofibroblast transdifferentiation for the treatment of fibrosis
(PNAS | May 2, 2017 | vol. 114 | no. 18 | 4683)
Strategy
Redx's ambition is to continue to discover and develop
proprietary, small molecule drugs to address areas of high, unmet
medical need. In cancer, Redx will pursue targeted therapies (i.e.
where a biomarker can potentially be used for selecting those
patients that are most likely to benefit from therapy) and/or drugs
that can potentially disrupt cancer resistance pathways. In
fibrosis, Redx is focused on developing treatments that will
potentially stop and reverse the formation of fibrotic tissue (i.e.
the drugs are potentially disease modifying, rather than simply
providing symptomatic relief). Fibrosis is a feature of the
pathology of a number of devastating diseases with high unmet
medical need. In both therapeutic areas Redx aims to develop drugs
whose profile suggests they will be best-in-class, if not first in
class.
The anti-infective research unit has been closed and the Group
will look to partner the assets in the near term. With the re-focus
on cancer and fibrosis, CARB-X has terminated the unused grant that
was awarded to Redx in March 2017 for the NBTI programme.
Redx will continue to seek to maximise shareholder value by
advancing selected programmes through to clinical development. The
Group will aim to take products through to at least clinical proof
of concept stage at which point they can be meaningfully assessed,
allowing a proper valuation of the asset for potential partnering.
Market data suggests success at this stage of development provides
the most significant value inflection in the development of a new
medicine, with a significant return on investment achievable
[Cortellis Competitive Intelligence Database].
Senior Management Team
Following Dr Neil Murray's resignation post year end when the
Company came out of Administration, Iain Ross became Interim
Executive Chairman and he will remain until such time as the
Company has appointed a suitably qualified Chief Executive Officer
(CEO) to lead the business. During this transition period, Iain
Ross will work closely with the executive management team
comprising: Dr Richard Armer (Chief Scientific Officer), Dr Matilda
Bingham (Head of Research and Operations) and Mr Nicholas Adams
(Chief Business Officer) all of whom have made a significant
contribution to enable the Company to exit Administration.
Financial Review
Financial position
At 30 September 2017, whilst still in Administration, the Group
had cash resources of GBP23.8m (2016: GBP5.8m). Borrowings of GBP2m
had been repaid at the balance sheet date, and a GBP6.1m clawback
of RGF funding was repaid post year end in October 2017. The Group
exited Administration on 2 November 2017 with a remaining GBP13.9m
in cash.
Impact of Administration
Two Group companies, Redx Pharma plc and Redx Oncology Ltd were
placed into administration on 24 May 2017. The principal financial
impacts of this were:
-- Costs of the Administration (note 4) GBP2.9m, including a
penalty payment with regard to the derivative financial instrument
of GBP510k;
-- Crystallisation of contingent liabilities with regard to grant funding costing GBP6.1m; and
-- The write off of the derivative financial instrument entered
into at the time of the last share issue (note 8) costing
GBP3.6m
Sale of BTK
Redx Oncology raised GBP30.5m ($40m) from the sale of its BTK
programme to Loxo Oncology Inc.
Share issue
GBP12.4m (gross) was raised from the issue of shares during the
year. (2016: GBP10m)
Cashflows
Overall positive net cash flow of GBP18m, (2016: GBP3.7m
outflow), generated from the BTK sale and the share issue. No
further grant income is expected.
Reorganisation
A major reorganisation of the Group took place in spring 2017,
resulting in a significant reduction in staff numbers. The cost of
this was GBP0.8m. Average headcount reduced from 199 in 2016 to 131
over the year to 30 September 2017. Actual headcount at 30
September was 51.
Taxation
The group continues to claim Research and Development
expenditure credits, with GBP1.1m due at 30 September 2017. (2016:
GBP0.6m.)
