ALIZYME PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2000

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1 EMBARGOED FOR RELEASE UNTIL 7:00AM 02 APRIL 2001 ALIZYME PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2000 Alizyme plc, announces its preliminary results for the twelve months ended 31 December Highlights of 2000 Irritable Bowel Syndrome: Demonstration of efficacy and acceptable safety and tolerability in the Phase IIa clinical trial of ATL-1251 (renzapride) in constipation-predominant irritable bowel syndrome patients, in both male and female patients. Alizyme also obtained outright ownership of SmithKline Beecham plc s rights to ATL-1251 and agreed to buy out all remaining royalty obligations. Obesity: ATL-962 progressed successfully through the final stages of pre-clinical development, a Phase Ia clinical trial and then demonstrated safety and tolerability of repeat doses and preliminary efficacy in a Phase Ib clinical trial, which reported in January Inflammatory Bowel Disease: The phase I clinical programme was successfully completed, demonstrating consistent release of the compound in the colon Following approval of the CTX a Phase II trial is currently being conducted with patients for treatment of ulcerative colitis. Mucositis: Scale up of manufacture of the natural material was enhanced with the acquisition of a licence for process technology. Significant progress was also made with recombinant production methods. Financials: Loss of 5.6 million for the year ended 31 December 2000 ( million). Fundraising of 21.2 million gross of expenses through a placing and open offer in August. Cash balances of 22.4 million at 31 December 2000; sufficient for planned needs beyond the end of Commenting on the announcement, Dr Richard Palmer, Chief Executive Officer said: The Company has reached a new level of maturity as a result of the progress made in The outlook for the year ahead is very encouraging. The progress of our programmes, with three of them demonstrating proof of concept in the clinic, together with our stronger cash position, justifies increasing investment further in R & D to leverage the value created to date for our shareholders. For further information, please contact: Dr Richard Palmer, Chief Executive Officer Mr Tim McCarthy, Finance Director ALIZYME plc Tel No: + 44 (0) Lisa Baderoon / Tim Anderson BUCHANAN COMMUNICATIONS Tel No: + 44 (0) Further information on Alizyme can be found on the Company s website:

2 1 Chairman s Statement ALIZYME plc for the year ended 31st December was a year of transformation for Alizyme, with significant progress across the product development portfolio, the largest fundraising in the Company s history and a move to the Official List and trading on the London Stock Exchange. During the year, substantial progress was made in Alizyme s product development portfolio. Trials conducted resulted in proof of concept being obtained for the irritable bowel syndrome drug ATL-1251 in its Phase IIa clinical trial and for the obesity drug, ATL-962, in a Phase Ib clinical trial. In addition, Alizyme obtained outright ownership of SmithKline Beecham plc s rights to ATL-1251 and secured an agreement that bought out all royalty provisions due to SmithKline Beecham plc. The inflammatory bowel disease product, ATL-2502 (now called COLAL-PRED ) moved into Phase II in ulcerative colitis patients. Finally, manufacturing issues relating to the mucositis drug, ATL-101, were resolved and pre-clinical development is now proceeding. The progress of Alizyme s product opportunities through several key development milestones, coupled with various external events such as competitor product withdrawals, has enhanced the potential value of these programmes. This gives the management the confidence to increase investment in these product opportunities and to build more value for the shareholders. In August, Alizyme completed its largest fundraising to date, providing the financial resources necessary to take the programmes through the next stages of product development and to capitalise on the progress made during the year. This fundraising not only provides the means to carry Alizyme s development programmes further, but also enabled the Company to move from AiM, which had served it well during the early years of its development, to the Official List and trading on the London Stock Exchange. Going forward, the Board is considering additional options for continued development of Alizyme and its product portfolio. The pharmaceutical industry is going through some major strategic changes and your Board will seek to capitalise on the opportunities for Alizyme that these changes could create. During the year, the Company has increased the number of both institutional and private shareholders, including new international investors. This has benefited the Company significantly, by increasing its profile and the liquidity of its shares in the market. The increasing support of the shareholders, throughout the year and particularly during the fundraising, has helped in the transformation of the Company. I would like to thank them all for their support and also to thank the staff of Alizyme for their hard work and commitment. Sir Brian Richards CBE Chairman

