TIDMRLM
RNS Number : 7159X
Realm Therapeutics PLC
14 August 2018
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE EU MARKET ABUSE REGULATION (596/2014). UPON THE PUBLICATION OF
THE ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Realm Therapeutics plc
("Realm Therapeutics", "Realm" or the "Company" and together
with its subsidiaries, the "Group")
Realm Therapeutics Reports Top-line Data from Phase 2 Trial of
PR022 in Atopic Dermatitis and First Half 2018 Financial
Results
Company Hosting Conference Call Today at 9:00 AM ET / 2:00 PM
BST
MALVERN, PA, 14 August, 2018 - Realm Therapeutics plc
(NASDAQ:RLM / AIM:RLM), a clinical stage biopharmaceutical company
focused on developing novel therapeutics in immune-mediated
diseases, today reports preliminary top-line data from its Phase 2
trial of PR022 in Atopic Dermatitis, as well as financial results
for the six months ended 30 June, 2018.
In a randomized, double-blind, vehicle controlled, Phase 2
clinical trial of 122 patients, PR022 showed no difference from
vehicle in the primary endpoint of percent change in Eczema Area
Severity Index (EASI) versus baseline.
"PR022 did not show the desired effect in this trial," said Alex
Martin, CEO of Realm Therapeutics. "Having just received the data,
we are working to better understand this outcome and to analyze all
of the data collected in the study. We are conducting a full review
to determine whether there is a path forward for our proprietary
technology in Atopic Dermatitis, and to evaluate the implications
for our Acne and Psoriasis programs. We will provide an update on
our plans in September. I would like to thank the patients and
investigators who participated in this trial."
CORPORATE AND FINANCIAL HIGHLIGHTS
-- Cash, cash equivalents and short-term investments were $23.7
million as at 30 June 2018 (as at 31 December 2017: $33.9m).
-- Investments in Research & Development (R&D) increased
to $7.4 million (H1 2017: $3.0m) driven by additional investment in
clinical development activities
-- General and Administrative (G&A) expenses increased to
$3.5 million (H1 2017: $1.6m) primarily due to Nasdaq listing
costs.
-- In July 2018, listed American Depositary Shares ("ADSs")
representing the Company's ordinary shares on the Nasdaq Capital
Market to facilitate the creation of a trading market in the US for
the Company's securities and in satisfaction of obligations under a
registration rights agreement entered into with investors who
participated in the Company's October 2017 private placement.
-- The US Patent and Trademark Office issued two new patents to
Realm that expand the intellectual property portfolio around the
Company's proprietary immunomodulatory technology in the treatment
of inflammatory and autoimmune disorders.
Conference Call
The Company will host a conference call and audio webcast today
at 9:00 a.m. ET / 2:00 p.m. BST to discuss the Atopic Dermatitis
Phase 2 trial results and the financial results. To access the
conference call, please use the dial in details below:
US Toll-Free: +1 855-857-0686
US Toll: +1 631-913-1422
UK Toll-Free: 08003589473
UK Toll: +44 3333000804
Conference call pin code: 51680194#
Please dial in at least 10 minutes prior to the start time. A
live and archived webcast of the call will be available on the
Events and Presentations page of the Company's website,
www.realmtx.com.
About the Company's Pipeline Candidates
PR022 is a proprietary, non-alcohol based, topical gel
formulation of high concentration hypochlorous acid (HOCl).
In pre--clinical models of Atopic Dermatitis, the Company has
demonstrated that PR022 is associated with down modulation of key
cytokines IL-4, IL-13 and TARC, as well as cytokines associated
with itch, including IL-31 and TSLP. Importantly, these results
occurred without the same immunosuppressive or other side effects
associated with steroids, the current standard of care, suggesting
a potential clinical advantage for PR022. However, the recently
completed Phase 2 clinical trial of PR022 in patients with Atopic
Dermatitis showed no difference from placebo in the primary
endpoint of percent change in Eczema Area Severity Index (EASI)
versus baseline.
Realm is also evaluating PR022 for Psoriasis. Pre-clinical
studies have shown that HOCl can down modulate key cytokines
TNF-<ALPHA>, IL-1 <BETA>, IL-6, IL-12, and IL-23 which
have been reported at elevated levels in patients with Psoriasis
and are correlated to disease severity
RLM023 is a topical formulation of HOCl that is being optimized
for Acne Vulgaris. In pre-clinical studies, HOCl demonstrated a
reduction in the expression of pro-inflammatory cytokines such as
TNF-<ALPHA>, IL 1<BETA>, Il-8 and IL-12, which have
been reported to be key cytokines associated with Acne
pathogenesis.
In light of the preliminary top-line data of the Phase 2
clinical trial with PR022 in AD, the Company is conducting a full
review of the results to determine whether there is a path forward
for Realm's proprietary technology in Atopic Dermatitis, and to
evaluate the implications for the Company's Acne and Psoriasis
programs.
About Realm Therapeutics
Realm Therapeutics is a clinical-stage biopharmaceutical company
developing novel therapeutics that target the interplay between
innate and adaptive immunity. The Company's programs seek to
influence immune signalling and change the course of
immune-mediated diseases in adults and children. Realm's lead drug
development program utilizes the Company's proprietary
immunomodulatory technology for the treatment of Atopic Dermatitis,
and the Company is exploring its efficacy in other dermatology
indications which include Acne Vulgaris and Psoriasis, as well as
other therapeutic areas. For more information on Realm Therapeutics
please visit www.realmtx.com.
