TIDMMPH
RNS Number : 8576X
Mereo BioPharma Group plc
27 February 2017
Mereo BioPharma Group plc
("Mereo" or the "Company" or the "Group")
Preliminary results for the year ended 31 December 2016
Continued significant progress on all programmes
London, 27 February 2017 - Mereo BioPharma Group plc (AIM: MPH),
a clinical stage, UK-based, biopharmaceutical company focused on
rare and specialty diseases, is pleased to announce its audited
preliminary results for the year ended 31 December 2016.
Operational Highlights
-- Phase 2 dose-ranging study initiated with acumapimod
(BCT-197) for treatment of the underlying inflammation in patients
with acute exacerbations of COPD in H1 2016
-- Phase 2b dose-confirmation study initiated with BGS-649 for
the treatment of hypogonadotropic hypogonadism in obese men in H1
2016 and a six month safety extension study was initiated in Q4
2016. The Group is on track to report interim analysis in March
2017
-- Obtained Orphan Drug Designation in the US and the EU for
BPS-804 as a treatment for osteogenesis imperfecta
-- Positive Phase 1 drug-drug interaction study with acumapimod and azithromycin
-- Strengthened intellectual property across the portfolio
Financial Highlights
-- Admitted to the AIM market of the London Stock Exchange on 9
June 2016 following a private placement raising a further GBP14.8
million of capital in addition to the GBP56.5 million drawn down
earlier in the year from the previous financing round bringing the
total raised since July 2015 to GBP91.3 million
-- Balance sheet remains strong, with cash and cash equivalents
balance at 31 December 2016 of GBP53.6 million
Post period highlight
-- Three abstracts accepted for presentation as posters at the
American Thoracic Society May 2017
-- BPS-804 accepted for EMA Adaptive Pathways programme,
potentially enabling earlier patient access
-- Richard Jones was appointed as Chief Financial Officer and we
are also pleased to announce the appointment of Jerome Dauvergne as
Head of Pharmaceutical Development
Dr Denise Scots-Knight, Chief Executive Officer of Mereo
BioPharma Group plc commented:
"This year we have made significant progress on all three of our
programmes with two now well advanced in the clinic and the third
set to enter a pivotal study. We remain focused on executing
against our strategy, delivering data on our current programmes and
continuing to build our portfolio of differentiated, late stage
products over time".
For Further Enquiries:
Mereo BioPharma Group
plc +44 (0)333 023 7319
Denise Scots-Knight, Chief
Executive Officer
Richard Jones, Chief Financial
Officer
Nominated Adviser and
Joint Broker
Cantor Fitzgerald Europe +44 (0)20 7894 7000
Phil Davies
Will Goode
Joint Broker
RBC Capital Markets +44 (0)20 7653 4000
Rupert Walford
Laura White
Financial Advisor
Evercore +44 (0)20 7268 2718
Julian Oakley
Tom Watson
Public Relations Adviser
to Mereo
FTI Consulting +44 (0)20 3727 1000
Ben Atwell
Simon Conway
Brett Pollard
About Mereo
Mereo is a UK-based biopharmaceutical company focused on the
development of innovative medicines that aim to address unmet
medical needs in rare and specialty disease areas and improve
patient quality of life. The Company seeks to selectively acquire
development-stage product candidates with demonstrated clinically
meaningful data from large pharmaceutical companies and to rapidly
progress these product candidates to subsequent value inflection
points.
Mereo combines the operational discipline and efficiency of a
small company with the financial resources to conduct comprehensive
clinical studies. The Company has the option to directly
commercialise products, for example in orphan diseases, in addition
to partnering or divesting its products.
Mereo's initial portfolio consists of three mid-late stage
clinical assets that were acquired from Novartis in July 2015.
BPS-804 is being developed for the prevention of fractures
resulting from osteogenesis imperfecta (brittle bone disease);
acumapimod (BCT-197), is being developed to treat inflammation in
patients with an AECOPD; and BGS-649 is a once-weekly pill to
restore normal testosterone levels in men with hypogonadotropic
hypogonadism.
In H1 2016 the Company initiated a Phase 2 study with acumapimod
and a Phase 2b study with BGS-649. Mereo expects to commence the
first pivotal trial for BPS-804 during H1 2017. Additional product
opportunities, from a range of large pharmaceutical and
biotechnology companies, are under active evaluation.
Current development activities
Acumapimod
In Q2 2016 we initiated a Phase 2 dose-ranging clinical trial
for acumapimod in 270 AECOPD patients in the US and the EU to
explore two different dosing regimens versus placebo (on top of
standard of care). The study aims to demonstrate the most
biologically active dose regime of acumapimod based on a primary
end point of forced expiratory volume in one second (FEV1).
Patients will be followed for 26 weeks after treatment to explore
recurrence rates of AECOPD and number of hospitalisations. We also
initiated and successfully completed a drug-drug interaction study
for acumapimod with the antibiotic azithromycin in 16 healthy
volunteers. This will allow acumapimod to be dosed in patients
already being treated with azithromycin, an antibiotic routinely
employed in this clinical indication.
