Summit Therapeutics
plc(‘Summit’, the ‘Company’ or the ‘Group’)
Summit Therapeutics Reports Financial
Results for the Second Quarter and Half Year Ended
31 July 2018 and Operational Progress
Oxford, UK, and Cambridge, MA, US, 20
September 2018 - Summit Therapeutics plc (NASDAQ: SMMT,
AIM: SUMM), a leader in new mechanism antibiotic innovation, today
reports its financial results for the second quarter and half year
ended 31 July 2018 and provides an update on operational
progress.
“The world is in desperate need of new
antibiotics, and we believe we can deliver with our new mechanism
antibiotics covering the most urgent infectious disease threats and
a platform that has the potential to continue to unveil novel
targets and deliver optimised candidates for the clinic,”
commented Mr Glyn Edwards, Chief Executive Officer of
Summit. “Following the disappointing Phase 2 clinical
trial results with our Duchenne muscular dystrophy programme, we
believe we are able to capitalise on our established strengths in
infectious diseases and focus on building a successful antibiotics
company."
"We believe this can be accomplished by
developing new mechanism antibiotics to show significant advantages
over the current standards of care for a specific pathogen or
infection,” added Mr Edwards. “This approach
supports the appropriate use of antibiotics, which could
significantly improve patient outcomes and ultimately reduce
healthcare costs.”
Programme Highlights
Antibiotics-focused Strategy
- Summit is focusing on developing its new mechanism antibiotics
to become new standards of care
- Decision follows discontinuation of ezutromid for treatment of
Duchenne muscular dystrophy (‘DMD’) after ezutromid missed the
primary and secondary endpoints in its Phase 2 proof of concept
clinical trial, as announced in June 2018
Ridinilazole for C. difficile Infection
(‘CDI’)
- Phase 3 clinical trials of ridinilazole are on-track to start
in Q1 2019
- $12 million option exercised under existing BARDA contract to
support development of ridinilazole, bringing total committed BARDA
non-dilutive funding to $44 million
- Publication in PLOS One of Phase 2 clinical data showing
ridinilazole was highly preserving of the microbiome of CDI
patients compared to patients treated with standard of care
vancomycin
SMT-571 for Gonorrhoea
- SMT-571 nominated to progress into IND-enabling studies for the
treatment of N. gonorrhoeae infections
- Up to $4.5 million of non-dilutive funding awarded by CARB-X to
support the preclinical and Phase 1 clinical development of
SMT-571
ESKAPE and Other Antibiotic Programmes
- Power of Discuva Platform demonstrated with the identification
of multiple new mechanism antibiotic research programmes
- Novel targets against ESKAPE pathogens identified with Discuva
Platform
- Second series of new mechanism antibiotics discovered against
second novel N. gonorrhoeae target
Operational Highlights
- Cost-cutting measures implemented following the trial results
from the Company’s Phase 2 clinical trial of ezutromid for DMD,
including a 23% reduction in headcount
- As part of the Company’s decision to focus on antibiotics
development, Dr Barry Price and Professor Stephen Davies have today
stepped down from the Board of Directors
Financial Highlights
- Profit for the three months ended 31 July 2018 of £26.6 million
compared to a loss of £3.3 million for the three months ended 31
July 2017. Profit in the current quarter was driven by the
recognition of all deferred revenue related to the Sarepta licence
and collaboration agreement following the discontinuation of
ezutromid development
- Cash and cash equivalents at 31 July 2018 of £17.1
million compared to £20.1 million at 31 January 2018
- Summit provides new guidance on its cash runway which has been
extended as a result of its cost cutting measures and business
re-alignment focusing on development of antibiotics. The Company
now expects that its existing cash and cash equivalents, along with
the Company’s existing funding arrangements, will be sufficient to
fund the Company’s operating expenses and capital expenditure
requirements through 30 September 2019
Conference Call and Webcast
InformationSummit will host a conference call and webcast
to review the financial results for the second quarter and half
year ended 31 July 2018 today at 1:00pm BST / 8:00am EDT. To
participate in the conference call, please dial +44 (0)330 336 9127
(UK and international participants) or +1 929-477-0324 (US local
number) and use the conference confirmation code 2035228. Investors
may also access a live webcast of the call via the investors
section of the Company’s website, www.summitplc.com. A replay of
the webcast will be available shortly after the presentation
finishes.
About Summit TherapeuticsSummit
Therapeutics is a leader in antibiotic innovation. Our new
mechanism antibiotics are designed to become the new standards of
care for the benefit of patients and create value for payors and
healthcare providers. We are currently developing new mechanism
antibiotics for C. difficile infection and gonorrhoea and are using
our proprietary Discuva Platform to expand our pipeline. For more
information, visit www.summitplc.com and follow us on Twitter
@summitplc.
This announcement contains inside information
for the purposes of Article 7 of EU Regulation 596/2014 (MAR).
For more information:
SummitGlyn Edwards / Richard Pye (UK office)Erik
Ostrowski / Michelle Avery (US office) |
Tel: +44 (0)1235 443 951 +1 617 225
4455 |
|
|
Cairn Financial Advisers LLP (Nominated
Adviser)Liam Murray / Tony Rawlinson |
Tel: +44 (0)20 7213 0880 |
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|
N+1
Singer (Joint Broker)Aubrey Powell / Jen Boorer, Corporate
FinanceTom Salvesen, Corporate Broking |
Tel: +44 (0)20 7496 3000 |
|
|
Panmure Gordon (Joint Broker) Freddy Crossley,
Corporate FinanceJames Stearns, Corporate Broking |
Tel: +44 (0)20 7886 2500 |
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|
MSL
Group (US)Jon Siegal |
Tel: +1 781 684 6557
summit@mslgroup.com |
|
|
Consilium Strategic Communications (UK)Mary-Jane
Elliott / Jessica Hodgson / Lindsey Neville |
Tel: +44 (0)20 3709 5700
summit@consilium-comms.com |
Forward Looking StatementsAny
statements in this press release about the Company’s future
expectations, plans and prospects, including but not limited to,
statements about the potential benefits and future operation of the
BARDA or CARB-X contract, including any potential future payments
thereunder, the clinical and preclinical development of the
Company’s product candidates, the therapeutic potential of the
Company’s product candidates, the potential of the Discuva
Platform, the potential commercialisation of the Company’s product
candidates, the sufficiency of the Company’s cash resources, the
timing of initiation, completion and availability of data from
clinical trials, the potential submission of applications for
marketing approvals and other statements containing the words
"anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "project,"
"should," "target," "would," and similar expressions, constitute
forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those indicated by such forward-looking statements
as a result of various important factors, including: the ability of
BARDA or CARB-X to terminate our contract for convenience at any
time, the uncertainties inherent in the initiation of future
clinical trials, availability and timing of data from ongoing and
future clinical trials and the results of such trials, whether
preliminary results from a clinical trial will be predictive of the
final results of that trial or whether results of early clinical
trials or preclinical studies will be indicative of the results of
later clinical trials, expectations for regulatory approvals, laws
and regulations affecting government contracts, availability of
funding sufficient for the Company’s foreseeable and unforeseeable
operating expenses and capital expenditure requirements and other
factors discussed in the "Risk Factors" section of filings that the
Company makes with the Securities and Exchange Commission,
including the Company’s Annual Report on Form 20-F for the fiscal
year ended 31 January 2018. Accordingly, readers should not place
undue reliance on forward-looking statements or information. In
addition, any forward-looking statements included in this press
release represent the Company’s views only as of the date of this
release and should not be relied upon as representing the Company’s
views as of any subsequent date. The Company specifically disclaims
any obligation to update any forward-looking statements included in
this press release.