The person who arranged for the release of this announcement on
behalf of the Company was Marella Thorell, Chief Financial Officer
and Chief Operating Officer.
Forward Looking Statements
Certain statements made in this announcement are forward-looking
statements, including with respect to the Company's clinical
trials, results of clinical trials, pipeline of candidates and
product candidate development plans including trial results, next
steps in clinical development, regulatory strategy, costs and
timelines. Words such as 'anticipates,' 'expects,' 'intends,'
'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions
are intended to identify forward-looking statements. All statements
contained in this press release that do not relate to matters of
historical fact should be considered forward-looking statements.
These statements are neither promises nor guarantees, but involve
known and unknown risks, uncertainties and other important factors
that may cause our actual results, performance or achievements to
be materially different from our expectations expressed or implied
by the forward-looking statements, including, but not limited to,
the following: our history of operating losses; the recently
announced results of the Phase 2 trial of PR022 in Atopic
Dermatitis and the uncertainty around future plans for PR022 or any
other product candidates; the impact of the PR022 Phase 2 results
on our development plans for other potential product candidates or
indications; uncertainty around our need for additional funding to
advance development and commercialization of any current or future
product candidates, which may not be available and which may force
us to delay, reduce or eliminate our development or
commercialization efforts; the reliance of our business on PR022 in
Atopic Dermatitis; economic, regulatory and other risks; the
lengthy and expensive process of drug development, which has an
uncertain outcome; undesirable or unacceptable side effects
associated with any of our pipeline candidate; the uncertainty of
our ability to develop or acquire products not based on our active
pharmaceutical ingredient (API) hypochlorous acid (HOCl) or outside
of dermatology leading to a high concentration of risk in limited
areas; certain risks associated with HOCl including its inherent
instability and the fact that there are other companies which make
HOCl-based products; the loss of any key personnel from our
relatively small team; potential material differences between our
reported top-line data and final data; our reliance on third
parties, including clinical research organizations, investigators,
manufacturers and other suppliers; and lawsuits related to patents
covering HOCl, PR022 and our pipeline candidates and the potential
for our patents to be found invalid or unenforceable. In addition,
following the listing of ADSs representing our ordinary shares on
Nasdaq, the Company is listed on two stock exchanges which results
in higher operating costs and varied regulatory obligations both of
which are impacted by the Company's status as a Foreign Private
Issuer and Emerging Growth Company which could change over time;
and the uncertainty with respect to an active market being
established for the ADSs. These risks and uncertainties and other
important factors are referred to in an exhibit to our Form 6-K
filed with the Securities and Exchange Commission (SEC) on August
14, 2018, and our other reports filed with the SEC, could cause
actual results to differ materially from those indicated by the
forward-looking statements made in this press release. Any such
forward-looking statements represent management's estimates as of
the date of this press release. While we may elect to update such
forward-looking statements at some point in the future, we disclaim
any obligation to do so, even if subsequent events cause our views
to change, except as required by law or by any appropriate
regulatory authority. These forward-looking statements should not
be relied upon as representing our views as of any date subsequent
to the date of this press release.
RNS-RLM
Contacts:
Realm Therapeutics plc
Alex Martin, Chief Executive Officer
Marella Thorell, Chief Financial Officer and Chief Operating
Officer
Outside US: +44 (0) 20 3727 1000
US: +1 212 600 1902
Argot Partners
Laura Perry / Maghan Meyers
+1 212 600 1902
FTI Consulting
Simon Conway / Mo Noonan
+44 (0) 20 3727 1000
N+1 Singer (Nominated Adviser and Broker)
Aubrey Powell / Jen Boorer
+44 (0) 20 7496 3000
Business Review and Outlook
Realm Therapeutics is a clinical-stage biopharmaceutical company
developing novel therapeutics that target the interplay between
innate and adaptive immunity. The Company's programs seek to
influence immune signalling and change the course of
immune-mediated diseases in adults and children. Realm's lead drug
development program utilizes the Company's proprietary
immunomodulatory technology for the treatment of Atopic Dermatitis
and the Company is exploring its efficacy in other dermatology
indications which include Acne Vulgaris and Psoriasis, as well as
other therapeutic areas.
The Company today announced top-line results from a Phase 2
study evaluating PR022 in patients with Atopic Dermatitis. This
trial began in December 2017 and enrollment was completed in May
2018. Preliminary top-line results from the study demonstrate that
PR022 showed no difference from vehicle in the primary endpoint of
percent change in Eczema Area Severity Index (EASI) versus
baseline. The Company is conducting a complete analysis of the
results of this study in order to determine whether there is a path
forward for Realm's proprietary technology in Atopic Dermatitis,
and to evaluate the implications for its other programs including
PR022 in Psoriasis and RLM023 for Acne. Realm intends to provide an
update on its plans in September 2018.