BGS-649
In Q1 2016 we initiated a Phase 2b clinical study for BGS-649 in
260 hypogonadotropic hypogonadism (HH) patients to determine the
lowest effective dose of the once-weekly pill. This study is
comparing three doses of BGS-649 with placebo. The primary
objective of this study is to demonstrate the efficacy of BGS-649
to normalise total testosterone levels in greater than 75% of
subjects after 24 weeks of treatment. We are also assessing patient
recorded outcomes and determining the impact of BGS-649 on
luteinising hormone (LH), follicle stimulating hormone (FSH) and
semen parameters. In Q4 2016 we initiated a six-month Phase 2b
extension study for BGS-649 to confirm the safety of long-term
treatment. This study aims to enrol up to 50% of the patients (130)
from the first BGS-649 study and will include monitoring of the
testosterone levels and any changes in bone mineral density. The
Group has announced that it will release the outcome of a blinded
interim analysis in the Phase 2b study of BGS-649 by the
Independent Data Monitoring Committee (IDMC) in March 2017.
BPS-804
During the year we obtained Orphan Drug Designation for BPS-804
in the US and the EU, which provides significant benefits for the
product. Following submissions to and discussions with the
regulators, we are progressing BPS-804 towards a potentially
pivotal dose-ranging study in 120 patients with OI using a novel
biomarker (HRpQCT). Post the period end, earlier this month BPS-804
was accepted to participate in the European Medicine Agency's (EMA)
Adaptive Pathways programme. The adaptive pathway approach is part
of the EMA's efforts to improve timely access for patients to new
medicines, primarily in areas of high medical need. The pivotal
Phase 2b study for BPS-804 in OI is expected to commence in H1
2017.
Chairman and Chief Executive Officer's statement
Introduction
The Group's strategy is to generate shareholder value by
acquiring clinical stage products according to our exacting
criteria, as an increasing number of pharmaceutical and
biotechnology companies face R&D and financial challenges. We
then seek to finance and develop such products to an optimum value
inflection point. Patients benefit from this approach by having
access to medicines that otherwise may remain underdeveloped by
larger pharmaceutical companies.
The Group plans to build a broad and diverse portfolio of
acquired orphan disease products and develop them through clinical
studies to regulatory approval and then plans to commercialise them
directly. Orphan disease products are an attractive opportunity for
smaller companies to commercialise. Due to the lack of existing
treatments, orphan drugs can be fast-tracked to the market and can
involve smaller clinical trials, with lower development costs. The
development of these products often involves close co-ordination
with patient organisations and a limited number of treatment sites
allowing for relatively easy identification of the patient
population and therefore a small sales infrastructure.
For speciality products, the Group plans to partner or sell the
product upon completion of additional clinical studies which may be
for dose-ranging optimisation or, in certain cases, the Phase 3
studies required for product approval and registration.
By acquiring products with clinical efficacy and safety data the
Group aims to reduce some of the development risks involved and to
accelerate the availability of these drugs for patients. Such well
characterised clinical-stage products will have received
significant investment whilst being developed by major
pharmaceutical companies.
Our product selection process has a clear set of criteria and
typically means that we acquire products that already have
compelling proof of concept data or a well-established scientific
proof of mechanism in the disease indication we plan to pursue.
This is the case for the Group's initial portfolio, comprising
of three products acquired from Novartis in 2015; acumapimod
(BCT-197) for acute exacerbations of chronic obstructive pulmonary
disease (AECOPD), BGS-649 for hypogonadotropic hypogonadism (HH)
and BPS-804 for osteogenesis imperfecta (OI, also known as brittle
bone disease). Each of these products was acquired with
proof-of-concept data in the target clinical indication we intend
to pursue.
Our acquisition structures are intended to align the interests
of the Group and our shareholders with those of the pharmaceutical
company through the use of equity and downstream payments based on
success, rather than substantial upfront cash payments. Another key
feature of our business model is the comprehensive nature of the
clinical studies we undertake. These are designed to answer the key
questions which are important to both patients and their
physicians, as well as the regulators and payers.
Our values and our people
The Group has grown significantly over the past 18 months and we
now employ over 20 full-time staff in our London headquarters. We
seek to attract and retain highly experienced individuals in
clinical development, clinical operations, manufacturing,
intellectual property and quality assurance and support them with
strong leadership at the executive and Board level. This internal
expertise is leveraged with external organisations such as the
clinical research organisation ICON and external contract
manufacturers. This combination has allowed the Group to
efficiently and effectively transfer the three programmes from
Novartis and to make significant progress this year with a lean
internal infrastructure. The successful growth to date is a result
of the hard work, enthusiasm, experience and skills of all our
employees who show a strong affiliation with Mereo and our mission
to deliver innovative medicines to patients.
Our Board members have significant operational experience in
large and small pharmaceutical companies and in clinical research
organisations. They provide valuable strategic input into our
development programmes and into the overall direction of the
Group.
In October 2016 Richard Bungay notified us of his intention to
step down as CFO/COO and as a Board member of Mereo. Richard left
the company on 13 January 2017 and we would like to thank him for
his contribution to the Group during the past 18 months.
In November 2016 we announced the appointment of Richard Jones
as CFO and a Board member of Mereo. Richard joined the company on
30 January 2017. Previously, Richard was the CFO of Shield
Therapeutics plc from April 2011 and a board member from early
2010. Prior to that, Richard was an investment banker in the
healthcare sector at Investec and Brewin Dolphin. We are also
pleased to announce the appointment of Jerome Dauvergne as Head of
Pharmaceutical Development. Jerome is currently Head of External
Manufacturing at Ipsen Biopharm Ltd and he will join the Group on 2
May 2017.
From founding the Group only 18 months ago we have made
outstanding progress, acquiring and integrating our first three
programmes from Novartis and advancing into them into the clinic.