OPERATIONAL REVIEW
Antibiotics: New Science, New
Philosophy, New Opportunity
Summit is building a new type of antibiotic
company. Summit is starting with innovative science focussed on
developing drugs that can truly make a difference in the lives of
patients. From there, Summit aims to design clinical trials to show
its antibiotic candidates have significant advantages over current
standards of care and offer a compelling value proposition to
payors. Through these collective efforts, Summit believes it can
position its new mechanism antibiotics for commercial success.
This strategy is exemplified by ridinilazole,
Summit’s lead antibiotic in development for the treatment of C.
difficile infection ('CDI'). Ridinilazole has the potential to
become the new front-line treatment for CDI and is expected to
enter Phase 3 clinical trials in the first quarter of 2019. Behind
ridinilazole, Summit is advancing a growing portfolio of earlier
stage antibiotic programmes which have emerged from its proprietary
Discuva Platform, including SMT-571 for the treatment of gonorrhoea
and a programme focussed on the ESKAPE pathogens.
Summit’s antibiotic research and development
activities have received significant funding support from third
party organisations including BARDA, CARB-X, the Wellcome Trust and
Innovate UK.
Ridinilazole: A Potential Front-Line
Antibiotic to Combat C. difficile Infection
Ridinilazole is a novel-class, Phase 3-ready
precision antibiotic in development for front-line treatment of
CDI. The drug is designed to selectively target C. difficile
bacteria without causing collateral damage to the gut microbiome,
and therefore has the potential to be a front-line therapy that
treats not only the initial CDI infection, but importantly reduces
the rate of CDI recurrence.
CDI is a major healthcare threat with a
significant unmet need. There are over one million cases of CDI in
the US and Europe per year, resulting in about 29,000 deaths
annually in the US alone. Mainstay CDI treatments are dominated by
broad spectrum antibiotics, such as vancomycin. Initial treatment
with vancomycin fails in approximately one-third of patients,
driven by a high rate of patients having a recurrence of the
disease within 30 days after treatment. This recurrence is caused
by substantial disruption to the gut microbiome. Each recurrent
episode of CDI is typically more severe than the prior episode and
carries an increased risk of mortality. As such, reducing disease
recurrence is the key clinical issue facing CDI.
Ridinilazole’s Phase 3 clinical trials have been
designed to replicate the positive results from the Phase 2 proof
of concept clinical trial in which ridinilazole demonstrated
clinical and statistical superiority over vancomycin in sustained
clinical response (‘SCR’). SCR is a combined endpoint that measures
cure of the initial infection and whether patients have disease
recurrence 30 days after completing treatment. The Phase 3
programme comprises two global clinical trials that will enrol
approximately 700 patients each. The trials will be randomised and
double blind with half of patients to be dosed with ridinilazole,
and the other half with vancomycin. The design of the Phase 3
trials also includes various health economic outcome measures that
are expected to support the commercialisation of ridinilazole. The
two trials are expected to start in the first quarter of 2019 with
top-line data expected to be reported in the second half of
2021.
The ongoing development of ridinilazole is being
supported by a contract with BARDA that potentially provides up to
$62 million in non-dilutive funding. To date, total committed BARDA
funding under this contract is $44 million, including a $12 million
option that was exercised by BARDA in August 2018.
SMT-571: Preclinical Antibiotic for the
Treatment of Gonorrhoea
Gonorrhoea is recognised as an urgent bacterial
threat by the US Centers for Disease Control (‘CDC’) and designated
as a high priority pathogen by the World Health Organization
(‘WHO’) due to the diminishing treatment arsenal for the disease.
The WHO estimates there are approximately 78 million new cases of
gonorrhoea globally each year. There is now only one treatment
option recommended by the CDC for the treatment of gonorrhoea, a
combination of two generic antibiotics. Resistance to this
treatment option is growing, and alarmingly there are currently no
other recommended antibiotics available.
Summit is developing SMT-571 as a new mechanism
antibiotic for killing N. gonorrhoeae. Working by targeting cell
division, SMT-571 has shown high potency for a range of N.
gonorrhoeae strains in in vitro studies, including those that are
multi-drug resistant. In September 2018, SMT-571 was nominated as a
preclinical candidate for progression into investigational new drug
(‘IND’) enabling studies. Summit expects to initiate a Phase 1
clinical trial of SMT-571 in the second half of 2019, with top-line
data expected to be reported in the second half of 2020.
In July 2018, Summit was awarded up to $4.5
million in non-dilutive funding from CARB-X, a public-private
partnership dedicated to accelerating antibacterial research and
development to address the rising global threat of drug-resistant
bacteria. The funding is supporting the preclinical and Phase 1
clinical development of SMT-571 if certain development milestones
are met.
Discuva Platform: An Engine to Generate
New Mechanism Antibiotics
The development of Summit’s pipeline of new
mechanism antibiotics is underpinned by its proprietary Discuva
Platform. From discovery through the selection of optimised
clinical candidates, the Discuva Platform has the potential to
deliver antibiotics with new mechanisms of action and a low
likelihood of resistance development combined with targeted
spectrum of activity. The Discuva Platform utilises proprietary
libraries of a wide range of bacteria that can be used to generate
new mechanism antibiotics against bacteria that are classified as
urgent or high-risk threats by the CDC and WHO.
ESKAPE ProgrammeIn September 2018, a new
discovery programme targeting ESKAPE pathogens was unveiled. The
ESKAPE pathogens (Enterococcus faecium, Staphylococcus aureus,
Klebsiella pneumoniae, Acinetobacter baumannii, Pseudomonas
aeruginosa, Enterobacter spp.) are a group of bacteria that
represent a leading cause of hospital acquired infections around
the world and are subject to increasing rates of resistance to
existing antibiotic classes.
Second Novel Gonorrhoea TargetIn June 2018,
identification of a second novel target to kill N. gonorrhoeae
distinct from the one targeted by SMT-571 was reported, along with
the discovery of a promising new series of compounds that may have
activity against this target. The development of this second series
of compounds is supported in part by a grant from Innovate UK.
Roche Collaboration Further Validates
Discuva Platform
In 2014, Roche and Summit’s subsidiary, Discuva
Limited, entered into a collaboration using the Discuva Platform
for the discovery and development of new antibiotic compounds. The
joint research element of the collaboration concluded early 2018,
and Roche is solely responsible for continuing development of any
compound that was identified under the collaboration, with Summit
eligible to receive from Roche milestones and royalty payments
based on the successful development and commercialisation of any
such compound.
Duchenne Muscular Dystrophy
(DMD)
In June 2018, Summit discontinued the
development of ezutromid, the Company’s lead utrophin modulator for
the treatment of DMD. This decision was taken following the Phase 2
proof of concept clinical trial in patients with DMD not meeting
its primary or secondary endpoints after 48-weeks of ezutromid
treatment. Summit expects activities related to PhaseOut DMD to be
substantially completed by year-end.
Operational and Board
Changes
In July 2018 as a consequence of the
discontinuation of ezutromid, the Company reduced its headcount by
17 employees, or approximately 23% of total headcount.
As part of the Company's business re-alignment
to focus on the development of new mechanism antibiotics, Dr Barry
Price and Professor Stephen Davies have today stepped down as
Non-Executive Directors. Dr Price and Professor Davies have
both made significant contributions towards the development and
growth of Summit since its formative years and they leave with the
Company’s very best wishes for the future.
With the Company focussing on progressing
ridinilazole through Phase 3 and towards potential
commercialisation, and advancing its pipeline of earlier-stage
antibiotics, the board will continue to assess its composition to
ensure it is supporting the future development of the business.