While the initial clinical development focus has been on
Dermatology, the Company is also exploring other potential
applications, in immune-mediated diseases generally. While the
other indications are in the early stage of evaluation, Realm
believes that the anti-inflammatory and immunomodulatory properties
of its formulations demonstrated in pre-clinical studies to date
provide scientific rationale for continuing to explore other
indications and, subject to the full analysis of the PR022 results,
intends to further evaluate the potential applications through
pre-clinical models and other research. In addition, the Company is
actively exploring opportunities to in-license new assets with
potential in immune-mediated diseases to complement its
portfolio.
Realm was pleased to announce in July 2018 that the SEC declared
effective registration statements with respect to the listing of
American Depositary Shares (ADSs), representing the Company's
ordinary shares, Nasdaq approved the ADSs for listing, and ADSs
were listed for trading. The registration statements were filed to
facilitate the creation of a trading market in the US for ADSs
representing the Company's ordinary shares and in satisfaction of
Realm's obligations under a registration rights agreement entered
into with investors who participated in the Company's October 2017
private placement. The Company did not register any new issuance of
securities in connection with the listing. The Company's ordinary
shares continue to be admitted to trading on AIM.
Financial Review
Cash
As at 30 June 2018, cash, cash equivalents and short-term
investments were $23.7 million (31 December 2017: $33.9m) and the
Company had no debt (31 December 2017: $nil).
Total cash and short-term investments used by the Group during
the six months ended 30 June 2018 was $10.2 million, primarily
driven by investments in R&D, Nasdaq listing costs and general
operations. During H1 2018, R&D spend was focused on clinical
study costs related to PR022 and PR013 (a formulation studied in
Allergic Conjunctivitis which is no longer an active program) and
studies to support the Company's Acne Vulgaris program. During H1
2017, Realm used a total of $5.9 million of cash, primarily driven
by investments in R&D, the pay-down of $1.1 million in
liabilities related to the October 2016 sale of the Supermarket
business, and general operations.
Revenue
The Group adopted IFRS 15, Revenue from Contracts with
Customers, effective 1 January 2018. The adoption of the new
standard arises from the fixed guaranteed future minimum royalty
payments from the out-licensing of the Group's Wound Care business.
Under the new standard, future minimum payments were recognized at
a point in time, rather than over future periods. The impact was a
decrease of $2.5 million in accumulated deficit as at 1 January
2018 and a corresponding increase in royalty receivable.
Accordingly, no royalty revenue was recognized during the period
ended 30 June 2018 (H1 2017: $0.6m).
Profit/Loss
Operating expenses increased to $10.9 million (H1 2017: $4.6m)
driven primarily by increased R&D investments in Realm's
clinical development programs and the cost of the Company's Nasdaq
listing. As a result of this increase and the absence of royalty
revenue being recognized in the P&L, the EBITDA* loss for H1
2018 was $10.6 million (H1 2017 loss: $3.8m).
* Earnings before interest, tax, depreciation, and share based
payment expense.
FINANCIAL STATEMENTS
Continuing operations comprise the Group's drug development
activities, out-licensed Wound Care business and costs associated
with operating Realm Therapeutics plc.
Consolidated Statement of Comprehensive Income
For the six-month periods ended 30 June 2018 and 2017 and the
12-month period ended 31 December 2017
For the six months ended For the year ended
30 June 2018 30 June 2017 31 December 2017
Unaudited Unaudited Audited
$ $ $
CONTINUING OPERATIONS
Revenues (1) - 618,921 1,120,840
Cost of sales - - -
--------------- -------------- -------------------
Gross Profit - 618,921 1,120,840
--------------- -------------- -------------------
Research and development expenses (7,375,968) (2,967,806) (8,189,196)
General and administrative expenses (3,518,262) (1,602,435) (3,622,796)
--------------- -------------- -------------------
Total operating expenses (10,894,230) (4,570,241) (11,811,992)
--------------- -------------- -------------------
Loss before Interest and Tax (10,894,230) (3,951,320) (10,691,152)
Finance income 247,999 18,466 58,082
--------------- -------------- -------------------
Total Finance income 247,999 18,466 58,082
Net Loss before Taxation (10,646,231) (3,932,854) (10,633,070)
Taxation benefit - - 107,687
--------------- -------------- -------------------
Net Loss (10,646,231) (3,932,854) (10,525,383)
--------------- -------------- -------------------
Loss Attributable to Equity Holders of the Parent (10,646,231) (3,932,854) (10,525,383)
Items that Are or May Be Reclassified to Profit and Loss:
Unrealized (loss) / gain on investments (12,489) - 13,748
Foreign currency translation differences for foreign operations (3,275) 9,354 (21,899)
--------------- -------------- -------------------
Total Comprehensive Loss Attributable to Equity Holders of the
Parent (10,661,995) (3,923,508) (10,533,534)
=============== ============== ===================
Net Loss per Share, Basic and Diluted (0.09) (0.08) (0.16)
=============== ============== ===================
(1) See Significant Accounting Policies - Adoption of IFRS 15:
Revenue from Contracts with Customers (new accounting standard)
below.