Iain Ross
Executive Chairman
19 December 2017
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2017
Note Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
Continuing operations
Revenue 5 30,474 -
Operating expenses (15,768) (16,527)
Non-recurring relocation
costs - (556)
RGF clawback 6 (6,086) -
Costs of Administration
Write-off of derivative
instrument 8 (3,560)
Other Administration
costs 4 (2,930)
--------
(6,490) -
Non-recurring reorganisation
costs 7 (791) -
Derecognition of
non-current asset 9 (641) -
Share based compensation (13) (245)
Other operating
income 1,291 2,380
___________ ___________
Profit/(loss) from
operations 1,976 (14,948)
Finance costs (368) (526)
Finance income 38 67
___________ __________
Profit/(loss) before
taxation 1,646 (15,407)
Income tax (118) (114)
___________ __________
Total comprehensive
profit/(loss) for
the year attributable
to owners of Redx
Pharma plc 1,528 (15,521)
========= ==========
Earnings/(loss)
per share (pence)
From continuing
operations
Basic 10 1.4 (19.8)
Diluted 10 1.4 (19.8)
Consolidated Statement of Financial Position
At 30 September 2017 Company No. 7368089
Note 2017 2016
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 222 533
Intangible assets 430 309
Other receivables 9 - 605
___________ __________
Total non-current assets 652 1,447
___________ __________
Current assets
Trade and other receivables 2,588 1,553
Cash and cash equivalents 23,806 5,758
Current tax 643 637
___________ __________
Total current assets 27,037 7,948
___________ __________
___________ __________
Total assets 27,689 9,395
___________ __________
Liabilities
Current liabilities
Trade and other payables 13,362 5,675
Borrowings - 2,000
___________ __________
Total liabilities 13,362 7,675
___________ __________
Net assets 14,327 1,720
=========== ==========
Equity
Share capital 1,265 936
Share premium 33,263 22,526
Share-based compensation 880 867
Capital redemption reserve 1 1
Retained deficit (21,082) (22,610)
___________ __________
Equity attributable to shareholders 14,327 1,720
=========== ==========
Consolidated Statement of Changes in Equity
For the year ended 30 September 2017
Share Share Share Capital Retained Total
capital premium based Redemption Deficit Equity
payment Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2015 650 13,516 622 1 (7,089) 7,700
--------- --------- --------- ------------ ----------- -----------
Share issue 286 9,714 - - - 10,000
Share issue
costs - (704) - - - (704)
Transactions
with owners
in their
capacity
as owners 286 9,010 - - - 9,296
Loss and
total comprehensive
income for
the year - - - - (15,521) (15,521)
Share based
compensation - - 245 - - 245
Movement
in year 286 9,010 245 - (15,521) (5,980)
--------- --------- --------- ------------ ----------- -----------
At 30 September
2016 936 22,526 867 1 (22,610) 1,720
--------- --------- --------- ------------ ----------- -----------
Share options
exercised 1 69 70
Share issue 328 11,966 - - - 12,294
Share issue
costs - (1,298) - - - (1,298)
Transactions
with owners
in their
capacity
as owners 329 10,737 - - - 11,066
Profit and
total comprehensive
income for
the period - - - - 1,528 1,528
Share based
compensation - - 13 - - 13
Movement
in year 329 10,737 13 - 1,528 12,607
--------- --------- --------- ------------ ----------- -----------
At 30 September
2017 1,265 33,263 880 1 (21,082) 14,327
========= ========= ========= ============ =========== ===========
Consolidated Statement of Cash Flows
For the year ended 30 September 2017
Note Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
Net cash flows from
operating activities
Profit/(loss) for the
year 1,528 (15,521)
Adjustments for:
Income tax 118 114
Finance costs 368 526
Finance income (38) (67)
Depreciation and amortisation 327 262
Share based compensation 13 245
Derecognition of non-current 641 -
asset
Write-off of derivative 3,560 -
asset
Profit on disposal of (107) -
assets
Movements in working
capital
Increase in trade and
other receivables (1,185) (124)
Increase in trade and
other payables 8,871 1,272
__________ __________
Cash generated by /
(used in) operations 14,096 (13,293)
Tax credit received - 750
Interest received 2 36
__________ __________
Net cash generated by
/ (used in) operations 14,098 (12,507)
__________ __________
Cash flows from investing
activities
Purchase of Intangible (121) -
assets
Sale of property, plant
and equipment 124 2
Purchase of property,
plant and equipment (33) (444)
__________ __________
Net cash used in investing
activities (30) (442)
__________ __________
Cash flows from financing
activities
Proceeds from share
issue 12,364 10,000
Share issue costs (1,298) (704)
Purchase of derivative (3,666) -
financial instrument
Receipt from derivative 106 -
financial instrument
Interest paid (1,551) -
Loan repaid / (granted) 25 (25)
LCC loan repaid (2,000) -
__________ __________
Net cash from financing
activities 3,980 9,271
__________ __________
Net increase / (decrease)
in cash and cash equivalents 18,048 (3,678)
Cash and cash equivalents
at beginning of the
year 5,758 9,436
__________ __________
Cash and cash equivalents
at end of the year 23,806 5,758
__________ __________
As at 30 September 2017, GBP23.7m of the above amount was held
in bank accounts operated by FRP Advisory LLP. (2016: Nil) All cash
from these accounts was returned to the control of the directors of
the relevant companies on exit from Administration.