FINANCIAL REVIEW
Revenue
Revenue was £38.0 million for the three months
ended 31 July 2018 compared to £4.8 million for the three
months ended 31 July 2017. Revenue was £41.8 million for
the six months ended 31 July 2018 compared to £6.5
million for the six months ended 31 July 2017. Revenues
in each of these periods relates primarily to the Group’s licence
and collaboration agreement with Sarepta Therapeutics, Inc.
(‘Sarepta’). The increase in revenues during the three months ended
31 July 2018 and the six months ended 31 July 2018 was driven by
the recognition of all remaining deferred revenue related to the
Sarepta licence and collaboration agreement during the three months
ended 31 July 2018, due to the Group’s decision to discontinue
development of ezutromid. This recognition of deferred revenues did
not impact the Group's cash flows. Revenue during the six months
ended 31 July 2018 included £23.6 million relating to the upfront
payment of $40.0 million (£32.8 million) received from Sarepta in
October 2016, as compared to £3.5 million recognised during the six
months ended 31 July 2017. Revenue during the six months ended 31
July 2018 also included £12.4 million relating to the development
milestone payment of $22.0 million (£17.2 million) received from
Sarepta in May 2017, as compared to £3.0 million for the six months
ended 31 July 2017. During the six months ended 31 July 2018, £5.3
million of revenue relating to development cost share income from
Sarepta was recognised, as compared to £nil for the six months
ended 31 July 2017.
The Group also recognised £0.1 million of
revenue during the three months ended 31 July 2018 and
£0.3 million of revenue during the six months ended
31 July 2018 related to the receipt of a $2.5 million
(£1.9 million) upfront payment in respect of the licence and
commercialisation agreement signed with Eurofarma Laboratórios SA
('Eurofarma') in December 2017. During the six months ended
31 July 2018, the Group recognised £0.2 million of
revenue pursuant to a research collaboration agreement between the
Group’s acquired subsidiary, Discuva Limited, and F. Hoffmann - La
Roche Limited (‘Roche’). On 21 February 2018, the research services
period under the Roche agreement ended.
Other Operating Income
Other operating income was £2.7 million for the
three months ended 31 July 2018 and £6.2 million for the
six months ended 31 July 2018, as compared to £nil for
both the three and six months ended 31 July 2017. These
increases resulted primarily from the recognition of operating
income from Summit’s funding contract with BARDA for the
development of ridinilazole which was £2.0 million during the three
months ended 31 July 2018 and £5.3 million during the six
months ended 31 July 2018.
During the three and six months ended
31 July 2018 the Group recognised £0.5 million of
operating income resulting from the release of the Group's
financial liabilities on funding arrangements relating to the US
not for profit organisations, which is further discussed in Note 6
– ‘Financial liabilities on funding arrangements.'
The Group also recognised £0.2 million of operating income
during the three months ended 31 July 2018 and £0.3
million of operating income during the six months ended
31 July 2018 related to the Group's CARB-X and Innovate
UK grants.
Operating Expenses
Research and Development ExpensesResearch and
development expenses increased by £2.9 million to £9.5 million for
the three months ended 31 July 2018 from £6.6 million for
the three months ended 31 July 2017. Research and
development expenses increased by £9.1 million to £20.7 million for
the six months ended 31 July 2018 from £11.6 million for
the six months ended 31 July 2017. These increases
reflected increased expenditure related to our DMD and CDI
programmes, as well as our antibacterial research activities and
research and development related staffing costs.
Investment in the DMD programme increased by
£1.0 million to £7.8 million for the six months ended
31 July 2018 from £6.8 million for the six months ended
31 July 2017. This was driven by an increase in expenses
associated with manufacturing costs for our clinical trials and
research activities associated with our utrophin modulator
programme. Costs associated with the CDI programme increased by
£6.8 million to £8.4 million for the six months ended
31 July 2018 from £1.6 million for the six months ended
31 July 2017. This increase primarily related to
manufacturing costs and other preparatory activities being
conducted for the planned Phase 3 clinical trials of ridinilazole.
Investment in antibacterial research activities was £0.4 million
for the six months ended 31 July 2018 compared to £nil
million for the six months ended 31 July 2017. Other
research and development expenses increased by £0.8 million to £4.1
million during the six months ended 31 July 2018 as
compared to £3.3 million during the six months ended
31 July 2017, which was driven by an increase in
headcount within the CDI and antibacterial research teams.
General and Administration ExpensesGeneral and
administration expenses increased by £0.2 million to £2.7 million
for the three months ended 31 July 2018 from £2.5 million
for the three months ended 31 July 2017. General and
administration expenses increased by £0.5 million to £5.4 million
for the six months ended 31 July 2018 from £4.9 million
for the six months ended 31 July 2017. These increases
were driven by a net positive movement in exchange rate variances,
offset by increased staff related costs, legal and professional
fees and overhead and facility related costs.
Impairment of Goodwill and Intangible AssetsDue
to the outcome of the ezutromid clinical trial, the Group announced
it was discontinuing development of ezutromid. As a result, the
Group recognised an impairment charge of £4.0 million relating to
the intangible asset and goodwill associated with the acquisition
of MuOx Limited. See Note 3 'Impairment of goodwill and intangible
assets' for further details.
Finance Income
Finance income was £2.8 million for the three
and six months ended 31 July 2018 and related primarily
to the re-measurement of the Group’s financial liabilities on
funding arrangements following the ezutromid clinical trial
results. See Note 6 'Financial liabilities on funding arrangements'
for further details. Finance income recognised in comparative
periods relates to bank interest received.
Finance Costs
Finance costs relate to the unwinding of the
discount on financial liabilities on funding arrangements and
provisions. Finance costs remained consistent at £0.1 million for
the three months ended 31 July 2018 compared to £0.2
million for the three months ended 31 July 2017. Finance
costs remained consistent at £0.3 million for the six months ended
31 July 2018 compared to £0.4 million for the six months
ended 31 July 2017. Following the re-measurement of the
financial liabilities on funding arrangements to £nil during the
three months ended 31 July 2018, the Group no longer
expects further financing costs in relation to the unwinding of the
discount on financial liabilities on funding arrangements.
Taxation
Income tax expense during the three months ended
31 July 2018 was £0.5 million as compared to an income
tax credit of £1.3 million during the three months ended
31 July 2017. Income tax credit during the six months
ended 31 July 2018 was £0.5 million as compared to an
income tax credit of £2.5 million during the six months ended
31 July 2017. The changes in income tax during the three
and six months ended 31 July 2018 as compared to during the three
and six months ended 31 July 2017 were driven by the Group's
de-recognition of its current year accrued UK research and
development tax credit, as it is not certain that the Group will
have sufficient losses in the year to remain eligible to receive
this research and development tax credit. This movement was offset
by the release of a deferred tax liability associated with the
impairment charge discussed in Note 3 'Impairment of goodwill and
intangible assets.'
Profit / (Losses)
The Group recorded a profit for both the three
and six months ended 31 July 2018, primarily because of the
recognition of all remaining amounts of deferred revenue related to
the Sarepta agreement following the Group's decision to discontinue
development of ezutromid.
Profit before income tax was £27.1 million for
the three months ended 31 July 2018 compared to a loss
before income tax of £4.6 million for the three months ended
31 July 2017. Profit before income tax was £20.4 million
for the six months ended 31 July 2018 compared to a loss
before income tax of £10.5 million for the six months ended
31 July 2017.
Profit for the three months ended
31 July 2018 was £26.6 million with a basic earnings per
share of 32 pence compared to a loss of £3.3 million for the three
months ended 31 July 2017 with a basic loss per share of
5 pence. Profit for the six months ended 31 July 2018 was
£20.8 million with a basic earnings per share of 26 pence compared
to a loss of £8.0 million for the six months ended
31 July 2017 with a basic loss per share of 13 pence.
Cash Flows
The Group had a net cash outflow of £3.8 million
for the six months ended 31 July 2018 compared to a net
cash inflow of £1.2 million for the six months ended
31 July 2017.
Operating ActivitiesFor the six months ended
31 July 2018, net cash used in operating activities was
£18.0 million compared to net cash generated from operating
activities of £1.5 million for the six months ended
31 July 2017. This negative movement of £19.5 million was
driven by an increase in net operating costs and a net reduction in
cash received from licensing agreements and funding
arrangements.