Consolidated Statement of Financial Position
As at 30 June 2018 and 2017 and 31 December 2017
As At
30 June 31 December
30 June 2018 2017 2017
Unaudited Unaudited Audited
$ $ $
ASSETS
Non-Current Assets
Property, plant, and equipment 252,317 205,106 245,550
Non-current royalty receivable
(1) 1,570,032 - -
Non-current other assets 280,000 325,917 320,000
-------------- -------------- --------------
Total Non-Current Assets 2,102,349 531,023 565,550
-------------- -------------- --------------
Current Assets
Prepaid expenses and other current
assets 203,454 118,576 244,507
Royalty receivable (1) 757,366 440,933 443,569
Short-term investments: available
for sale 7,433,342 - 24,345,346
Cash and cash equivalents 16,235,931 15,563,124 9,507,804
-------------- -------------- --------------
Total Current Assets 24,630,093 16,122,633 34,541,226
-------------- -------------- --------------
Total Assets 26,732,442 16,653,656 35,106,776
-------------- -------------- --------------
LIABILITIES
Current Liabilities
Trade payables and other accruals (2,451,472) (1,388,150) (2,910,938)
-------------- -------------- --------------
Total Liabilities (2,451,472) (1,388,150) (2,910,938)
-------------- -------------- --------------
Net Assets 24,280,970 15,265,506 32,195,838
============== ============== ==============
EQUITY
Share capital 17,263,076 8,519,391 17,263,076
Share premium 95,275,483 81,417,557 95,275,483
Other reserves 104,390,664 103,348,176 104,103,809
Retained earnings (192,621,225) (178,025,850) (184,435,266)
Accumulated other comprehensive
(loss) / income (27,028) 6,232 (11,264)
-------------- -------------- --------------
Issued Capital and Reserves Attributable
to Equity Holders of the Parent 24,280,970 15,265,506 32,195,838
-------------- -------------- --------------
Total Equity 24,280,970 15,265,506 32,195,838
============== ============== ==============
(1) See Significant Accounting Policies - Adoption of IFRS 15:
Revenue from Contracts with Customers (new accounting standard)
below.
Consolidated Cash Flow Statement
For the six-month periods ended 30 June 2018 and 2017 and the
12-month period ended 31 December 2017
For the six months For the year
ended ended
30 June 30 June 2017 31 December
2018 2017
Unaudited Unaudited Audited
$ $ $
Cash Flows from Operating Activities
Net Loss for period (10,646,231) (3,932,854) (10,525,383)
Adjustments for non-cash:
Share-based payment expense 286,855 140,901 455,470
Depreciation and amortisation 39,333 39,456 85,787
Finance income (247,999) (18,466) (58,082)
Write off of property, plant and
equipment - 2,674 10,380
Taxation benefit - - (107,687)
------------- ------------- -------------
Operating Loss before Movement in
Working Capital (10,568,042) (3,768,289) (10,139,515)
Decrease / (Increase) in royalty
receivable 576,444 (174,627) (177,264)
Decrease / (Increase) in prepaid
expenses, other current assets and
other assets 81,052 (32,569) (152,557)
(Decrease) / Increase in trade payables
and other accruals (459,466) (690,959) 912,904
Decrease in taxes payable - (26,612) -
Cash Used in Operations (10,370,012) (4,693,056) (9,556,432)
Finance income 247,999 18,466 58,082
------------- ------------- -------------
Net Cash Flow from Operating Activities (10,122,013) (4,674,590) (9,498,350)
------------- ------------- -------------
Cash Flows from Investing Activities
Purchases of short-term investments (10,931,834) - (29,331,620)
Proceeds from sale of short-term
investments 27,831,349 - 5,000,000
Purchases of property, plant, and
equipment (46,100) (108,348) (207,682)
Proceeds from sale of plant, property
and equipment - - 4,850
Payment of Supermarket Retail disposal
costs - (1,093,154) (1,093,154)
Net Cash Flow from Investing Activities 16,853,415 (1,201,502) (25,627,606)
------------- ------------- -------------
Cash Flows from Financing Activities
Proceeds from sale of placing units,
net of costs paid - - 23,225,788
------------- ------------- -------------
Net Cash Flows from Financing Activities - - 23,225,788
------------- ------------- -------------
Net Increase / (Decrease) in Cash
and Cash Equivalents 6,731,402 (5,876,092) (11,900,168)
Cash and Cash Equivalents at Beginning
of Period 9,507,804 21,429,871 21,429,871
Effect of Foreign Exchange Rate Changes
on Cash Held (3,275) 9,345 (21,899)
------------- ------------- -------------
Total Cash and Cash Equivalents Held
at End of Period 16,235,931 15,563,124 9,507,804
Total Short-term Investments Available
for Sale at End of Period 7,433,342 - 24,345,346
------------- ------------- -------------
Total Cash, Cash Equivalents and
Short-term Investments 23,669,723 15,563,124 33,853,150
============= ============= =============
Consolidated Statement of Changes in Equity
For the six-month periods ended 30 June 2018 and 2017 and the
12-month period ended 31 December 2017
Other
Retained Comprehensive
Share capital Share premium Other reserves earnings Income / (Loss) Total
$ $ $ $ $ $
As at 1 January
2018 17,263,076 95,275,483 104,103,809 (184,435,266) (11,264) 32,195,838
Adoption of IFRS
15 (1) - - - 2,460,272 - 2,460,272
Loss for the
period - - - (10,646,231) - (10,646,231)
Unrealized loss
on investments - - - - (12,489) (12,489)
Other
comprehensive
loss - - - - (3,275) (3,275)
-------------- -------------- --------------- ---------------- ---------------- -------------
Total
comprehensive
loss - - - (8,185,959) (15,764) (8,201,723)
Share-based
payment movement - - 286,855 - - 286,855
-------------- -------------- --------------- ---------------- ---------------- -------------