Notes to the financial information
1. Basis of preparation
The financial information set out herein does not constitute
statutory accounts as defined in Section 434 of the Companies Act
2006. The financial information for the year ended 30 September
2017 has been extracted from the Group's audited financial
statements which were approved by the Board of Directors on 19
December 2017 and which, if adopted by the members at the Annual
General Meeting, will be delivered to the Registrar of Companies
for England and Wales.
The financial information for the year ended 30 September 2016
has been extracted from the Group's audited financial statements
which were approved by the Board of Directors on 20 March 2017 and
which have been delivered to the Registrar of Companies for England
and Wales.
The reports of the auditor on both these financial statements
were unqualified, did not include any references to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under
Section 498(2) or Section 498(3) of the Companies Act 2006.
The information included in this preliminary announcement has
been prepared on a going concern basis under the historical cost
convention, and in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU and the
International Financial Reporting Interpretations Committee (IFRIC)
interpretations issued by the International Accounting Standards
Board ("IASB") that are effective or issued and early adopted as at
the date of these financial statements and in accordance with the
provisions of the Companies Act 2006.
The Company is a public limited company incorporated and
domiciled in England & Wales and whose shares are quoted on
AIM, a market operated by The London Stock Exchange.
2. Going concern
As part of their going concern review the Directors have
followed the guidelines published by the Financial Reporting
Council entitled "Guidance on Risk Management and Internal Control
and Related Financial and Business Reporting".
The Group made a net profit of GBP1.5m during the year,
following the sale of its BTK programme, and after taking into
account all the costs associated with two Group companies, Redx
Pharma Plc and Redx Oncology Limited, entering Administration in
May 2017. The Directors are satisfied, based on detailed cash flow
projections and after the consideration of reasonable
sensitivities, that sufficient working capital is available to meet
the Group's needs as they fall due, and at least 12 months from the
date of signing the accounts.
The detailed cash flow assumptions are based on the Group's
working capital projections, prepared and approved by the Board,
which reflects a number of key assumptions in respect of project
costs, overheads and discretionary spend, underpinned by the
current pipeline. As detailed in the Chairman's statement the
Group's internal projections and assumptions were subject to an
independent review by Crowe Clark Whitehill and the forecasts
provide a cash runway to early 2019.
No revenue has been assumed in the forecasts, save for that
generated from subletting unused space. As detailed in the
Chairman's Statement, the Group is already in discussions with
third-parties in respect of partnerships and the licensing of
non-core assets. In addition, no corporation tax expense has been
accrued in respect of the disposal of the BTK Program because, as
detailed in the announcement of the completion of administration on
3 November 2017 various reliefs are thought to be available. This
is on the basis that the Administrators and CCW took tax counsel's
opinion that the methodology applied is correct and the reliefs
utilised are available. The forecasts indicate that the Group has a
cash runway through to February 2019 and its ability to continue to
develop its programmes thereafter is dependent on entering a
partnership agreement or an additional fund raise. The Group is
already in discussions with third-parties in respect of
partnerships and the licensing of non-core assets and furthermore,
the Group continues to have the ability to seek to raise additional
funds on capital markets.
In the absence of such opportunities in relation to partnerships
and the licensing of non-core assets coming to fruition, the
ability to raise additional funds on capital markets before
February 2019 or the unlikely event of the Group becoming liable to
pay tax on the disposal of the BTK Program, management has
identified further discretionary spending areas which can be
reduced to allow the Group to extend its cash runway to early May
2019. These can be made without impinging on the ability of key
programmes to reach value inflection points, such as data from
clinical trials which are expected to be completed in late
2018.
On the basis of the above review, the Directors are confident
that the Group has sufficient working capital to honour all of its
obligations to creditors as and when they fall due. Accordingly,
the Directors continue to adopt the going concern basis in
preparing the Financial Statements.
3. Segmental information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The Board of Directors and the Chief Financial Officer are together
considered the chief operating decision-maker and as such are
responsible for allocating resources and assessing performance of
operating segments.
The Directors consider that there are no identifiable business
segments that are subject to risks and returns different to the
core business. The information reported to the Directors, for the
purposes of resource allocation and assessment of performance is
based wholly on the overall activities of the Group. Therefore, the
Directors have determined that there is only one reportable segment
under IFRS8.