3 2 Chief Executive s Review of Operations The Company has reached a new level of maturity as a result of the progress made during Research and Development Alizyme s product portfolio is distinguished by its targeting of markets which are poorly served by existing therapies, and which involve high numbers of patients. The competitive positioning of Alizyme s product opportunities was enhanced during the year, as they made progress through development. The more advanced programmes are reaching a stage where they are becoming increasingly attractive to potential partners. Alizyme will seek to continue to add value to these products, whilst intending to secure appropriate partnerships upon acceptable terms. Irritable Bowel Syndrome (ATL-1251) ATL-1251 (renzapride) interacts with two of the key receptors (5-HT 3 antagonist/5-ht 4 agonist) implicated in IBS. Alizyme is initially developing this compound for treatment of constipationpredominant IBS, through exploiting its 5- HT 4 agonist property. The year saw the achievement of a number of key steps in the progress of this programme. Most notable was the successful completion of the placebo-controlled, multi-centre Phase IIa study in constipation predominant IBS patients. This trial was the first time that ATL-1251 had been tested in this patient population. The results demonstrated a level of efficacy, in both male and female patients, comparable with that of other compounds being developed, or approved, for this condition. Additionally, ATL-1251 demonstrated acceptable safety and tolerability. These results are encouraging and have resulted in plans to move forward into Phase IIb clinical trials in this patient group. Furthermore, Alizyme is now justified in evaluating this compound s combination mechanism of action, by exploring its activity in mixed symptom patients, who suffer alternating periods of diarrhoea and constipation. The year also saw considerable changes in Alizyme s commercial arrangements regarding this compound. Previously, SmithKline Beecham plc had the right to take back the compound after the Phase IIa clinical study. In May, SmithKline Beecham plc agreed to assign all its rights and patents on this compound to Alizyme. Subsequently in November, Alizyme bought out its remaining royalty obligation for a 3 million one-off payment, payable only after first approval of this compound in a major market. Alizyme now owns this product outright and is in a position to negotiate potentially more favourable terms with a licensing partner. Obesity (ATL-962) ATL-962 inhibits the enzyme lipase, which is responsible for breaking down fat in the diet, thus blocking the absorption of fat into the body. This compound is the only lipase inhibitor known to be in development, other than Roche s Xenical, which is being marketed for the treatment of obesity and which is also being developed for the management of Type II diabetes. Our obesity drug, ATL-962, has made major progress during It progressed through the final stages of pre-clinical development, obtained Ethics Committee approval to conduct a Phase Ia clinical trial and then progressed into a repeat-dose Phase Ib trial. This was completed successfully in January 2001, demonstrating safety and tolerability of repeat doses. Most importantly, this trial demonstrated preliminary efficacy, providing proof of concept for this drug. The level of activity and safety observed has justified further investment to prepare for entering into a Phase II clinical trial in obese patients before the end of The progress of this programme has served to demonstrate the capabilities of Alizyme. Moving a compound from discovery through to initial clinical trials and proof of concept in less than two years

4 3 is a remarkable achievement and is a credit to the efforts of all those in Alizyme and of our collaborators and contractors on this programme. Inflammatory Bowel Disease (ATL-2502) Anti-inflammatory steroids are an established therapy for IBD, but their use is limited to short periods, because of the side effects attributable to absorbed drug. By combining an effective steroid with delivery to the site of the disease, using COLAL, Alizyme aims to develop a product with reduced side effects and which can be used for longer periods to control this condition. Our use of an approved steroid for this product should result in a comparatively short and focussed development programme. Alizyme s product involving a steroid ester, ATL-2502, in combination with COLAL, has made considerable progress during the year. The Phase I clinical programme was completed, demonstrating consistent release of the compound in the colon and proof of concept. An application has been made for the Trademark, COLAL-PRED, for this product, and this will be used in future communications. Following the success of the Phase I programme, approval to carry out a Phase II clinical trial in mild to moderate ulcerative colitis patients was obtained, from the Medicines Control Agency, in the form of a CTX. This trial is in progress and is expected to report in mid Mucositis (ATL-101) Alizyme s product opportunity for the treatment of mucositis, a serious consequence of the damage to the gastrointestinal tract caused by cancer therapy, is a plant-derived lectin which, when administered orally, stimulates the growth of the cells that line the gastrointestinal tract. Following the resolution of the manufacturing problems experienced in 1999, scale up of manufacture of the natural material was enhanced with the acquisition of a licence for process technology from the Katholieke Universiteit, Leuven, Belgium. In parallel Alizyme has also made significant progress with recombinant production methods. No adverse toxicological events have been observed in pre-clinical development studies. As a result, this has necessitated manufacture of larger quantities of drug than were anticipated, to undertake studies at higher doses to meet regulatory requirements in pre-clinical development. Entry of this compound into a Phase Ia clinical trial is expected to occur around the middle of 2001, with entry into phase II clinical trials in cancer patients expected at the beginning of COLAL COLAL is an oral drug delivery technology which allows the release of drugs specifically in the colon. The Phase I programme with COLAL-PRED completed in 2000 confirming the specificity and reproducibility of this delivery system. The identification of commercial sources of amylose and the approval of the CTX for COLAL-PRED, has allowed further investment in this technology s development and exploration of other actives applicable to this technology. Research Programmes During the year, Programme AZM-119, targeting second generation lipase inhibitors for treatment of obesity and Type II diabetes, continued to generate active chemical leads and further patent applications. Alizyme now has three patent families and a further three patent applications, in the lipase inhibitor area. In addition, the recent strengthening of the Company s cash position, will now allow further evaluation of several compounds with development potential, with a view to identifying additional novel lipase inhibitors with differentiated product profiles. Programmes AZM-134 (GLP-1 mimetics) and AZM-145 (novel diabetes treatment) continued to evaluate a number of approaches to generating lead compounds.