Transactions with
owners - - 286,855 - - 286,855
As at 30 June
2018 17,263,076 95,275,483 104,390,664 (192,621,225) (27,028) 24,280,970
============== ============== =============== ================ ================ =============
As at 1 January
2017 8,519,391 81,417,557 103,207,275 (174,092,996) (3,113) 19,048,114
Loss for the
period - - - (3,932,854) - (3,932,854)
Other
comprehensive
income - - - - 9,345 9,345
-------------- -------------- --------------- ---------------- ---------------- -------------
Total
comprehensive
loss - - - (3,932,854) 9,345 (3,923,509)
Share-based
payment movement - - 140,901 - - 140,901
-------------- -------------- --------------- ---------------- ---------------- -------------
Transactions with
owners - - 140,901 - - 140,901
As at 30 June
2017 8,519,391 81,417,557 103,348,176 (178,025,850) 6,232 15,265,506
As at 1 January
2017 8,519,391 81,417,557 103,207,275 (174,092,996) (3,113) 19,048,114
Loss for the year - - - (10,525,383) - (10,525,383)
Unrealized gain
on investments - - - - 13,748 13,748
Other
comprehensive
loss - - - - (21,899) (21,899)
-------------- -------------- --------------- ---------------- ---------------- -------------
Total
comprehensive
loss - - - (10,525,383) (8,151) (10,533,534)
New share and
warrant capital
issued 8,743,685 13,857,926 624,177 - - 23,225,788
Reclassification
following lapse
of share options - - (183,113) 183,113 - -
Share-based
payment movement - - 455,470 - - 455,470
-------------- -------------- --------------- ---------------- ---------------- -------------
Transactions with
owners 8,743,685 13,857,926 896,534 183,113 - 23,681,258
As at 31 December
2017 17,263,076 95,275,483 104,103,809 (184,435,266) (11,264) 32,195,838
============== ============== =============== ================ ================ =============
(1) See Significant Accounting Policies - Adoption of IFRS 15:
Revenue from Contracts with Customers (new accounting standard)
below.
General Information and Basis of Preparation
Realm Therapeutics plc, a company incorporated under the laws of
England and Wales and domiciled in the United Kingdom, is a
clinical-stage biopharmaceutical company focused on developing
novel therapeutics for immune-mediated diseases in adults and
children. The consolidated interim financial statements of the
Company as at and for the six months ended 30 June 2018 and 2017
and the consolidated financial statements as at 31 December 2017
and for the 12 months ended 31 December 2017 comprise the Company
and its subsidiaries (together referred to as the "Group"). The
financial statements have been prepared in accordance with IAS 34
"Interim Financial Reporting" (IAS34). The financial statements do
not include all of the information required in annual financial
statements in accordance with IFRSs and should be read in
conjunction with the consolidated financial statements for the year
ended 31 December 2017.
The reporting currency of the Group is the U.S. Dollar (USD)
given the majority of the Group's operations are located in the
U.S. and transactions are denominated in USD. The financial
statements are presented in USD rounded to the nearest dollar.
The consolidated interim financial statements have been approved
by the Board of Directors for issuance on 14 August 2018.
The interim financial statements for the periods ended 30 June
2018 and 2017 are unaudited and do not comprise statutory accounts
within the meaning of Sections 434 and 435 of the Companies Act of
2006.
The comparative figures for the financial year ended 31 December
2017 are not the Company's statutory accounts for the financial
year. The statutory accounts for the year-ended 31 December 2017,
which were prepared under International Financial Reporting
Standards adopted by the EU ("Adopted IFRS"), have been reported on
by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, and (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their
report.
Certain prior year amounts have been reclassified for
consistency with the current period presentation.
Significant Accounting Policies
The accounting policies set out in the annual report and
accounts for the year ended 31 December 2017 have been applied
consistently throughout the Group for the purpose of these
consolidated interim financial statements. The following additional
significant accounting policies apply to the Group.
Revenue Recognition
Adoption of IFRS 15: Revenue from Contracts with Customers (new
accounting standard)
Effective 1 January 2018, the Company adopted IFRS 15, Revenue
from Contracts with Customers (IFRS 15), using the modified
retrospective method with the impact of the adoption reflected in
opening accumulated deficit. The impact of the standard relates to
the Group's agreement related to its Wound Care product and the
recognition of the future minimum guaranteed royalty payments.
Under IFRS 15, minimum royalty payments are included in the
transaction price as variable consideration, subject to a
constraint. Therefore, the future minimum payments are recognized
at the time of adoption of IFRS 15, rather than over the future
periods. The revenue recognized is net of the effect of financing
components calculated using the customers-specific risk,
risk-adjusted lending rates and will be recognized as interest
income over time on an effect interest rate basis.
The impact of the adoption to the Group's financial statements
was a decrease of $2.5 million in its accumulated deficit as at 1
January 2018 and a corresponding increase to royalty receivable.