We would like to thank Board members and our staff for their
important contributions during this successful period, and also our
shareholders for their continued support.
Recent developments and outlook
The Group is expecting to deliver a number of key clinical
milestones in 2017.
The Group has announced it will release the outcome of a blinded
interim analysis in the Phase 2b study of BGS-649 by the
Independent Data Monitoring Committee (IDMC) in March 2017. This
follows the enrolment of 93 patients out of a total of 260 patients
expected in the study. They will have received at least one month's
treatment at this point. Following this analysis, any doses either
not expected to normalise testosterone at 24 weeks or with
significant safety concerns will be dropped and the study will
continue with remaining doses versus placebo until patients have
received six months' treatment. Any doses that have been dropped at
the interim analysis will also be dropped from the 6 month safety
extension study. As per the trial design, the Group will continue
to be completely blinded to the study, including information on
dosing, until it is complete.
The Phase 2 study for acumapimod in AECOPD and the Phase 2b
study for BGS-649 in HH are expected to read out as planned in H2
2017.
Following consultation with regulators the BPS-804 programme for
osteogenesis imperfecta was accepted into the Adaptive Pathways
programme in the EU as announced earlier this month. We expect to
start the pivotal Phase 2b study for BPS-804 in OI in H1 2017.
These data points are each important in demonstrating our
ability to successfully transfer programmes from major
pharmaceutical companies, to rapidly execute comprehensive clinical
studies and also to validate our selection criteria for the product
acquisitions.
The Group continues to seek further product opportunities to
accelerate growth with the aim of becoming a leading player in the
development and commercialisation of novel therapies for rare and
speciality diseases with high unmet medical needs. Our plan is to
use our first mover advantage to add additional product
opportunities such that in the longer term we have between five and
seven products under development. Mereo is looking to become the
partner of choice for pharmaceutical and large biotechnology
companies as they look to unlock the potential in their development
pipelines and deliver promising drug candidates to patients. During
the period, we have seen strong interest from a range of
pharmaceutical companies to partner with us in respect of a
significant number of specific product opportunities. We remain
confident of delivering on our strategy.
Dr Denise Scots-Knight Peter Fellner
Chief Executive Officer Non-Executive Chairman
27 February 2017
Financial review
The financial statements are presented for the year ended 31
December 2016; comparative data is shown for the Group's first
accounting period, from the parent company's incorporation on 10
March 2015 to the financial year end on 31 December 2015.
During June 2016, the Group raised gross proceeds of GBP14.8
million in a private placement with institutional investors and
additionally drew down the remaining balance of GBP56.5 million
gross proceeds from the GBP76.5 million private financing round
that was completed in July 2015, in total therefore the Group
raised GBP71.3 million gross proceeds in 2016, GBP68.3 million net
of expenses. This will enable the Group to continue to fund its
existing programmes for each of its three current product
candidates to achieve key value inflection points in 2017 and 2018,
as detailed in the Strategic Report.
On 9 June 2016, following completion of the private placement,
the Company's shares were admitted to trading on the AIM market of
the London Stock Exchange under the ticker symbol "MPH".
The Group is structured to provide flexibility for the eventual
sale, licensing or commercialisation of its product candidates,
with each being developed within a wholly owned subsidiary company.
External research and development activities are contracted
directly by the Group's subsidiary companies, with the parent
company employees providing services on an "arm's-length" basis to
facilitate efficient development of product candidates. It is
envisaged that future product acquisitions can be added to the
Group with modest increases in internal resource.
Revenue
The Group did not generate any revenue from product sales or
licensing activities during the period.
Research and development expenses
Research and Development (R&D) expenses during the period
amounted to GBP24.6 million (2015: GBP5.4 million). Excluding a
non-cash charge relating to share-based payments, adjusted R&D
expenses were GBP22.8 million (2015: GBP5.0 million). This
expenditure primarily related to payments to contract research
organisations (CROs) for the ongoing and planned clinical trials
for each of the Group's product candidates and to contract
manufacturing organisations (CMOs) for the provision of drug
products to support the clinical studies. R&D expenses are
expected to increase in 2017, with the planned initiation of the
first pivotal clinical study and associated manufacturing
activities for the Group's orphan disease candidate BPS-804
alongside the ongoing clinical studies for acumapimod and BGS-649,
both of which are expected to read out as planned H2 2017.
Administrative expenses
Administrative expenses during the period amounted to GBP11.6
million (2015: GBP7.7 million). Excluding share based payments and
one off advisory fees adjusted administrative expenses amounted to
GBP5.7 million (2015:GBP5.2 million). This expenditure primarily
related to employee-related expenses, including the Board and
executive management, costs of the Group's premises and
professional advisors' fees. Underlying administrative expenses are
expected to increase in 2017 ahead of inflation reflecting a small
planned increase in headcount and a full year's cost relating to
being a listed company.
Financial income
The Group earns interest on its cash reserves from short-term
deposits. Interest earned during the period amounted to GBP0.2
million (2015: GBP0.03 million). The Group has benefited during
2016 from holding a significant amount of its cash in US Dollars
(see below), where the available interest rates have been higher
than those available for Sterling deposits, reflecting the
underlying base rates and future base rate expectations. In
addition, the group registered a non-cash gain on these deposits of
GBP2.3 million (2015:GBPnil) from the gain on translation of these
deposits at the year-end reflecting a strengthening of the US
Dollar against Sterling during the year.