Investing ActivitiesNet cash used in investing
activities for the six months ended 31 July 2018 was £0.1
million compared to £0.4 million for the six months ended
31 July 2017. This represents amounts paid to acquire
property, plant and equipment and intangible assets, net of bank
interest received on cash deposits.
Financing ActivitiesNet cash generated from
financing activities for the six months ended
31 July 2018 of £14.2 million includes £14.1 million of
proceeds, net of transaction costs, received following the Group’s
equity placing on the AIM market of the London Stock Exchange in
March 2018, and £0.1 million received following the exercise of
Restricted Stock Units ('RSUs') and share options. During the six
months ended 31 July 2017 the Group received proceeds of
£0.03 million following the exercise of warrants and share
options.
Financial Position and Cash Runway
Guidance
As at 31 July 2018, total cash and
cash equivalents held were £17.1 million (31 January 2018: £20.1
million).
We believe that our existing cash and cash equivalents, as well
as the $44 million we have been awarded under our contract with
BARDA for the development of ridinilazole, the cost-sharing
arrangement under our licence and collaboration agreement with
Sarepta, and funding from our grant from CARB-X for the development
of gonorrhoea antibiotic candidates, will be sufficient to enable
the Group to fund its operating expenses and capital expenditure
requirements through 30 September 2019.
Glyn
Edwards |
Erik Ostrowski |
|
Chief Executive Officer |
Chief Financial Officer |
|
|
|
|
20 September 2018 |
|
|
FINANCIAL STATEMENTS
Condensed Consolidated Statement of Comprehensive
Income (unaudited) For the three months ended
31 July 2018
|
|
|
Three months ended 31 July
2018 |
|
Three months ended 31 July
2018 |
|
Three months ended 31 July 2017 |
|
|
|
|
|
|
|
(Adjusted*) |
|
Note |
|
$000s |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
Revenue |
2 |
|
49,820 |
|
|
37,958 |
|
|
4,750 |
|
|
|
|
|
|
|
|
|
Other operating income |
|
|
3,542 |
|
|
2,699 |
|
|
— |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Research and development |
|
|
(12,428 |
) |
|
(9,469 |
) |
|
(6,608 |
) |
General and administration |
|
|
(3,553 |
) |
|
(2,707 |
) |
|
(2,488 |
) |
Impairment of goodwill and intangible assets |
3 |
|
(5,232 |
) |
|
(3,986 |
) |
|
— |
|
Total operating expenses |
|
|
(21,213 |
) |
|
(16,162 |
) |
|
(9,096 |
) |
Operating profit / (loss) |
|
|
32,149 |
|
|
24,495 |
|
|
(4,346 |
) |
|
|
|
|
|
|
|
|
Finance
income |
6 |
|
3,655 |
|
|
2,785 |
|
|
1 |
|
Finance
costs |
|
|
(184 |
) |
|
(140 |
) |
|
(219 |
) |
Profit / (loss) before income tax |
|
|
35,620 |
|
|
27,140 |
|
|
(4,564 |
) |
|
|
|
|
|
|
|
|
Income tax |
|
|
(644 |
) |
|
(491 |
) |
|
1,283 |
|
Profit / (loss) for the period |
|
|
34,976 |
|
|
26,649 |
|
|
(3,281 |
) |
|
|
|
|
|
|
|
|
Other comprehensive income / (losses) |
|
|
|
|
|
|
|
Items that
may be reclassified subsequently to profit or lossExchange
differences on translating foreign operations |
|
|
16 |
|
|
12 |
|
|
7 |
|
Total comprehensive income / (loss) for the
period |
|
|
34,992 |
|
|
26,661 |
|
|
(3,274 |
) |
|
|
|
|
|
|
|
|
Basic earnings / (loss) per ordinary share from
operations |
4 |
|
42 cents |
|
32 pence |
|
(5) pence |
Diluted earnings per ordinary share from
operations |
4 |
|
42 cents |
|
32 pence |
|
— |
|
* See Note 1 - ‘Basis of Accounting - Adoption
of IFRS 15 Revenue from contracts with customers’.
Condensed Consolidated Statement of
Comprehensive Income (unaudited) For the six months ended
31 July 2018
|
|
|
Six months ended 31 July
2018 |
|
Six months ended 31 July
2018 |
|
Six months ended 31 July 2017 |
|
|
|
|
|
|
|
(Adjusted*) |
|
Note |
|
$000s |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
Revenue |
2 |
|
54,905 |
|
|
41,832 |
|
|
6,478 |
|
|
|
|
|
|
|
|
|
Other operating income |
|
|
8,077 |
|
|
6,154 |
|
|
— |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Research and development |
|
|
(27,199 |
) |
|
(20,723 |
) |
|
(11,643 |
) |
General and administration |
|
|
(7,056 |
) |
|
(5,376 |
) |
|
(4,922 |
) |
Impairment of goodwill and intangible assets |
3 |
|
(5,232 |
) |
|
(3,986 |
) |
|
— |
|
Total operating expenses |
|
|
(39,487 |
) |
|
(30,085 |
) |
|
(16,565 |
) |
Operating profit / (loss) |
|
|
23,495 |
|
|
17,901 |
|
|
(10,087 |
) |
|
|
|
|
|
|
|
|
Finance
income |
6 |
|
3,657 |
|
|
2,786 |
|
|
2 |
|
Finance
costs |
|
|
(431 |
) |
|
(328 |
) |
|
(443 |
) |
Profit / (loss) before income tax |
|
|
26,721 |
|
|
20,359 |
|
|
(10,528 |
) |
|
|
|
|
|
|
|
|
Income tax |
|
|
597 |
|
|
455 |
|
|
2,486 |
|
Profit / (loss) for the period |
|
|
27,318 |
|
|
20,814 |
|
|
(8,042 |
) |
|
|
|
|
|
|
|
|
Other comprehensive income / (losses) |
|
|
|
|
|
|
|
Items that
may be reclassified subsequently to profit or lossExchange
differences on translating foreign operations |
|
|
25 |
|
|
19 |
|
|
(8 |
) |
Total comprehensive income / (loss) for the
period |
|
|
27,343 |
|
|
20,833 |
|
|
(8,050 |
) |
|
|
|
|
|
|
|
|
Basic earnings / (loss) per ordinary share from
operations |
4 |
|
34 cents |
|
26 pence |
|
(13) pence |
Diluted earnings per ordinary share from
operations |
4 |
|
34 cents |
|
26 pence |
|
— |
|
* See Note 1 - ‘Basis of Accounting - Adoption
of IFRS 15 Revenue from contracts with customers’
Condensed Consolidated Statement of
Financial Position (unaudited) As at
31 July 2018
|
|
31 July 2018 |
|
31 July 2018 |
|
31 January 2018 |
|
|
|
|
|
|
(Adjusted*) |
|
|
$000s |
|
£000s |
|
£000s |
ASSETS |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Goodwill |
|
2,381 |
|
|
1,814 |
|
|
2,478 |
|
Intangible
assets |
|
14,481 |
|
|
11,033 |
|
|
14,785 |
|
Property,
plant and equipment |
|
921 |
|
|
702 |
|
|
809 |
|
|
|
17,783 |
|
|
13,549 |
|
|
18,072 |
|
Current assets |
|
|
|
|
|
|
Prepayments
and other receivables |
|
15,091 |
|
|
11,497 |
|
|
11,134 |
|
Current tax
receivable |
|
6,038 |
|
|
4,600 |
|
|
4,654 |
|
Cash and
cash equivalents |
|
22,482 |
|
|
17,129 |
|
|
20,102 |
|
|
|
43,611 |
|
|
33,226 |
|
|
35,890 |
|
Total assets |
|
61,394 |
|
|
46,775 |
|
|
53,962 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Deferred
revenue |
|
(1,419 |
) |
|
(1,081 |
) |
|
(27,270 |
) |
Financial
liabilities on funding arrangements |
|
— |
|
|
— |
|
|
(3,090 |
) |
Provisions
for other liabilities and charges |
|
(2,279 |
) |
|
(1,736 |
) |
|
(1,641 |
) |
Deferred
tax liability |
|
(2,381 |
) |
|
(1,814 |
) |
|
(2,379 |
) |
|
|
(6,079 |
) |
|
(4,631 |
) |
|
(34,380 |
) |
Current liabilities |
|
|
|
|
|
|
Trade and
other payables |
|
(8,643 |
) |
|