Results for reporting periods beginning 1 January 2018 reflect the
application of IFRS 15, while the results for prior reporting
periods were prepared under the guidance of IAS 18, Revenue.
Royalties in excess of the estimated future minimum royalty amount
will be recognized, if applicable, when the royalty is earned.
The Company concluded that the minimum guaranteed royalty
amounts are fixed in substance and are recognized upon transferring
the license to the distributor under IFRS 15 rather than upon
billing under IAS 18. As a consequence of the acceleration of
revenue recognition, the Company will not recognize royalty income
unless and until the minimum guaranteed amount has been realized.
Any royalties in excess of the minimum guarantee will be recognized
as revenue in the period in which the royalty is earned.
Adoption of IFRS 15 had no impact to cash provided by / (used
in) operating, financing or investing activities on the Company's
Consolidated Statement of Cash Flows. In accordance with IFRS 15,
the disclosure of the impact of adoption on the Company's
Consolidated Statement of Operations and Consolidated Statement of
Financial Position was as follows.
For the six months ended 30 June 2018
-----------------------------------------------------
Balances without
the adoption
of IFRS 15
$
As Reported Effect of Change
$ $
-------------- ------------------ -----------------
Revenues - 434,001 434,001
-------------- ------------------ -----------------
Research and development
expenses (7,375,968) - (7,375,968)
General and administrative
expenses (3,518,262) - (3,518,262)
-------------- ------------------ -----------------
Total operating expenses (10,894,230) - (10,894,230)
-------------- ------------------ -----------------
Net Loss before interest
and taxes (10,894,230) 434,001 (10,460,229)
Finance income 247,999 (70,465) 177,534
-------------- ------------------ -----------------
Net Loss (10,646,231) 363,536 (10,282,695)
============== ================== =================
As at 30 June 2018
-----------------------------------------------------
Balances without
the adoption
of IFRS 15
$
As Reported Effect of Change
$ $
-------------- ------------------ -----------------
Assets
Royalty receivable 757,366 (526,704) 230,662
Non-current Royalty receivable 1,570,032 (1,570,032) -
Shareholders' Equity
Retained Earnings (192,621,225) (2,096,736) (194,717,961)
Use of Estimates and Judgments
The preparation of the unaudited interim consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as at the date of
the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. In preparing these consolidated
interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that
applied to the consolidated financial statements as at and for the
year ended 31 December 2017.
Going Concern
The financial statements are prepared on a going concern basis,
which the Directors believe to be appropriate for the following
reasons. The Group had cash, cash equivalents and short-term
investments of $23.7 million as at 30 June 2018. While the cost,
timeline for and likelihood of success of the development and
regulatory approval of drugs are inherently uncertain and change
over time, the Directors have prepared cash flow forecasts to 31
August 2019. These forecasts make a number of assumptions, the most
significant of which relate to the clinical development plans for
the Company's pipeline candidates, associated planned investment in
research and development, overall operating expenses and projected
royalties payments to be received. Based on the final analysis of
the Atopic Dermatitis trial results, we will determine how to
prioritize our resources either for further Atopic Dermatitis
development, a proof of concept study in Acne or Psoriasis or for
some other purpose which might relate to potential new assets.
Due to the fact that the some of the significant investments
remain discretionary, the Directors have prepared a sensitivity to
the cash flow forecasts, reflecting spending delays and deferrals,
including those portions of planned spending which are not yet
committed, which shows that the Group will be able to continue to
operate within its available cash throughout the period to at least
31 August 2019, with greater headroom at the end of that
period.
The Directors have concluded the Group will continue to operate
with sufficient funding for at least the next 12 months on the
basis that certain planned investments could be delayed to preserve
cash or that the proceeds received from the successful completion
of the placing would supplement the current cash resources, and
accordingly these interim financial statements have been prepared
on a going concern basis.
Earnings per Share
Both basic and diluted earnings per share have been calculated
using the loss attributable to the equity shareholders of the
parent company as the numerator since no adjustments to losses were
necessary during the six months ended 30 June 2018 and 2017 or the
year ended 31 December 2017.
The Group's issued share capital at 30 June 2018 consisted of
116,561,917, 10 pence ordinary shares. The weighted average number
of shares for the calculation of the Group's basic and diluted
profit or loss per share for the six months ended 30 June 2018 and
2017 and year ended 31 December 2017 is as follows.
For the six months For the year
ended ended
30 June 2018 30 June 31 December
2017 2017
Number of Shares
Weighted average number of ordinary
shares for the purpose of basic
earnings / (loss) per share 116,561,917 50,165,432 65,081,903
Weighted average number of ordinary
shares for the purpose of diluted
profit per share * 116,561,917 50,165,432 65,081,903
* The calculation for diluted loss per share is identical to
that used for basic loss per share. The exercise of share options
would have the effect of reducing the loss per share and are
therefore excluded since not dilutive under the terms of IAS 33
"Earnings per Share."
The following potentially dilutive securities outstanding as at
30 June 2018 and 2017 and as at 31 December 2017 have been excluded
from the computation of diluted weighted average shares
outstanding, as they would be anti-dilutive:
For the six months ended For the year
ended
30 June 2018 30 June 31 December
2017 2017
Share options 11,263,655 3,924,468 11,418,175
Warrants 26,917,173 154,229 26,917,176
--------------- ---------- -------------
38,180,828 4,078,697 38,335,351
=============== ========== =============
Share Based Payments
The Company operates the 2016 Executive Omnibus Incentive Plan
(the Plan), under which a variety of equity instruments can be
issued to employees. As at 30 June 2018, there were 392,537 shares
available for future issuance under the Plan. The amount and terms
of grants are determined by the Company's board of directors.