Taxation
The Company's subsidiaries conduct all research and development
activities and consequently are responsible for submitting claims
under the UK research and development small or medium-sized
enterprise ("R&D tax credit") scheme. The R&D tax credit
scheme provides additional taxation relief for qualifying
expenditure on R&D activities, with an option to surrender a
portion of tax losses arising from qualifying activities in return
for a cash payment from HM Revenue & Customs (HMRC). The
Company's subsidiaries received the first R&D tax cash
repayment during the year, totalling GBP0.9 million, in respect of
the claim for the period ended 31 December 2015. The R&D tax
credit receivable in the balance sheet of GBP5.3 million is an
estimate of the cash repayments the Company's subsidiaries expect
to qualify for in respect of activities during the year ended 31
December 2016; however, as at the date of this announcement these
amounts have not yet been agreed with HMRC.
Loss per share
Basic Loss per share for the year was 63 pence (2015: 101
pence). On an adjusted non-GAAP basis, excluding one-off items and
share based payments, Loss per share was 51 pence (a comparative
2015 adjusted loss per share has not been presented after taking
into account that the company was formed in 2015 and therefore the
nature of the operating expenses was not comparable between 2015
and 2016). Taking account that Admission and the associated fund
raising occurred part way through the year, on an adjusted non-GAAP
proforma basis, Loss per share was 36 pence.
For definitions of adjusted and proforma adjusted loss per share
please see note 6.
Liquidity, cash, cash equivalents and money market
investments
The Group's cash, cash equivalents and money market investments
at the period end totalled GBP53.6 million (2015: GBP12.2
million).
During June 2016, the Group raised gross proceeds of GBP14.8
million in a private placement with institutional investors, of
which GBP3.4 million was in the form of a convertible loan, and
additionally drew down the remaining balance of GBP56.5 million
gross proceeds from the GBP76.5 million private financing round
that was completed in July 2015, in total therefore the Group
raised GBP71.3 million gross proceeds in 2016, GBP68.4 million net
of expenses.
The net cash outflow from operating activities in 2016 was
GBP27.4 million against an operating loss of GBP33.7 million, with
the major reconciling items being the non-cash charge for
share-based payments of GBP7.5 million, the R&D credit received
of GBP0.9 million and other movements in working capital of GBP2.0
million.
A significant component of the Group's clinical trial
expenditure is denominated in US Dollars. The Group has in place a
conservative hedging strategy in respect of its USD requirements
that ensures that sufficient Sterling is converted to US Dollars at
any time to cover up to the next 12 months anticipated operational
requirements. At the time of Brexit, the Group therefore had
significant US Dollar deposits converted at favourable rates. The
Group continues to purchase US Dollars on an ongoing basis based on
this policy and utilises a conservative assumption when considering
the cash funding requirements for its operational activities.
Other balance sheet items
Intangible assets at the year-end were GBP25.8 million (2015:
GBP25.8 million), representing the value assigned to the Group's
product candidates acumapimod, BGS-649 and BPS-804 upon acquisition
from Novartis. The Group has performed an annual review of the
value in use for these programmes at 31 December 2016 and has
concluded that there is no impairment at that date.
Future commitments to Novartis will be recognised as an expense
in the same period when related future cash inflows from product
sales or outlicensing or other monetisation of the programs by the
Group are earned.
Trade and other receivables (including R&D tax credit
receivable of GBP5.3 million) at the year-end were GBP7.2 million
(2015: GBP1.6 million) and trade and other payables were GBP3.2
million (2015: GBP4.0 million) at the year end.
Outlook
Overall, the Group believes it is well positioned and
well-funded to execute on its business strategy and to progress its
existing products through the current trial programmes in 2017 and
2018.
Richard Jones
Chief Financial Officer
27 February 2017
Consolidated statement of comprehensive loss
for the year ended 31 December 2016
10 March
2015
to
31 December 31 December
2016 2015
------------- -------------
Notes GBP GBP
Research and development expenses 4 (24,562,502) (5,445,015)
Administrative expenses (11,616,816) (7,716,344)
------------- -------------
Operating loss (36,179,318) (13,161,359)
Net finance income 195,141 25,717
Net foreign exchange gain 2,262,626 -
-------------
Loss before tax (33,721,551) (13,135,642)
Taxation 5 5,331,271 946,681
-------------
Loss for the period, attributable
to equity holders of the parent (28,390,280) (12,188,961)
============= =============
Other comprehensive income/(loss)
for the period, net of tax - -
============= =============
Total comprehensive (loss) for
the period, net of tax and attributable
to the equity holders of the