5 4 Financial Results The loss for the year of 5,635,000 was increased by 36% compared to This increase was due to increased investment in the product development programmes as they have moved forward. Excluding the one-off cost of moving to the Official List, the percentage spent directly on R&D increased from 84% to 85%. The end of year cash balance of 22.4 million was higher than last year, due to the successful exercise of warrants in June, which raised 2.8 million and the subsequent placing and open offer in August, which raised 21.2 million before expenses. Cash balances will be sufficient for the Group s planned needs beyond the end of Prospects The progress made by the Group in 2000 has not meant any change in the business model, culture or operating principles, which have been the basis on which the Company has been built. The outlook for the year ahead is very encouraging. The progress of our programmes and the improved cash position, mean that we can look forward positively to increasing shareholder value further, to leveraging the value created and to being in a stronger position regarding out-licensing negotiations. This will be very important for the Company as potential partners become increasingly aware of the attractions of Alizyme s product opportunities. Finally, I would like to add my thanks to those of the Chairman, to everyone in the Alizyme team and to those of you associated in so many ways with Alizyme, for your contribution to making 2000 such a year of transformation for the Company. Dr. Richard Palmer Chief Executive Officer

6 5 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31 December 31 December Turnover - - Research and development costs (5,200) (3,639) Management and administrative expenses (1,104) (687) Operating loss (6,304) (4,326) Interest receivable Loss on ordinary activities before taxation (5,635) (4,134) Taxation on loss on ordinary activities - - Retained loss for the year (5,635) (4,134) Loss per share for the year basic and diluted (Note 2) (9.0p) (9.9p) All activities during the financial year relate to continuing operations. There were no recognised gains or losses other than the retained loss for the current and prior year.

7 6 CONSOLIDATED BALANCE SHEET As at As at 31 December 31 December Fixed assets Tangible assets Current assets Debtors Liquid resources (short term cash deposits) 22,014 4,258 Cash at bank and in hand ,609 4,529 Creditors: Amounts falling due within one year (2,114) (1,306) Net current assets 20,495 3,223 Provisions for liabilities and charges (37) - Net assets 20,570 3,244 Capital and reserves Called-up share capital 1, Share premium account 35,755 13,380 Capital reserve 1,530 1,530 Profit and loss account (18,292) (12,657) Equity shareholders' funds 20,570 3,244

8 7 CONSOLIDATED CASH FLOW STATEMENT Year ended Year ended 31 December 31 December Operating loss (6,304) (4,326) Depreciation charge Decrease in debtors Increase / (decrease) in creditors 808 (41) Increase in provision 37 - Net cash outflow from operating activities (5,382) (4,260) Returns on investments and servicing of finance Interest received Net cash inflow from returns on investments and servicing of finance Capital expenditure and financial investment Purchase of tangible fixed assets (117) (10) Net cash outflow from investing activities (117) (10) Cash outflow before management of liquid resources and financing (4,892) (4,078) Management of liquid resources Cash placed on Money Market deposits (17,756) (535) Net cash outflow from management of liquid resources (17,756) (535) Financing Issue of ordinary share capital after expenses 22,961 4,635 Net cash inflow from financing 22,961 4,635 Increase in cash (Note 3)

9 8 NOTES: 1. Financial Information The financial information set out in the preliminary statement does not comprise the Company's statutory accounts within the meaning of section 240(5) of the Companies Act The financial information for 2000 has been extracted from the statutory accounts of the Company for the year ended 31 December 2000, which have been audited by the Company's auditors Arthur Andersen and whose report thereon is unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act The Company's statutory accounts will be delivered to the Registrar of Companies for England and Wales in due course and will also be sent to shareholders. The financial information for 1999 has been extracted from the statutory accounts for the year ended 31 December 1999, which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act Loss per share Basic and diluted loss per share for the year ended 31 December 2000 is based on the loss of 5,635,000 (31 December 1999 loss of 4,134,000) and on 62,900,000 ordinary shares ( ,676,000 ordinary shares), being the weighted average number of ordinary shares in issue and ranking for dividend during the year. In accordance with Financial Reporting Standard No. 14 Earnings per share, no potential ordinary shares have been included in the calculation of fully diluted earnings per share because they would not increase the net loss per share. 3. Analysis and reconciliation of net funds At 1 At 31 January Cash December 2000 flow Cash at bank and in hand Liquid resources (short term cash deposits) 4,258 17,756 22,014 Total cash and short term deposits 4,287 18,069 22,356 Reconciliation of net cash flow to movement in net funds Increase in cash in the year 313 Cash outflow and increase in liquid resources 17,756 Movement in net funds in the year 18,069 Net funds at 1 January ,287 Net funds at 31 December ,356

10 9 The identification of compounds for successful research, their progress through development and the obtaining of regulatory approvals or authorisations before marketing, manufacture and/or distribution of products is not certain or a formality.