(6,586 |
) |
|
(8,932 |
) |
Deferred
revenue |
|
(3,287 |
) |
|
(2,504 |
) |
|
(13,834 |
) |
|
|
(11,930 |
) |
|
(9,090 |
) |
|
(22,766 |
) |
Total liabilities |
|
(18,009 |
) |
|
(13,721 |
) |
|
(57,146 |
) |
Net assets / (liabilities) |
|
43,385 |
|
|
33,054 |
|
|
(3,184 |
) |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
Share
capital |
|
1,078 |
|
|
821 |
|
|
736 |
|
Share
premium account |
|
97,642 |
|
|
74,394 |
|
|
60,237 |
|
Share-based
payment reserve |
|
10,377 |
|
|
7,906 |
|
|
6,743 |
|
Merger
reserve |
|
3,973 |
|
|
3,027 |
|
|
3,027 |
|
Special
reserve |
|
26,241 |
|
|
19,993 |
|
|
19,993 |
|
Currency
translation reserve |
|
74 |
|
|
56 |
|
|
37 |
|
Accumulated
losses reserve |
|
(96,000 |
) |
|
(73,143 |
) |
|
(93,957 |
) |
Total equity / (deficit) |
|
43,385 |
|
|
33,054 |
|
|
(3,184 |
) |
* See Note 1 - ‘Basis of Accounting - Adoption
of IFRS 15 Revenue from contracts with customers'
Condensed Consolidated Statement of Cash
Flows (unaudited) For the six months ended
31 July 2018
|
|
Six months ended 31 July
2018 |
|
Six months ended 31 July
2018 |
|
Six months ended 31 July 2017 |
|
|
|
|
|
|
(Adjusted*) |
|
|
$000s |
|
£000s |
|
£000s |
Cash flows from operating
activities |
|
|
|
|
|
|
Profit /
(loss) before income tax |
|
26,721 |
|
|
20,359 |
|
|
(10,528 |
) |
|
|
26,721 |
|
|
20,359 |
|
|
(10,528 |
) |
Adjusted
for: |
|
|
|
|
|
|
Gain on
re-measurement of financial liabilities on funding
arrangements |
|
(707 |
) |
|
(539 |
) |
|
— |
|
Finance
income |
|
(3,657 |
) |
|
(2,786 |
) |
|
(2 |
) |
Finance
costs |
|
431 |
|
|
328 |
|
|
443 |
|
Foreign
exchange (gain) / loss |
|
(1,101 |
) |
|
(839 |
) |
|
994 |
|
Depreciation |
|
206 |
|
|
157 |
|
|
58 |
|
Amortisation of intangible fixed assets |
|
545 |
|
|
415 |
|
|
4 |
|
Loss on
disposal of assets |
|
32 |
|
|
24 |
|
|
42 |
|
Movement in
provisions |
|
— |
|
|
— |
|
|
(85 |
) |
Impairment
of goodwill and intangible assets |
|
5,232 |
|
|
3,986 |
|
|
— |
|
Share-based
payment |
|
1,526 |
|
|
1,163 |
|
|
807 |
|
Adjusted profit / (loss) from operations before
changes in working capital |
|
29,228 |
|
|
22,268 |
|
|
(8,267 |
) |
|
|
|
|
|
|
|
Increase in
prepayments and other receivables |
|
(441 |
) |
|
(336) |
|
|
(351 |
) |
(Decrease)
/ increase in deferred revenue |
|
(49,244 |
) |
|
(37,519) |
|
|
10,746 |
|
Decrease in
trade and other payables |
|
(3,099 |
) |
|
(2,361) |
|
|
(478 |
) |
Cash (used in) / generated from
operations |
|
(23,556 |
) |
|
(17,948) |
|
|
1,650 |
|
Taxation
paid |
|
(70 |
) |
|
(53) |
|
|
(102 |
) |
Net cash (used in) / generated from operating
activities |
|
(23,626 |
) |
|
(18,001) |
|
|
1,548 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Purchase of
property, plant and equipment |
|
(66 |
) |
|
(50 |
) |
|
(357 |
) |
Purchase of
intangible assets |
|
(7 |
) |
|
(5 |
) |
|
— |
|
Interest
received |
|
3 |
|
|
2 |
|
|
2 |
|
Net cash used in investing
activities |
|
(70 |
) |
|
(53 |
) |
|
(355 |
) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Proceeds
from issue of share capital |
|
19,688 |
|
|
15,000 |
|
|
— |
|
Transaction
costs on share capital issued |
|
(1,126 |
) |
|
(858 |
) |
|
— |
|
Proceeds
from exercise of warrants |
|
— |
|
|
— |
|
|
10 |
|
Proceeds
from exercise of share options |
|
131 |
|
|
100 |
|
|
24 |
|
Net cash generated from financing
activities |
|
18,693 |
|
|
14,242 |
|
|
34 |
|
|
|
|
|
|
|
|
(Decrease) / increase in cash and cash
equivalents |
|
(5,003 |
) |
|
(3,812 |
) |
|
1,227 |
|
Effect of exchange rates in cash and cash
equivalents |
|
1,101 |
|
|
839 |
|
|
(998 |
) |
Cash and cash equivalents at beginning of the
period |
|
26,384 |
|
|
20,102 |
|
|
28,062 |
|
Cash and cash equivalents at end of the
period |
|
22,482 |
|
|
17,129 |
|
|
28,291 |
|
* See Note 1 - ‘Basis of Accounting - Adoption
of IFRS 15 Revenue from contracts with customers’
Consolidated Statement of Changes in
Equity (unaudited) Six months ended
31 July 2018
Group |
|
Share capital£000s |
|
Share premium account£000s |
|
Share-based payment reserve£000s |
|
Merger reserve£000s |
|
Special reserve£000s |
|
Currencytranslationreserve£000s |
|
Accumulated losses reserve£000s |
|
Total £000s |
At 1
February 2018 (as previously reported) |
|
736 |
|
|
60,237 |
|
|
6,743 |
|
|
3,027 |
|
|
19,993 |
|
|
37 |
|
|
(80,898 |
) |
|
9,875 |
|
Change in
accounting policy (modified retrospective application IFRS 15) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,059 |
) |
|
(13,059 |
) |
At 1 February 2018 (Adjusted*) |
|
736 |
|
|
60,237 |
|
|
6,743 |
|
|
3,027 |
|
|
19,993 |
|
|
37 |
|
|
(93,957 |
) |
|
(3,184 |
) |
Profit for
the period |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
20,814 |
|
|
20,814 |
|
Currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19 |
|
|
— |
|
|
19 |
|
Total
comprehensive profit for the period |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19 |
|
|
20,814 |
|
|
20,833 |
|
New share
capital issued |
|
83 |
|
|
14,917 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
15,000 |
|
Transaction
costs on share capital issued |
|
— |
|
|
(858 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(858 |
) |
Share
options exercised |
|
2 |
|
|
98 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
Share-based payment |
|
— |
|
|
— |
|
|
1,163 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,163 |
|
At 31 July 2018 |
|
821 |
|
|
74,394 |
|
|
7,906 |
|
|
3,027 |
|
|
19,993 |
|
|
56 |
|
|
(73,143 |
) |
|
33,054 |
|
Year ended 31 January 2018
Group |
|
Share capital£000s |
|
Share premium account£000s |
|
Share-based payment reserve£000s |
|
Merger reserve£000s |
|
Special reserve£000s |
|
Currencytranslationreserve£000s |
|
Accumulated losses reserve£000s |
|
Total £000s |
At 1
February 2017 |
|
618 |
|
|
46,420 |
|
|
5,136 |
|
|
(1,943 |
) |
|
19,993 |
|
|
50 |
|
|
(73,767 |
) |
|
(3,493 |
) |
Loss for
the year |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,131 |
) |
|
(7,131 |
) |
Currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13 |
) |
|
— |
|
|
(13 |
) |
Total
comprehensive loss for the year |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13 |
) |
|
(7,131 |
) |
|
(7,144 |
) |
New share
capital issued |
|
84 |
|
|
14,847 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
14,931 |
|
Transaction
costs on share capital issued |
|
— |
|
|
(1,428 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,428 |
) |
Issue of
ordinary shares as consideration for a business combination |
|
30 |
|
|
— |
|
|
— |
|
|
4,970 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,000 |
|
New share
capital issued from exercise of warrants |