parent (28,390,280) (12,188,961)
============= =============
Basic and diluted loss per share
for the period 6 (GBP0.63) (GBP1.01)
========== ==========
Non-GAAP measure
Adjusted loss per share for the
period 6 (0.51)
----------
Proforma adjusted loss per share 6 (0.36)
----------
Balance sheet
as at 31 December 2016
Group Company
-------------------------- ------------------------
31 December 31 December 31 December 31 December
2016 2015 2016 2015
------------ ------------ ----------- -----------
Notes GBP GBP GBP GBP
Assets
Non-current assets
Property, plant and equipment 173,869 204,517 173,869 204,517
Investments - - 67,754,682 421,352
Intercompany receivables - - - 35,699,919
Intangible assets 25,812,941 25,812,941 - -
Other receivables - - - -
------------ ------------ ----------- -----------
25,986,810 26,017,458 67,928,551 36,325,788
Current assets
Prepayments 1,102,146 253,926 1,102,146 253,926
R&D tax credits 5,331,271 946,681 - -
Other receivables 767,009 396,022 767,009 396,022
Cash and short-term deposits 7 53,577,571 12,247,986 53,577,571 12,247,986
------------ ------------ ----------- -----------
60,777,997 13,844,615 55,446,726 12,897,934
------------ ------------ ----------- -----------
Total assets 86,764,807 39,862,073 123,375,277 49,223,722
============ ============ =========== ===========
Equity and liabilities
Equity
Issued capital 8 193,022 59,221 193,022 59,221
Share premium 8 99,975,399 26,212,880 99,975,399 26,212,880
Other capital reserves 8 12,667,562 21,660,105 12,667,562 21,660,105
Accumulated Profit / (loss) (33,579,241) (12,188,961) 3,031,229 (2,827,315)
Total equity 79,256,742 35,743,245 115,867,212 45,104,891
------------ ------------ ----------- -----------
Non-current liabilities
Provisions 1,172,424 141,311 1,172,424 141,311
Convertible loan 9 3,126,526 - 3,126,526 -
------------ ------------ ----------- -----------
4,298,950 141,311 4,298,950 141,311
------------ ------------ ----------- -----------
Current liabilities
Trade and other payables 3,209,115 3,977,517 3,209,115 3,977,520
------------ ------------ ----------- -----------
Total liabilities 7,508,065 4,118,828 7,508,065 4,118,831
------------ ------------ ----------- -----------
Total equity and liabilities 86,764,807 39,862,073 123,375,277 49,223,722
------------ ------------ ----------- -----------
Consolidated and Company statement of cash flows
for the year ended 31 December 2016
Group Company
---------------------------- -------------------------------
Period Period
ended ended
31 December 31December 31 December 31 December
2016 2015 2016 2015
------------- ------------- ---------------- -------------
Notes GBP GBP GBP GBP
------------- ------------- ---------------- -------------
Operating activities
Loss before tax 1 (33,721,551) (13,135,642) (1,141,456) (2,827,315)
Adjustments to
reconcile loss
before tax to net
cash flows:
Depreciation of
property, plant
and equipment 32,940 11,361 32,940 11,361
Share-based payment
expense 8 6,494,018 2,982,265 4,905,559 2,560,916
Provision for social
security contributions
on employee share
options 1,031,109 141,311 794,960 121,346
Interest received (374,906) (25,717) (374,906) (299,759)
Interest on convertible
loan 179,765 - 179,765 -
Capitalisation
of Intercompany
balances - - (29,808,806) -
Working capital
adjustments:
(Increase) in receivables (1,219,202) (649,948) (1,219,202) (10,565,215)
Increase / (decrease)
in payables (768,402) 3,977,517 (768,402) 4,025,774
Tax received 946,681 - - -
Net cash flows
from operating
activities (27,399,548) (6,698,853) (27,399,548) (6,972,892)
------------- ------------- ---------------- -------------
Investing activities
Purchase of property,
plant and equipment (3,467) (215,878) (3,467) (215,878)
Disposal of property,
plant and equipment 1,175 - 1,175 -
Investment in subsidiaries - - - (3)
Interest received 374,906 25,717 374,906 299,759
Net cash flows
used in investing
activities 372,614 (190,161) 372,614 83,878
------------- ------------- ---------------- -------------
Financing activities
Proceeds from issue
of ordinary shares 8 67,888,820 20,005,000 67,888,820 20,005,000
Transaction costs
on issue of shares 8 (2,995,864) (868,000) (2,995,864) (868,000)
Proceeds from issue
of convertible
loan 3,463,563 - 3,463,563 -
Net cash flows
from financing
activities 68,356,519 19,137,000 68,356,519 19,137,000
------------- ------------- ---------------- -------------
Net increase in
cash and cash equivalents 41,329,585 12,247,986 41,329,585 12,247,986
Cash and cash equivalents
at beginning of
the period 12,247,986 - 12,247,986 -
------------- ------------- ---------------- -------------
Cash and cash equivalents
at 31 December 7 53,577,571 12,247,986 53,577,571 12,247,986
============= ============= ================ =============
Significant non-cash transaction
During the year the Directors of the Company signed a solvency
statement with the agreement of all shareholders and undertook a
capital reduction, reducing the share premium account by
GBP7,000,000 and reducing the accumulated losses by the same
amount.
During the year, 8,697,480 shares were issued to Novartis Pharma
AG (for nil consideration). The fair value of these was GBP1.84 per
share.