4. Administration
On 24 May 2017, two companies within the Group, Redx Pharma plc
and Redx Oncology Limited were placed into Administration as a
result of the default on repaying a loan from Liverpool City
Council. FRP Advisory LLP were appointed as Administrators. Dealing
in the shares of the Group on the AIM market was suspended on 24
May 2017. As at 30 September 2017 those companies remained in
Administration. They exited Administration on 2 November 2017, when
control was returned to the Directors. The costs directly
associated with the Administration (including a provision for costs
up to the end of the Administration), principally Administrators'
costs, legal costs and taxation costs, have been separately
disclosed on the face of the Consolidated Statement of
Comprehensive income, and total GBP2.93m. (2016: Nil).
5. Revenue
In August 2017, the Group sold its BTK inhibitor drug
development programme and related IP to Loxo Oncology Inc. for
$40m. The sale included certain patents, intellectual property,
contracts for product manufacture, and physical materials relating
to that program.
2017 2016
GBP'000 GBP'000
Sale of scientific 30,474 -
programme and related
IP
========= =========
6. Clawback of Regional Growth Fund grant funding
The Group has, in both the current and past years, received
Regional Growth Funds (RGF) grants administered by the Department
of Business, Energy and Industrial Strategy of the UK Government.
At the end of the year the Group had received total grants as
follows:
2017 2016
GBP'000 GBP'000
RGF 2 5,920 5,920
RGF 3 4,700 4,700
RGF 5 3,007 2,630
13,627 13,250
========= =========
Under the terms of the grant awards, clawback amounts totalling
GBP9.7m became repayable on Redx Pharma plc entering
Administration. During the course of the Administration, a full and
final settlement was reached in the sum of GBP6.1m. This amount is
disclosed within Trade and other payables, It was repaid in October
2017, as part of the exit from Administration.
7. Reorganisation costs
In March 2017, the Board of directors agreed a proposal to
undertake a restructuring of the Group, leading to a significant
reduction in headcount across all areas of operation. The non-
recurring costs incurred in implementing this proposal were
GBP791,000 (2016: Nil)
8. Write off of Derivative financial instrument
On 1 March 2017 the Company issued 11,500,000 new ordinary
shares of 0.1p each ("Ordinary Shares") at a price of 37.5p per
share to Lanstead Capital for GBP4,312,500. The Company
simultaneously entered into an equity swap with Lanstead for 85 per
cent of these shares with a reference price of 50p per share (the
"Reference Price"). The equity swap was for an 18-month period
ending in October 2018. All 11,500,000 Ordinary Shares were
allotted with full rights on the date of the transaction.
Of the subscription proceeds of GBP4,312,500 received from
Lanstead, GBP3,665,625 (85 per cent) was invested by the Company in
the equity swap.
Investment in the equity swap was a condition of the placing
with Lanstead.
In the period to 24 May 2017, which was the date of Redx Pharma
plc entering Administration, GBP106,000 had been received by the
Group under the terms of the swap.
As a consequence of entering Administration, the terms of the
equity swap were such that it terminated with no further benefit to
the Company. The remaining balance of GBP3.56m has therefore been
written off. (2016: GBPnil)
9. Derecognition of non-current asset
2017 2016
GBP'000 GBP'000
Loan 641 605
Derecognition (641) -
__________ _________
- 605
__________ _________
The loan of GBP714k was granted to Redag Crop Protection Ltd as
part of the sale of the former subsidiary. It bears interest at 5%
repayable with the principal sum. The loan is unsecured, and is
only repayable on the sale, listing, or change of control of Redag
Crop Protection ltd.
At 30 September 2017, the total amount outstanding (including
accrued interest), was GBP821k. At 30 September 2016, that amount
was GBP785k before a fair value adjustment was made to reflect the
non-current nature of the asset, amounting to GBP180k. following
review, and as a result of the conditionality attached to the
repayment of the loan, the Directors have derecognised it as an
asset in accordance with International accounting standards.
Whilst the loan has been de-recognised as an asset, the
Directors do not consider it to be extinguished and will continue
to seek full repayment under its terms"
10. Earnings / (loss) per share
Basic earnings / (loss) per share is calculated by dividing the
net income for the period attributable to ordinary equity holders
by the weighted average number of ordinary shares outstanding
during the period.
In the case of diluted amounts, the denominator also includes
ordinary shares that would be issued if any dilutive potential
ordinary shares were issued following exercise of share
options.