|
1 |
|
|
9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10 |
|
Share
options exercised |
|
3 |
|
|
389 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
392 |
|
Share-based
payment |
|
— |
|
|
— |
|
|
1,607 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,607 |
|
At 31 January 2018 |
|
736 |
|
|
60,237 |
|
|
6,743 |
|
|
3,027 |
|
|
19,993 |
|
|
37 |
|
|
(80,898 |
) |
|
9,875 |
|
Six months ended 31 July 2017
Group |
|
Share capital£000s |
|
Share premium account£000s |
|
Share-based payment reserve£000s |
|
Merger reserve£000s |
|
Special reserve£000s |
|
Currencytranslationreserve£000s |
|
Accumulated losses reserve£000s |
|
Total £000s |
At 1
February 2017 |
|
618 |
|
|
46,420 |
|
|
5,136 |
|
|
(1,943 |
) |
|
19,993 |
|
|
50 |
|
|
(73,767 |
) |
|
(3,493 |
) |
Loss for
the period (Adjusted*) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,042 |
) |
|
(8,042 |
) |
Currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8 |
) |
|
— |
|
|
(8 |
) |
Total
comprehensive loss for the period (Adjusted*) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8 |
) |
|
(8,042 |
) |
|
(8,050 |
) |
New share
capital issued from exercise of warrants |
|
1 |
|
|
9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10 |
|
Share
options exercised |
|
— |
|
|
24 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
24 |
|
Share-based payment |
|
— |
|
|
— |
|
|
807 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
807 |
|
At 31 July 2017 (Adjusted*) |
|
619 |
|
|
46,453 |
|
|
5,943 |
|
|
(1,943 |
) |
|
19,993 |
|
|
42 |
|
|
(81,809 |
) |
|
(10,702 |
) |
* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 15
Revenue from contracts with customers’
The accompanying notes form an integral part of
these condensed consolidated interim financial statements.
NOTES TO THE FINANCIAL INFORMATION
For the three and six months ended
31 July 2018
1. Basis of Accounting
The unaudited condensed consolidated interim
financial statements of Summit Therapeutics plc ('Summit') and its
subsidiaries (together, the ‘Group’) for the three and six months
ended 31 July 2018 have been prepared in accordance with
International Financial Reporting Standards ('IFRS') and
International Financial Reporting Interpretations Committee
(‘IFRIC’) interpretations as issued by the International Accounting
Standards Board and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS including those
applicable to accounting periods ending 31 January 2019 and the
accounting policies set out in Summit’s consolidated financial
statements. There have been no changes to the accounting policies
as contained in the annual consolidated financial statements as of
and for the year ended 31 January 2018 other than as described
below. These condensed consolidated interim financial statements do
not include all the statements required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Group as at 31 January 2018.
The unaudited condensed consolidated interim
financial statements are prepared on a going concern basis and
under the historical cost convention. Whilst the financial
information included in this announcement has been prepared in
accordance with IFRS and IFRIC interpretations as issued by the
International Accounting Standards Board and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS, this announcement does not itself contain sufficient
information to comply with IFRSs.
The Group expects it will need to raise
additional funding in the future in order to support research and
development efforts, potential commercialisation related activities
if any of its product candidates receive marketing approval, as
well as to support activities associated with operating as a public
company in both the United States and the United Kingdom.
Management expects to finance its cash needs through a combination
of some, or all, of the following: equity offerings,
collaborations, strategic alliances, grants and clinical trial
support from government entities, philanthropic, non-government and
not for profit organisations and patient advocacy groups, debt
financings, and marketing, distribution or licensing
arrangements.
The financial information for the three and six
month periods ended 31 July 2018 and 2017 are
unaudited.
Solely for the convenience of the reader, unless
otherwise indicated, all pound sterling amounts stated in the
Consolidated Statement of Financial Position as at
31 July 2018 and the Consolidated Statement of
Comprehensive Income and Consolidated Statement of Cash Flows for
the six months ended 31 July 2018 have been translated
into US dollars at the rate on 31 July 2018 of $1.3125 to
£1.00. These translations should not be considered representations
that any such amounts have been, could have been or could be
converted into US dollars at that or any other exchange rate as at
that or any other date.
The Board of Directors of the Company approved
this statement on 20 September 2018.
Adoption of IFRS 15 Revenue from
contracts with customers
IFRS 15 establishes comprehensive guidelines for
determining when to recognise revenue and how much revenue to
recognise. The Group has adopted this new standard effective 1
February 2018 as required, using the full retrospective transition
method in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors.
The core principle in that framework is that a
company should recognise revenue to depict the transfer of control
of promised goods or services to the customer in an amount that
reflects the consideration to which the company expects to be
entitled in exchange for those goods or services. To determine
revenue recognition for arrangements that a company determines are
within the scope of IFRS 15, a company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognise revenue
when (or as) the company satisfies a performance obligation.
The Group has assessed the effect of adoption of
this standard as it relates to the licence and collaboration
agreement with Sarepta Therapeutics, Inc. (‘Sarepta’) and the
licence and commercialisation agreement with Eurofarma Laboratórios
S.A. ('Eurofarma').
The licence and collaboration agreement with
Sarepta and the licence and commercialisation agreement with
Eurofarma grant the rights in specific territories to commercialise
products in the Group’s utrophin modulator pipeline and
ridinilazole, respectively, as well as the provision of the
associated research and development activities. Such activities
result in a service that is the output of the Group’s ordinary
activities. The Group assessed that the revenues from these
agreements are in the scope of IFRS 15.