During the period ended 31 December 2015 the Company issued two
bonus shares of GBP0.001 in nominal value for each ordinary shares
held. The post-bonus share capital was consolidated such that each
ordinary shareholder received one share for every three held. The
total number of ordinary shares remained at 19,740,296 but the
nominal value is now GBP0.003
Consolidated statement of changes in equity
Issued Share Other capital Accumulated Total
capital premium reserves losses equity
-------- ----------- ------------- ------------ ------------
GBP GBP GBP GBP GBP
-------- ----------- ------------- ------------ ------------
As at 10 March - - - - -
2015
Loss for the period
to 31 December
2015 - - - (12,188,961) (12,188,961)
Issue of share
capital 19,740 27,067,420 - - 27,087,160
Issue of bonus
share capital 39,481 (39,481) - - -
Share-based payments
- share options - - 2,982,265 - 2,982,265
Shares to be issued - - 18,677,840 - 18,677,840
Profit on transfer
of loan notes
for equity - 52,941 - - 52,941
Transaction costs
on issuance of
share capital - (868,000) - - (868,000)
-------- ----------- ------------- ------------ ------------
At 31 December
2015 59,221 26,212,880 21,660,105 (12,188,961) 35,743,245
-------- ----------- ------------- ------------ ------------
Loss for the year
to 31 December
2016 - - - (28,390,280) (28,390,280)
Issue of share
capital 107,709 67,781,112 - - 67,888,821
Share-based payments
- share options - - 6,185,067 - 6,185,067
Share-based payments
- LTIPS - - 133,601 - 133,601
Share-based payments
- deferred bonus
shares - - 175,350 - 175,350
Redemption of
shares to be issued 26,092 15,977,271 (16,003,363) - -
Equity element
of convertible
loan - - 516,802 - 516,802
Share capital
reduction - (7,000,000) - 7,000,000 -
Transaction costs
on issuance of
share capital - (2,995,864) - - (2,995,864)
-------- ----------- ------------- ------------ ------------
At 31 December
2016 193,022 99,975,399 12,667,562 (33,579,241) 79,256,742
-------- ----------- ------------- ------------ ------------
1. Corporate information
Mereo BioPharma Group plc (the "Company" or the "parent") is a
public limited company incorporated and domiciled in United
Kingdom, and registered in England, and whose shares are publicly
traded. The registered office is located at Fourth Floor, 1
Cavendish Place, London, W1G 0QF. The Group is principally engaged
in the research and development of novel pharmaceuticals
The financial information set out above has been prepared in
accordance with the recognition and measurement criteria of
International Financial reporting Standards adopted by the EU
(Adopted IFRS). The financial information does not constitute the
group's statutory accounts for the year ended 31 December 2016.
Statutory accounts for 2016 will be published and delivered to the
Registrar of Companies in due course.
The auditor has reported on these accounts; their reports were
unqualified, and did not include a reference to any matter to which
the auditor drew attention by way of emphasis without qualifying
their report and their report did not contain a statement under
s498.
These results were approved by the Board of Directors on 24
February 2017.
2. Significant accounting policies
Basis of preparation
The Group and Company's annual financial statements have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and for the Company in
accordance with the Companies Act 2006.
The financial information is presented in Sterling.
3. Going concern
Though the Group and Company continues to make losses, the
Directors believe it is appropriate to prepare the financial
information on the going concern basis. This is because the Group's
research into new products continues to progress according to plan
and the funding secured in June 2016 will allow it to meet its
liabilities as they fall due for at least 12 months from the date
of authorisation for issue of these consolidated financial
statements.
4. Segment information
For management purposes, the Group is organised into business
units based on its products and has three reportable segments, as
follows:
-- Respiratory Unit, which develops drugs to treat respiratory diseases
-- Endocrinology Disorders Unit, which develops drugs to treat endocrine disorders
-- Orphan Diseases Unit, which develops drugs to treat various orphan diseases
The Executive Management Committee monitors the operating
results of its business units separately as part of the process for
making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on progress of
each development program and the related development expenditure.
Expenditure is measured consistently with the total expenditure
included in the consolidated financial statements. The Group's
financing (including finance costs and finance income) are managed
on a Group basis and are only partially allocated to operating
segments.
Year
ended Endocrinology Orphan
31 December Respiratory disorders diseases Total
2016 unit unit unit segments Unallocated Consolidated
------------- -------------- ------------ ------------- ------------ -------------
Expenses GBP GBP GBP GBP GBP GBP
Research
& Development (9,733,421) (9,431,758) (4,804,117) (23,969,296) (593,206) (24,562,502)
(3,006,
Administrative (2,747,085) (2,787,307) (3,076,405) (8,610,797) 019) (11,616,816)
------------- -------------- ------------ ------------- ------------ -------------
Segment
operating
loss (12,480,506) (12,219,065) (7,880,522) (32,580,093) (3,599,225) (36,179,318)
Assets
Tax Credit 2,102,469 2,094,259 1,134,543 5,331,271 - 5,331,271
Intangible
Assets 4,310,761 9,886,56 11,615,824 25,812,941 - 25,812,941
Period
ended Endocrinology Orphan
31 December Respiratory disorders diseases Total
2015 unit unit unit segments Unallocated Consolidated
------------ -------------- ------------ ------------- ------------ -------------
Expenses GBP GBP GBP GBP GBP GBP
Research
& Development (2,399,367) (1,393,860) (1,437,664) (5,230,891) (214,124) (5,445,015)
Administrative (1,641,880) (1,695,991) (1,739,566) (5,077,437) (2,638,907) (7,716,344)
------------ -------------- ------------ ------------- ------------ -------------
Segment
operating
loss (4,041,247) (3,089,851) (3,177,230) (10,308,328) (2,853,031) (13,161,359)
Assets
Tax Credit 300,024 290,965 355,692 946,681 - 946,681
Intangible
Assets 4,310,761 9,886,356 11,615,824 25,812,941 - 25,812,941
Unallocated
The majority of payroll and related costs, and expenses relating
to the Group's facilities, are not allocated to segments as these
are managed centrally, as are finance income and costs.
All non-current assets held by the Group are located in the
United Kingdom.
5. Income tax
The Group is entitled to claim tax credits in the United Kingdom
under the UK research and development (R&D) small or
medium-sized enterprise (SME) scheme, which provides additional
taxation relief for qualifying expenditure on R&D activities,
and includes an option to surrender a portion of tax losses arising
from qualifying activities in return for a cash payment from HM
Revenue & Customs (HMRC). The amount included in the financial
statements for the represents the credit receivable by the Group
for the year. The 2016 amounts have not yet been agreed with the
relevant tax authorities.