Issued share options carry a term of up to 10 years and are
exercisable in cash or as otherwise determined by the Directors.
Generally, share options vest annually over a three-year period or,
for certain key executives, vest upon the achievement of
performance conditions measured over a three year period. All share
options granted to date have exercise prices equal to the fair
value of the underlying ordinary shares on the date of the grant.
Share options are denominated in pounds sterling and the amounts
represented in U.S. dollars are impacted by currency
fluctuations.
An analysis of the Group's option activity for the six months
ended 30 June 2018 is as follows.
For the six months ended 30 June 2018
----------------------------------------------------
Weighted average exercise price Number of options
$
Share options outstanding, as at 1 January 2018 0.45 11,418,175
Share options granted during the period 0.56 90,000
Share options exercised during the period - -
Share options expired & forfeited during the period 1.56 (244,520)
-------------------------------- ------------------
Share options outstanding, as at 30 June 2018 0.42 11,263,655
================================ ==================
Share options exercisable, as at 30 June 2018 0.40 4,686,061
================================ ==================
Share options vested and expected to vest, as at 30 June 2018 0.42 11,263,655
================================ ==================
An analysis of the inputs for the Black Scholes valuation model
for share options granted during the six months ended 30 June 2018
and 2017 and year ended 31 December 2017 is as follows.
For the six months ended For the year ended
31 December 2017
2018 2017
Weighted average fair
value share options granted
during period $ 0.20 $ 0.16 $ 0.15
Weighted average exercise
price $ 0.56 $ 0.38 $ 0.52
Expected volatility 44% 43% 35%
Dividend yield - - -
Expected term (in years) 6 5 6
Risk-free interest rate 2.71% - 2.90% 1.80% 1.69% - 2.19%
The Group recorded share based payment expense during the six
months ended 30 June 2018 and 2017 and year ended 31 December 2017
as follows.
For the six months ended For the year ended
31 December 2017
2018 2017
$ $ $
Research and development 107,914 49,835 209,300
General and administrative 178,941 91,066 246,170
-------------- ----------- -------------------
286,855 140,901 455,470
============== =========== ===================
Cash, Cash Equivalents and Short-Term Investments Available for
Sale
An analysis of the Group's and Company's cash, cash equivalents
and short-term investments available for sale as at 30 June 2018,
30 June 2017 and 31 December 2017 is as follows.
As at As at As at
30 June 2018 30 June 2017 31 December 2017
$ $ $
Cash at bank 1,920,878 272,736 530,097
Cash equivalents (1) 14,315,053 15,290,388 8,977,707
-------------- -------------- ------------------
Total Cash and Cash Equivalents 16,235,931 15,563,124 9,507,804
-------------- -------------- ------------------
Short-term investments available for sale measured at fair value:
U.S. government agency 7,433,342 - 20,871,541
Certificates of deposit - - 3,473,805
-------------- -------------- ------------------
Total Short-term Investments (2) 7,433,342 - 24,345,346
-------------- -------------- ------------------
Total Cash, Cash Equivalents and Short-term Investments 23,669,273 15,563,124 33,853,150
-------------- -------------- ------------------
(1) Balance as at 30 June 2018 includes cash sweep accounts,
U.S. Treasury money market fund, and U.S. Treasury bills that have
a maturity of three months or less from the original acquisition
date; as at 30 June 2017 includes U.S. Treasury money market fund;
and, as at 31 December 2017 includes cash sweep accounts, U.S.
Treasury money market fund, bank certificates of deposit and U.S.
Treasury bills that have a maturity of three months or less from
the original acquisition date.
(2) Includes U.S. government agency securities and bank
certificates of deposit (December 2017 only) that have a maturity
of more than three months from original acquisition date.
An analysis of the Group's short-term investments as at 30 June
2018 is as follows.
As at 30 June 2018
-------------------------------------------------------------------------------
Original Cost Gross Unrealized Gains Gross Unrealized Losses Total
$ $ $ Carrying
Value (1)
$
U.S. government agency 7,432,084 1,258 - 7,433,342
-------------- ----------------------- ------------------------ ------------
Total Short-term Investments 7,432,084 1,258 - 7,433,342
-------------- ----------------------- ------------------------ ------------
As at 31 December 2017
-------------------------------------------------------------------------------
Original Cost Gross Unrealized Gains Gross Unrealized Losses Total
$ $ $ Carrying
Value (1)
$
U.S. government agency 20,856,588 14,953 - 20,871,541
Certificates of deposit 3,475,011 - (1,206) 3,473,805
-------------- ----------------------- ------------------------ ------------
Total Short-term Investments 24,331,599 14,953 (1,206) 24,345,346
-------------- ----------------------- ------------------------ ------------
(1) Represents quoted prices in active markets
Fair Values of Financial Assets
The guidance requires fair value measurements to be classified
and disclosed in one of the following three categories:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly
Level 3 - Inputs for the asset or liability that are not based
on observable market data, which require the Group to develop its
own assumptions
This hierarchy requires the use of observable market data when
available and to minimize the use of unobservable inputs when
determining fair value.