For both of these agreements the Group assessed
that the licence to commercialise the Group’s intellectual property
is not distinct in the context of the contract and that there is a
transformational relationship between the licence and the research
and development activities delivered as they are highly
interrelated elements of the contract. The Group therefore
determined that there is one single performance obligation under
IFRS 15 in relation to the licence granted and research and
development activities, which is the transfer of a licence for
which the associated research and development activities are
completed over time. The transaction price of these agreements
includes upfront payments, development and regulatory milestone
payments, development cost share income, sales milestones and
sales-based royalties. Milestone payments are included in the
transaction price only when it becomes highly probable that a
significant reversal in the amount of cumulative revenue recognised
will not occur. The relevant transaction price elements are
allocated to the performance obligation identified being the
transfer of a licence for which the associated research and
development activities are completed over time. The revenues are
recognised over the development period using an output method based
on time elapsed, reflecting both the increase in value of the
licence and the progression of the research and development
activities over the development period towards potential
commercialisation of the product. Sales milestones and sales-based
royalties are not included in the Group’s revenues if the
associated clinical programme is still in development. The
predominant element of the performance obligation that the
sales-based royalties relate to is the licence granted and hence
the revenues are recognised when the related sales occur.
The licence and collaboration agreement with Sarepta also has a
number of further performance obligations, including research and
clinical development activities relating to the future generation
small molecule utrophin modulators and the licence granted to
commercialise in Latin America, which is at the option of Sarepta.
The development, regulatory and sales milestone payments allocated
to the future generation candidate activities and Latin America
licence granted are contingent on future activities, and, as a
result, would only be included in the transaction price and
accounted for as revenue when it would be highly probable that a
significant reversal in the amount of cumulative revenue recognised
would not occur. The relevant sales-based royalties would be
recognised when the related sales occur, as the licence granted is
the predominant element of the performance obligation. The
development cost share income allocated to clinical trial wind-down
activities, which is also a separate performance obligation within
the Sarepta agreement, are recognised using an input method based
on costs incurred.
Due to the adoption of IFRS 15, the $22.0 million (£17.2
million) development milestone payment the Group received in May
2017 as part of the licence and collaboration agreement with
Sarepta, which had previously been recognised in full under IAS 18
during the Group's fiscal year ended 31 January 2018, is recognised
as revenue over the development period. Similarly, development cost
share income from Sarepta which commenced in January 2018 under the
agreement is recognised over the development period. As a result of
this change, £13.1 million of income related to the licence and
collaboration agreement with Sarepta previously recognised as
revenue during the year ended 31 January 2018 was classified as
deferred revenue in the opening Statement of Financial Position as
at 1 February 2018. This adjustment consisted of (i) £12.4 million
related to the development milestone payment; and (ii) £0.7 million
related to development cost share income related to Sarepta’s share
of research and development costs incurred in January 2018 (the
first month that the cost share component of the agreement was in
effect).
In June 2018, the Group announced the
discontinuation of the development of ezutromid after its Phase 2
clinical trial, PhaseOut DMD, did not meet its primary or secondary
endpoints. As a result, the Group has updated the development
period over which Sarepta-related revenues are recognised, and the
development period is now deemed to have concluded in June 2018 in
line with when development of ezutromid was discontinued. This
resulted in all revenues relating to the Sarepta licence and
collaboration agreement that were previously deferred in the
Statement of Financial Position as at 31 January 2018, which
totalled £36.7 million, being released in full during the six
months ended 31 July 2018. The Group continues to receive cost
share income from Sarepta, including for wind-down activities for
the ezutromid clinical trial, at 45% of eligible costs. This cost
share income is recognised as revenue when such costs are
incurred.
The Group’s assessment results in no difference
in the accounting treatment of the licence and commercialisation
agreement with Eurofarma under IAS 18 and IFRS 15. Revenues
recognised relating to the agreement during the year ended 31
January 2018 under IAS 18 related only to the upfront payment,
which was initially reported as deferred revenue in the Statement
of Financial Position and is being recognised as revenue over the
development period. This is consistent with the accounting
treatment under IFRS 15.
This change in accounting policy has been
reflected retrospectively in the comparative Statement of Financial
Position for the year ended 31 January 2018, the comparative
Statement of Comprehensive Income for the three and six months
ended 31 July 2017 and the comparative Statement of Cash
Flows and Statement of Changes in Equity for the six months ended
31 July 2017. The opening Statement of Financial Position
as at 1 February 2017 is in line with comparative amounts disclosed
in the financial statements for the year ended 31 January 2017, as
there was no impact of this change in accounting policy on the
Statement of Financial Position as at 31 January 2017.
The impact of this change in accounting policy
on the comparatives to the unaudited condensed consolidated interim
financial statements was an increase in non-current and current
deferred revenue, an increase in accumulated losses reserve, a
reduction in revenue historically recognised, and a presentational
change to the Statement of Cash Flows. The increase in non-current
and current deferred revenue for the year ended 31 January 2018 and
reduction in revenue recognised during the six months ended
31 July 2017, relate to the difference between the
accounting treatment of the Sarepta development milestone payment
and development cost share income under IAS 18 and IFRS 15, as
described above, and is recognised as revenue over the remainder of
the determined development period.
Impact on Unaudited Condensed Consolidated
Statement of Financial Position |
OriginalYear
ended31
January2018£000s |
|
AdjustedYear
ended31
January2018£000s |
|
Impact£000s |
Non-current liabilities |
|
|
|
|
|
Deferred
revenue |
(18,033 |
) |
|
(27,270 |
) |
|
(9,237 |
) |
Current liabilities |
|
|
|
|
|
Deferred
revenue |
(10,012 |
) |
|
(13,834 |
) |
|
(3,822 |
) |
Equity |
|
|
|
|
|
Accumulated losses reserve |
(80,898 |
) |
|
(93,957 |
) |
|
(13,059 |
) |
Impact on Unaudited Condensed Consolidated Statement of
Comprehensive Income |
OriginalThree
monthsended31
July 2017£000s |
|
Adjusted Three months
ended31
July2017£000s |
|
Impact£000s |
Revenue |
18,952 |
|
|
4,750 |
|
|
(14,202 |
) |
Profit / (loss) for the period |
10,921 |
|
|
(3,281 |
) |
|
(14,202 |
) |
Impact on Unaudited Condensed Consolidated Statement of
Comprehensive Income |
OriginalSix
monthsended31
July2017£000s |
|
AdjustedSix
monthsended31
July2017£000s |
|
Impact£000s |
Revenue |
20,680 |
|
|
6,478 |
|
|
(14,202 |
) |
Profit / (loss) for the period |
6,160 |
|
|
(8,042 |
) |
|
(14,202 |
) |
Impact on Unaudited Condensed Consolidated Statement of
Cash Flows |
OriginalSix
monthsended31
July2017£000s |
|
AdjustedSix
monthsended31
July2017£000s |
|
Impact£000s |
Profit / (loss) before income tax |
3,674 |
|
|
(10,528 |
) |
|
(14,202 |
) |
Adjusted for: |
|
|
|
|
|
(Decrease)
/ increase in deferred revenue |
(3,456 |
) |
|
10,746 |
|
|
14,202 |
|
Impact on net cash generated from operating
activities |
218 |
|
|
218 |
|
|
— |
|
The Group will continue to monitor
interpretations released by the IFRS Interpretations Committee and
amendments to IFRS 15 and, as appropriate, will adopt these from
the effective dates.
2. Revenue
|
Three months ended 31 July
2018 |
|
Three months ended 31 July 2017 |
|
Six months ended 31 July
2018 |
|
Six months ended 31 July 2017 |
|
|
|
(Adjusted*) |
|
|
|
(Adjusted*) |
Analysis of revenue by category |
£000s |
|
£000s |
|
£000s |
|
£000s |
Licensing agreements |
37,958 |
|
|
4,750 |
|
|
41,586 |
|
|
6,478 |
|
Research collaboration agreement |
— |
|
|
— |
|
|
246 |
|
|
— |
|
|
37,958 |
|
|
4,750 |
|
|
41,832 |
|
|
6,478 |
|
The Group elected to adopt IFRS 15 effective 1
February 2018. For details on the performance obligations
identified and judgments exercised by management in the application
of IFRS 15 see Note 1 ‘Basis of Accounting - Adoption of IFRS 15
Revenue from contracts with customers.’