Reconciliation of the accounting loss multiplied by United
Kingdom's domestic tax rate for 2016:
Year Period
ended ended
31 December 31 December
2016 2015
------------- -------------
Group GBP GBP
United Kingdom Corporation Tax R&D
credit 5,331,271 946,681
------------- -------------
Income tax credit 5,331,271 946,681
------------- -------------
The tax credit for the year is lower
than the standard rate of corporation
tax in the UK of 20%. The differences
are explained below
Loss on ordinary activities before
income tax (33,721,551) (13,135,642)
------------- -------------
Loss on ordinary activities before
tax at United Kingdom's statutory
income tax rate of 20% 6,744,310 2,627,129
Expenses not deductible for tax
purposes (permanent differences) (15,116) (438,196)
Temporary timing differences (1,300,044) (599,975)
Research development relief uplift 2,134,107 378,956
Tax losses carried forward to future
periods (2,231,986) (1,021,233)
Tax credit for the period 5,331,271 946,681
------------- -------------
A reduction in the rate of UK corporation tax to 19% from 1
April 2017 and to 17% from 1 April 2020 has been substantively
enacted. UK deferred tax assets and liabilities are recognised at a
rate of 17%.
At 31 December 2016, the Group had tax losses to be carried
forward of approximately (GBP16,343,508) (2015: (GBP5,106,165))
Deferred tax
Deferred tax relates to the following:
31 December 31 December
2016 2015
------------ ------------
GBP GBP
Losses 2,788,396 919,110
Accelerated capital allowances (9,883) -
Other 2,210 3,170
Net deferred tax asset 2,770,723 922,280
============ ============
The deferred tax asset has not been recognised as there is
uncertainty regarding when suitable future profits against which to
offset the accumulated tax losses will arise. There is no
expiration date for the accumulated tax losses.
6. Loss per share
Basic loss per share is calculated by dividing the loss
attributable for the period to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period.
As net losses from continuing operations were recorded in the
period, the dilutive potential shares are anti-dilutive for the
earnings per share calculation.
Year ended 31 Period ended 31
December 2016 December 2015
----------------------------------- -----------------------------------
Loss Weighted Loss Loss Weighted Loss
GBP shares per GBP shares per
share share
GBP GBP
------------- ----------- ------- ------------- ----------- -------
Group
IFRS - basic and
diluted (28,390,280) 44,789,893 (0.63) (12,188,961) 12,009,419 (1.01)
Adjusted - basic
and diluted (22,956,976) 44,789,893 (0.51)
Proforma adjusted
- basic and diluted (22,956,976) 64,340,798 (0.36)
The Company operates share option schemes which could
potentially dilute basic earnings per share in future. In addition
there exist within equity 1,453,520 shares to be issued which also
have the potential to dilute basic earnings per share in future.
There have been no other transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date
of authorisation of these financial statements.
The adjusted loss is calculated using the weighted average
number of ordinary shares in issue during the period and after
adding back non-recurring items and share based payments as
illustrated in the table below. A comparative 2015 adjusted loss
per share has not been presented after taking into account that the
company was formed in 2015 and therefore the nature of the
operating expenses was not comparable between 2015 and 2016.
Adjusted profit/(loss) per share information will be disclosed in
future years on a consistent basis.
The adjusted proforma loss per share is calculated using the
number of ordinary shares in issue following admission to the AIM
market of the London Stock Exchange (that is it assumes the
admission took place on 1 January 2016 in respect of the number of
shares in issue to enable better comparison in future years). As
the date of admission to the AIM market was on 9 June 2016,
comparatives for the previous period have not been provided.
The table below reconciles the loss used for the basic and
adjusted (non-GAAP) loss per share computations
Year-ended
31 December
2016
-------------
Group
Loss for the period (28,390,280)
Share based payments 6,494,018
Provision for social
security on share options 1,031,109
Non capitalised IPO
costs 45,000
Corporate finance costs 125,803
Net gain on foreign
exchange (2,262,626)
Adjusted loss (22,956,976)
-------------
7. Cash and short-term deposits
31
31 December December
Group and Company 2016 2015
------------ -----------
GBP GBP
Cash at banks and on hand 421,292 647,007
Short-term deposits 53,156,279 11,600,979
53,577,571 12,247,986
============ ===========
Cash at banks earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are available immediately
and earn interest at the respective short-term deposit rates.
8. Issued capital and reserves
10
March
to
31
31 December December
Ordinary share capital 2016 2015
------------ ----------
GBP GBP
Balance at beginning of year / period 59,221 1
Issuances in the period 133,801 59,220
------------
Nominal share capital as at 31 December 193,022 59,221
============ ==========
Ordinary shares issued and fully paid (post
ordinary share split)
At 1 January 2016 19,740,296
Issued on 9 June 2016 for private financing
round 39,464,540
Issued on 9 June 2016 for private placement 5,135,962
At 31 December 2016 64,340,798
-----------
Nominal value at 31 December 2016 0.003
Issued capital at 31 December 2016 193,022
-----------
Ordinary shares issued and fully paid (post
ordinary share split)
At 10 March 2015 - Incorporation capital 1,000
Founders Shares 4,999,000
Issued on 29 July 2015 for private financing
round 14,740,296
Bonus shares issued on 27 November 2015 39,480,592
Consolidation of post-bonus share capital (39,480,592)
At 31 December 2015 19,740,296
-------------
Nominal value at 31 December 2015 0.003
Issued capital at 31 December 2015 59,221
On 29 July 2015, there was a subdivision of 5,000 ordinary
shares of GBP1.00 in nominal value in the capital of the Company to
5,000,000 ordinary shares of GBP0.001 in nominal value in the
capital of the Company (the "ordinary share split");
On 27 November 2015 the company issued two ordinary bonus shares
of GBP0.001 in nominal value for each ordinary share held and
consolidated the post-bonus share capital such that each ordinary
shareholder received one share for every three held. The nominal
value of each ordinary shares changed to GBP0.003.