The basic and diluted calculations are based on the
following:
2017 2016
GBP'000 GBP'000
Profit / (loss)
for the period
attributable
to the owners
of the Company 1,528 (15,521)
Number Number
Weighted average
number of shares
- basic 113,022,840 78,360,552
============ ===========
Weighted average
number of shares
- diluted 113,046,401 78,360,552
============ ===========
Pence Pence
Earnings / (loss)
per share - basic 1.4 (19.8)
============ ===========
Earnings / (loss)
per share - diluted 1.4 (19.8)
============ ===========
The loss and the weighted average number of shares used for
calculating the diluted loss per share in 2016 are identical to
those for the basic loss per share. This is because the outstanding
share options would have the effect of reducing the loss per share
and would therefore not be dilutive under IAS 33 Earnings per
Share.
11. Related Parties
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and other related parties are disclosed
below:
Trading transactions
The Group has purchased services in the normal course of
business from the following companies related to individuals who
are or were Directors of the Group:
Acceleris Capital Ltd - of which Mr N. Molyneux is a
Director
Norman Molyneux Consultancy Ltd - owned by Mr N. Molyneux
Dr Frank M Armstrong Consulting Ltd - owned by Dr F.
Armstrong
The Group has also purchased administration services from Mrs.
J. Murray, who is the wife of Dr N. Murray.
The Group has purchased other services, and has paid deal fees
and commissions, in connection with external fundraising from
Acceleris Capital Ltd. These are also set out below, and were
charged to the share premium account.
The Group has provided services in the normal course of business
to the following companies related to individuals who are or were
Directors of the Group:
Redag Crop Protection Ltd - of which Mr N. Molyneux is a
Director. A loan has also been granted as part of the sale of this
company.
AMR Centre Ltd - of which P Jackson is a Director.
The amounts outstanding are unsecured.
The Group has a loan of GBP821k due from Redag Crop Protection
Ltd. Mr N. Molyneux, Dr N. Murray, Dr P. Jackson and Mr P.
McPartland are all shareholders in Redag Crop Protection Ltd.
Whilst the loan has been de-recognised as an asset, the
Directors do not consider it to be extinguished and will continue
to seek full repayment under its terms
On 10 June 2016, a short term, interest free loan of GBP25,000
was made to AMR Centre Ltd, of which P Jackson is a Director. This
loan was repaid on 18 August 2017.
2017 2016
Purchases from/(charges to) related parties GBP'000 GBP'000
Redag Crop Protection Ltd (257) (163)
Acceleris Capital Ltd 90 88
Acceleris Capital Ltd (fundraising items) 139 309
Norman Molyneux Consultancy Ltd - 10
Dr Frank M Armstrong Consulting Ltd (expenses) 2 5
AMR Centre Ltd (110)
Mrs J Murray 24 24
__________ __________
(112) 273
__________ __________
2017 2016
Amounts owed to/(by) related parties GBP'000 GBP'000
Redag Crop Protection Ltd (71) (33)
Redag Crop Protection Ltd - loan - (605)
Acceleris Capital Ltd 77 18
AMR Centre Ltd - short term loan - (25)
AMR Centre Ltd (16) -
Norman Molyneux Consultancy Ltd - -
Dr Frank M Armstrong Consulting Ltd - 1
Mrs J Murray 12 2
__________ __________
2 (642)
__________ __________
12. Events after the reporting period
2 November 2017 - Exit from Administration and the Group (Redx
Pharma plc and its subsidiaries), announces it has resumed trading
under the control of the Directors.
6 November 2017 - the Group updates the market on its revised
strategy, share suspension from trading on AIM is lifted and the
following changes in personnel are announced:
-- CEO Dr Neil Murray resigned and left the board with immediate
effect and Non-Executive Director Mr Norman Molyneux resigned from
the Board;
-- Mr Iain Ross appointed Interim Executive Chairman;
-- Mr Dominic Jackson appointed CFO and executive Director;
-- Mr Peter Presland appointed as a Non-Executive Director and
Chairman of the Audit, Risk and Disclosure Committee; and
-- A search for new CEO initiated
14 November 2017 - Interim Executive Chairman buys 348,000
shares
20 December 2017 - Group announces Preliminary Results for year
ending 30 September 2017
13. Report and accounts
A copy of the Annual Report and Accounts will be sent to all
shareholders with notice of the Annual General Meeting shortly and
will also be available to download from the Group's website at
www.redxpharma.com in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR XKLLFDLFBFBL
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