In June 2018, the Group announced the
discontinuation of the development of ezutromid after its Phase 2
clinical trial, PhaseOut DMD, did not meet its primary or secondary
endpoints. As a result, the Group has updated the development
period over which the revenues are recognised, as described in Note
1 ‘Basis of Accounting - Adoption of IFRS 15 Revenue from contracts
with customers.' The development period is now deemed to have
concluded in June 2018 in line with when development of ezutromid
was discontinued. This resulted in all revenues relating to the
Sarepta licence and collaboration agreement that were previously
deferred in the Statement of Financial Position as at 31 January
2018, which totalled £36.7 million, being released in full during
the six months ended 31 July 2018. The Group continues to receive
cost share income from Sarepta, at 45% of eligible costs, including
for wind-down activities for the ezutromid clinical trial. This
cost share income is recognised as revenue when such costs are
incurred.
3. Impairment of Goodwill and Intangible
Assets
As a result of the Group's decision in June 2018
to discontinue development of ezutromid, management reviewed the
intangible asset and goodwill associated with the acquisition of
MuOx Limited which related to the utrophin programme acquired.
Based on this review, the decision was made to incur an impairment
charge of £4.0 million, representing the full aggregate carrying
value of the intangible asset of £3.3 million and goodwill of £0.7
million. This charge was recognised during the three months ended
31 July 2018 (31 July 2017: £nil).
The corresponding deferred tax liability of £0.6
million relating to the intangible asset, recognised upon the
acquisition of MuOx Limited, has been credited to the Statement of
Comprehensive Income as a result of the impairment of the
intangible asset.
A discount factor of 18% has been used over the
forecast period for the valuation model used to assess the value in
use of the utrophin programme acquired and the associated goodwill.
The key assumptions used in the valuation model are as follows:
- expected research and development costs based on management’s
past experience and knowledge;
- probabilities of achieving development milestones based on
industry standards;
- reported disease prevalence;
- expected discovery pipeline;
- expected market share based on management’s estimates;
- drug reimbursement, costs of goods and marketing estimates;
and
- expected patent life.
The Group has considered the remaining goodwill
and intangible assets and has not identified any further
indications of impairment.
4. Earnings / (Loss) per Share Calculation
The calculation of earnings / (loss) per share
is based on the following data:
|
Three months ended 31 July
2018 |
|
Three months ended 31 July 2017 |
|
Six months ended 31 July
2018 |
|
Six months ended 31 July 2017 |
|
|
|
(Adjusted*) |
|
|
|
(Adjusted*) |
|
000s |
|
000s |
|
000s |
|
000s |
Profit / (loss) for the period |
£ |
26,649 |
|
|
(£ |
3,281 |
) |
|
£ |
20,814 |
|
|
(£ |
8,042 |
) |
|
|
|
|
|
|
|
|
Weighted
average number of ordinary shares for basic earnings / (loss) per
share |
|
82,008 |
|
|
|
61,915 |
|
|
|
79,335 |
|
|
|
61,900 |
|
Effect of
dilutive potential ordinary shares (share options and
warrants) |
|
649 |
|
|
|
— |
|
|
|
628 |
|
|
|
— |
|
Weighted
average number of ordinary shares for diluted earnings / (loss) per
share |
|
82,657 |
|
|
|
— |
|
|
|
79,963 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Basic earnings / (loss) per ordinary share from
operations £ |
|
0.32 |
|
|
|
(0.05 |
) |
|
|
0.26 |
|
|
|
(0.13 |
) |
Diluted earnings / (loss) per ordinary share
from operations £ |
|
0.32 |
|
|
|
— |
|
|
|
0.26 |
|
|
|
— |
|
Basic earnings / (loss) per ordinary share has
been calculated by dividing the profit / (loss) for the three and
six months ended 31 July 2018 by the weighted average
number of shares in issue during the three and six months ended
31 July 2018. Diluted earnings/(loss) per ordinary share
has been calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all potentially
dilutive ordinary shares. Potentially dilutive ordinary shares
represents the number of shares that could have been acquired at
fair value based on the monetary value of the subscription rights
attached to share options in-the-money compared with the number of
shares that would have been issued assuming the exercise of share
options in-the-money.
IAS 33 ‘Earnings per Share’ requires the
presentation of diluted earnings per share where a company could be
called upon to issue shares that would decrease net profit or
increase net loss per share. No diluted earnings / (loss) per share
has been calculated for the three and six months ended
31 July 2017 as the Group reported a net loss and
therefore the exercise of the share options would have the effect
of reducing loss per ordinary share which is not dilutive.
5. Issue of Share Capital
On 29 March 2018, the Group completed an equity
placing on the AIM market of the London Stock Exchange, issuing
8,333,333 new ordinary shares at a price of 180 pence per share.
Total gross proceeds of £15.0 million were raised and directly
attributable transaction costs of £0.9 million were incurred and
accounted for as a deduction from equity.
During the six months ended 31 July 2018, the
following exercises of share options and Restricted Stock Units
('RSUs') took place:
Date |
Number of
optionsexercised |
16 March
2018 |
4,216 |
|
18 April
2018 |
38,850 |
|
23 April
2018 |
48,981 |
|
18 July 2018 |
136,991 |
|
|
229,038 |
|
The total net proceeds from exercised share
options and RSUs during the period was £0.1 million.
All new ordinary shares rank pari passu with
existing ordinary shares.
Following the above placing and exercise of
share options and RSUs, the number of ordinary shares in issue was
82,125,995 as of 31 July 2018.
6. Financial Liabilities on Funding
Arrangements
Because of the Group's decision in June 2018 to
discontinue the development of ezutromid, the financial liabilities
attributable to the charitable funding arrangements with the
Muscular Dystrophy Association (‘MDA’) and Duchenne Partners Fund
Inc. (‘DPF’) have been re-measured during the three months ended 31
July 2018 as future royalties on revenues generated from ezutromid
are no longer anticipated. This re-measurement resulted in a credit
to the Statement of Comprehensive Income. The portion of the credit
presented as other operating income during the three and six months
ended 31 July 2018 represents the component of the funding received
from MDA and DPF not previously credited to the Statement of
Comprehensive Income upon initial recognition of the financial
liability. The portion of the credit presented as finance income
during the three and six months ended 31 July 2018 relates to
previous re-measurements and discounting associated with the
financial liability which were previously recognised as finance
costs.
The value of the estimated financial liabilities
on funding arrangements as of 31 July 2018 amounted to
£nil (as at 31 January 2018: £3.1 million). The net
decrease in the value of the estimated financial liabilities during
the six months ended 31 July 2018 amounted to £3.1
million (during the year ended 31 January 2018: £2.8
million).
|
|
Six months ended 31 July
2018 |
|
Year ended 31 January 2018 |
|
|
£000s |
|
£000s |
At February 1, |
|
3,090 |
|
|
5,919 |
|
Unwinding of discount factor |
|
232 |
|
|
754 |
|
De-recognition of financial liabilities – Finance income |
|
— |
|
|
(3,085 |
) |
Re-measurement of financial liabilities on funding
arrangements |
|
(2,784 |
) |
|
410 |
|
Net finance costs on funding arrangements accountedfor
as financial liabilities |
|
(2,552 |
) |
|
(1,921 |
) |
Re-measurement / de-recognition of financial liabilities – Other
operating income |
|
(539 |
) |
|
(908 |
) |
|
|
— |
|
|
3,090 |
|
-END-
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