ETX: e-Therapeutics plc: Preliminary results for the year ended 31 January 2013

  ETX: e-Therapeutics plc: Preliminary results for the year ended 31 January
  2013

UK Regulatory Announcement

LONDON

    e-Therapeutics’ preliminary results for the year ended 31 January 2013

14 May 2013 - e-Therapeutics plc (“e-Therapeutics”; AIM: ETX), the drug
discovery and development company, today announces its preliminary results for
the year ended 31 January 2013.

Highlights of 2012/13

(* = events after the 31 January 2013 year end; **announced today)

Lead cancer drug ETS2101 enters clinic
• US phase I trial started in patients with brain cancer
• UK phase I trial begun in patients with solid tumours
• First findings reported from phase I programme**
• Key phase I results expected in Q4 2013 (brain cancer) and Q1 2014 (solid
  tumours)
  
Pipeline refined and advanced
• ETS6103: application filed with UK regulator for phase IIb trial in major
  depressive disorder**
• ETX1153a for MRSA infection: preclinical development discontinued
• ETX1153c for C. difficile infection: preclinical work progressing
  
Major focus on drug discovery
• Network Pharmacology Centre opened near Oxford
• Multiple discovery programmes advancing in oncology and central nervous
  system disorders
• Further strengthening of platform approach and intellectual property
  position
• New candidate expected to progress to development by end of 2013
  
Significant equity raise supports growth plans*
  Year-end cash and liquid resources of £9.8 million (31 January 2012: £13.9
• million) boosted to £48 million pro-forma following equity placing in March
  2013*
  Post-placing cash sufficient to fund business into calendar 2017, complete
• key efficacy trials of ETS2101 and broaden portfolio through new drug
  discovery programmes*
• Full-year net loss of £4.2 million (2012: loss of £3.2 million) reflects
  increasing investment in drug discovery and development programmes

Commenting on the results, Professor Malcolm Young, CEO of e-Therapeutics,
said: “We have growing momentum in the key areas of our business. Use of our
innovative network pharmacology platform to discover new drugs is on track
while our most significant product candidate, the cancer drug ETS2101, is
making good progress in the clinic.”

Dr Daniel Elger, CFO of e-Therapeutics, added: “We are increasing investment
in R&D as we seek to make the most of the opportunities in our platform and
pipeline. Our recent £40 million fundraising leaves us even better placed to
pursue our goals, with a cash runway that now extends to a potential
partnering deal for our lead cancer drug and resources sufficient to generate
a diversified portfolio of assets over the next 3-4 years.”

For more information, please contact:

e-Therapeutics plc

Malcolm Young, CEO / Daniel Elger, CFO

Tel: +44 (0) 7909 915 068

www.etherapeutics.co.uk

Panmure Gordon (UK) Limited

Fred Walsh / Hannah Woodley / Grishma Patel

Tel: +44 (0) 20 7886 2500

www.panmure.com

College Hill

Melanie Toyne Sewell / Stefanie Bacher / Rebecca Caygill / Donia Al Saffar

Tel: +44 (0) 20 7457 2020

Email: e-therapeutics@collegehill.com

ComStrat Group (US)

Ted Agne

Tel: (+1) 781 631 3117

Email: edagne@comstratgroup.com

Chairman’s statement

Overview

Our business is built around a distinctive new approach to the discovery of
medicines called network pharmacology. We have formulated this approach as a
patented platform technology, which we are using to seek novel treatments for
cancer and disorders of the nervous system. Our strategy is to take promising
drug candidates from discovery through clinical trials to a point when they
can be licensed on attractive terms to larger companies. We expect this to
provide revenues in the form of upfront payments, progress-based milestone
payments and royalties on any sales. During the year we advanced our most
important candidate, the cancer drug ETS2101, into two phase I trials. We also
continued to build a broad portfolio through work to discover more new drugs
at our Network Pharmacology Centre near Oxford and by selectively advancing
other candidates alongside ETS2101. Since the year end, we have raised
significant additional capital to further our drug discovery and development
plans.

Cancer drug enters trials

Our top priority in 2012 was to move our cancer drug ETS2101 into clinical
trials. Accordingly, we initiated two phase I studies during the period: an
investigator-led trial in brain cancer, which is taking place at the UC San
Diego Moores Cancer Center in La Jolla, California, and a company-sponsored
study that is enrolling patients with a variety of solid tumours at hospitals
in Newcastle and Leeds, UK. Both trials have a dose-escalating design, in
which successive groups of patients receive increasing doses of ETS2101. The
aim is to establish an appropriate dose for phase II development, assess
safety and tolerability and identify any initial signs of anti-cancer
activity.

In December we announced that the two trials had enrolled a total of 12
patients at relatively low dose levels and that no serious drug-related
adverse events had been observed. Since then, more patients have been treated
with higher doses of ETS2101. The additional patients have all been in the UK
because recruitment paused for a time in the US pending approval of a protocol
amendment. Eleven patients have now been treated in the UK trial. No serious
adverse events have been attributed to ETS2101, although one patient had
severe fatigue after receiving the drug and continued treatment at a lower
dose. A patient with oesophageal cancer has experienced a partial response
according to RECIST, a standard method for assessing the impact of treatments
on tumour burden (see Notes below). Both the UK and US studies continue to
recruit patients and we expect key data from the brain cancer trial in Q4 2013
and from the solid tumour trial in Q1 2014.