The Group has classified assets measured at fair value on a
recurring basis as at 30 June 2018 and 31 December 2017 as follows.
The Group did not have classified assets measured at fair value as
at 30 June 2017.
As at 30 June 2018
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Fair Value Measurement Based on
----------------------------------------------------------------------------------------------------------------------------
Significant Unobservable Inputs
Carrying Amount Fair Value Quoted Prices in Active Markets (Level 1) Significant other Observable Inputs (Level 2) (Level 3)
$ $ $ $ $
Available
for Sale
Financial
Assets
Cash
equivalents
(1) 14,315,053 14,315,053 14,315,053 - -
U.S.
government
agency 7,433,342 7,433,342 - 7,433,342 -
---------------- ----------- ------------------------------------------ ---------------------------------------------- --------------------------------
21,748,395 21,748,395 14,315,053 7,433,342 -
================ =========== ========================================== ============================================== ================================
(1) Includes cash sweep accounts, U.S. Treasury money market
mutual fund, and U.S. Treasury bills that have a maturity of three
months or less from the original acquisition date.
As at 30 June 2017
---------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fair Value Measurement Based on
--------------------------------------------------------------------------------------------------------------------------------------
Carrying Amount Fair Value Quoted Prices in Active Markets (Level 1) Significant other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
$ $ $ $ $
Available
for Sale
Financial
Assets
Cash
equivalents
(2) 15,290,388 15,290,388 15,290,388 - -
15,290,388 15,290,388 15,290,388 - -
================ =========== ========================================== ============================================== ==========================================
(2) Includes U.S. Treasury money market mutual fund.
As at 31 December 2017
---------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fair Value Measurement Based on
--------------------------------------------------------------------------------------------------------------------------------------
Carrying Amount Fair Value Quoted Prices in Active Markets (Level 1) Significant other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
$ $ $ $ $
Available for
Sale
Financial
Assets
Cash
equivalents
(3) 8,977,707 8,977,707 8,977,707 - -
U.S.
government
agency 20,871,541 20,871,541 - 20,871,541 -
Certificates
of deposit 3,473,805 3,473,805 3,473,805 - -
---------------- ----------- ------------------------------------------ ---------------------------------------------- ------------------------------------------
33,323,053 33,323,053 12,451,512 20,871,541 -
---------------- ----------- ------------------------------------------ ---------------------------------------------- ------------------------------------------
(3) Includes cash sweep accounts, U.S. Treasury money market
mutual fund, bank certificates of deposit and U.S. Treasury bills
that have a maturity of three months or less from the original
acquisition date.
Trade Payables and Other Accruals
The Directors believe the carrying amount of trade payables and
other accruals approximates their fair value. An analysis of the
Group's trade payables and other accruals as at 30 June 2018 and
2017 and 31 December 2017 is as follows.
As at
30 June 2018 30 June 2017 31 December 2017
$ $ $
Trade payables 1,233,265 265,944 1,008,715
Research and development related accruals 692,353 622,678 755,643
Compensation and related benefits 437,497 207,032 994,098
Other accruals 88,357 292,496 152,482
------------- ------------- -----------------
Total trade payables and other accruals 2,451,472 1,388,150 2,910,938
============= ============= =================
Products and Services
Realm Therapeutics is a clinical-stage biopharmaceutical company
developing novel therapeutics that target the interplay between
innate and adaptive immunity. The Company's programs seek to
influence immune signaling and change the course of immune-mediated
diseases in adults and children. Realm's lead drug development
program utilizes the Company's proprietary immunomodulatory
technology for the treatment of Atopic Dermatitis (AD), and the
Company is exploring its efficacy in other dermatology indications
including Acne Vulgaris and Psoriasis, as well as other therapeutic
areas. In light of the preliminary top-line data of the Phase 2
clinical trial with PR022 in AD, the Company is conducting a full
review of the results to determine whether there is a path forward
for Realm's proprietary technology in Atopic Dermatitis, and to
evaluate the implications for the Company's Acne and Psoriasis
programs.
Risks and Uncertainties
The Company operates in the inherently uncertain environment of
drug development with minimal cash in-flows (arising from a royalty
arrangement) and significant cash investments necessary to advance
Realm's drug development strategy. Among the developments in 2018
which are reflected in the risks, are the results of the Group's
Phase 2 clinical trial of PR013, the preliminary top-line results
of the Group's Phase 2 clinical trial of PR022 in Atopic Dermatitis
and the listing of ADSs representing the Company's ordinary shares
on Nasdaq.
Responsibility Statement of the Directors in Respect of the
Half-Yearly Financial Report
We confirm that to the best of our knowledge the condensed set
of financial statements has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
The Directors of Realm Therapeutics plc as at 31 December 2017
are listed in the Realm Therapeutics plc 2017 Annual Report. This
report is available on the Company's website at www.realmtx.com. A
current list of Directors, which has not changed since 31 December
2017, is available on the Company's website at www.realmtx.com.
By order of the Board
Charles Spicer
Non-Executive Chairman
14 August 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFIRTEISLIT
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