Since 1 January 2016, the following alterations to the Company's
share capital have been made:
-- under the subscription agreement dated 28 July 2015, as
amended by an agreement dated 1 June 2016, the issue and allotment
of 39,464,540 ordinary shares of GBP0.003 in nominal value in the
capital of the Company on 9 June 2016 at a price of GBP1.84 per
share. 39,699 of these ordinary shares were issued to WG Partners
LLP, for no cash consideration, as payment for financial advisory
services;
-- on 21 March 2016 the Directors of the Company signed a
solvency statement with the agreement of all shareholders and
undertook a capital reduction, reducing the share premium account
by GBP7,000,000 and reducing the accumulated losses by the same
amount;
-- under a private placement dated 9 June 2016, the issue and
allotment of 5,135,962 ordinary shares of GBP0.003 in nominal value
in the capital of the Company on 9 June 2016 at a price of GBP2.21
per share; and;
-- on 9 June 2016, the Company's ordinary shares were admitted
to trading on the AIM market of the London Stock Exchange.
31 December
2016
------------
GBP
Share premium
At 1 January 2016 26,212,880
Issuance of share capital for private financing
round on 9 June 2016 72,423,314
Issuance of share capital for private placement
on 9 June 2016 11,335,068
Transaction costs for issued share capital (2,995,863)
Share capital reduction on 21 March 2016 (7,000,000)
At 31 December 2016 99,975,399
============
31 December
2015
------------
GBP
At 10 March 2015 -
Issuance of share capital for private financing
round on 29 July 2015 27,067,420
Transaction costs for issued share capital (868,000)
Profit on transfer of loan notes for equity 52,941
Consolidation of post-bonus share capital
on 27 November 2015 (39,481)
At 31 December 2015 26,212,880
============
Other capital reserves
GBP
At 1 January 2016 21,660,105
Share-based payments expense
during the period 6,494,018
Shares issued (16,003,363)
Equity component of convertible
loan instrument 516,802
At 31 December 2016 12,667,562
=============
GBP
At 10 March 2015 -
Share-based payments expense
during the period 2,982,265
Shares to be issued 18,677,840
At 31 December 2015 21,660,105
============
Share-based payments
The Group has a share option scheme under which options to
subscribe for the Group's shares have been granted to certain
Executives, Non-Executive Directors and employees.
The share-based payment reserve is used to recognise the value
of equity-settled share-based payments provided to employees,
including key management personnel, as part of their remuneration.
Of the GBP6,494,018 share-based payment expense in the year,
GBP298,836 is an accelerated charge relating to 500,000 share
options which were cancelled on 9 June 2016.
Shares issued / to be issued
Of the 14,740,296 ordinary shares issued on 29 July 2015,
3,849,000 shares were issued to Novartis Pharma AG (Novartis). This
left a further 10,151,000 shares are to be issued to Novartis pro
rata to their percentage shareholding as and when the Company
issued further ordinary shares.
Of the 44,600,502 ordinary shares issued on 9 June 2016,
8,697,480 shares were issued to Novartis as fully paid up bonus
shares (for nil consideration), the number of which was calculated
to maintain its shareholding at 19.5%. The fair value of these
shares was GBP1.84 per share. A further 1,453,520 shares are to be
issued to Novartis pro rata to their percentage shareholding as and
when the Company issues further ordinary shares.
9. Convertible loan note
On 3 June 2016, the Company issued 3,463,563 GBP1 unsecured
convertible loan notes ("Notes") to Novartis Pharma AG, a related
party. The Notes attract an interest rate of 4% per annum payable
annually and accruing daily and constitute direct, unsecured
obligations of the Company ranking ahead of any other unsecured
obligations of the Company.
The noteholder shall be entitled, at any time within 36 months
of the date of the instrument ("Maturity Date"), to serve a
conversion notice on the Company to convert all or some only of the
outstanding Notes into fully paid ordinary shares at a conversion
price of GBP2.21 per share. To the extent the Notes are not
converted at the Maturity Date, the outstanding principal amount of
the Notes, together with any accrued interest, is redeemable. Upon
conversion of any Notes, in addition to the relevant number of
conversion shares, the noteholder is entitled to receive an
additional number of ordinary shares in the Company equal to the
number of conversion shares into which such Notes are to convert,
multiplied by 0.93, up to a maximum aggregate number of 1,453,520
such bonus shares.
The value of the debt component of the Notes at the date of
issue was calculated as GBP2,946,761. The cash flows attached to
the Note up to the Maturity Date were calculated and discounted at
an appropriate venture debt rate of 10%. The carrying amount at 31
December 2016 is GBP3,126,526.
The value of the equity component of the Notes at 31 December
2016 was calculated as GBP516,802.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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