ETS2101 represents a significant commercial opportunity because it could
address unmet needs in multiple high-value oncology market segments. If key
data on dosing and safety from the phase I programme are supportive we intend
to advance the drug rapidly into the next phase of its clinical development.
We expect this to include a randomised phase II trial in brain cancer (glioma)
and a phase Ib/II trial that will explore the drug’s activity in four to six
other cancer indications. We indicated with the announcement of our share
placing in February 2013 that we expect to spend around £25 million on
completion of phase I trials and the efficacy trials that follow, with the
intention to finish the studies in time to conclude a licensing deal or deals
during 2017 if the data are positive.

Pipeline continues to evolve

We announce today that we have filed a Clinical Trial Application (“CTA”) with
the UK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”) for a
phase IIb trial of ETS6103 in major depressive disorder. We anticipate that we
will start enrolling patients at or around the end of Q2 2013. The trial will
build on an earlier, small phase IIa study that produced encouraging results
with ETS6103 in comparison with the approved tricyclic anti-depressant
amitriptyline. It will include more patients and a longer period of treatment
than we had originally planned, so we now expect to report results in the
second half of 2014. We regard ETS6103 as a smaller commercial opportunity
than ETS2101 but one that justifies the limited further investment needed to
complete a proof-of-concept trial designed to demonstrate the product’s value
to potential partners.

In May we announced that we would perform further preclinical work with our
drug for the treatment of C. difficile infection, ETX1153c, before taking a
decision on whether it should progress into clinical trials. This work is
nearing completion, and we expect to make a go/no-go decision on the programme
in Q3 2013. In October, we decided to cease development of our preclinical
anti-MRSA drug ETX1153a because we considered other programmes likely to
provide a better return on investment.

Discovery – fuelling future growth

Our new drug discovery hub near Oxford was opened in February 2012 by the UK’s
Prime Minister, David Cameron. Scientists there are generating a pool of new
drug candidates, from which we will select the best to advance into the clinic
based on technical, clinical and commercial criteria. Work is concentrated in
complex diseases in which we believe our technology has particular strengths,
principally cancer and nervous system disorders. We remain on track to advance
a new candidate from discovery into development by the end of 2013.

We continue to invest in improvements to our discovery platform and to gain
additional intellectual property protection for our approach; we were granted
further patents in the US and Europe during the period. We also remain active
in exploring opportunities to collaborate with other companies on discovery
programmes.

Strong balance sheet supports investment

Increasing investment in discovery and development drove an increase in our
operating expenses from £4.0 million last year to £5.2 million for the year
ended 31 January 2013. We had no revenues in the period (2012: nil), but
recognition of R&D tax credits of £0.8 million (2012: £0.6 million) and net
interest income of £0.2 million (2012: £0.2 million) reduced our net loss to
£4.2 million (2012: £3.2 million).

At 31 January 2013 we had cash and short-term investments of £9.8 million (31
January 2012: £13.9 million). These resources were expanded significantly by a
share placing to existing and new investors in March 2013; this raised £40.0
million (£38.8 million net of expenses) through the issue of 125 million new
shares at 32p per share, leaving the Company with pro-forma cash and
short-term investments of approximately £48 million on the close of the
transaction.

The Company’s strategy is to license its products to pharmaceutical companies
for late-stage development and commercialisation. The Company may also enter
discovery collaborations with selected partners. We anticipate continuing
losses until revenues from these sources exceed investment in R&D. Following
our recent placing, we expect to be able to support our discovery and
development plans into calendar 2017 even in the absence of any income from
partners. Over that period we plan to complete mid-stage trials of our lead
cancer drug ETS2101 and conclude a licensing deal for the product if the data
are supportive. We also expect to add newly discovered candidates to our
pipeline and advance a number of these through preclinical and early clinical
development, giving us a broader portfolio in which risk is diversified and
there are multiple sources of potential upside.

Board enhanced by new appointment

In February 2012 we appointed Dr Rajesh Chopra, a senior executive at Celgene
Corporation, as a Non-Executive Director. Dr Chopra is bringing a great deal
of relevant R&D and clinical experience to our Board.

Outlook

We look forward to reporting key results from our phase I trials of ETS2101
over the next year. We have clear plans in place to take this drug rapidly
into efficacy trials if data continue to be supportive, and following our
recent share placing we have the resources on hand to do this. In the
meantime, during the remainder of this year we expect progress announcements
on other clinical and preclinical candidates and to adopt the first of a new
wave of candidates from our discovery work into formal development, an
important landmark following the renewal of investment in our network
pharmacology platform that began in 2011.

Professor Oliver James

14 May 2013

Notes

About the RECIST criteria used to assess tumour responses

RECIST (Response Evaluation Criteria in Solid Tumours) provide a standardised
way of assessing the response of solid tumours to treatment. Under the
criteria, a partial response is recorded when the linear dimensions of the
tumour lesions selected for measurement at the start of the study reduce by at
least 30% from baseline and no new lesions appear.

Consolidated income statement

For the year ended 31 January 2013

                                                            2013     2012
                                                           £000      £000
Revenue                                                      —         —
Cost of sales                                               —         —
Gross profit                                                 —         —
Research and Development expenditure                         (4,093)   (2,898)
Administrative expenses                                     (1,154)   (1,130)
Operating loss                                               (5,247)   (4,028)
Financial income                                             223       191
Financial expense                                           —         (26)
Loss before tax                                              (5,024)   (3,863)
Taxation                                                    846       621
Loss for the year                                           (4,178)   (3,242)
Loss for the year attributable to equity holders of the     (4,178)   (3,242)
Company
Loss per share – basic and diluted                          (3.02)p   (2.47)p

Consolidated statement of comprehensive income

For the year ended 31 January 2013

                                                   2013     2012
                                                   £000      £000
Loss for the financial year                         (4,178)   (3,242)
Other comprehensive income                          —         —
Total comprehensive income for the financial year   (4,178)   (3,242)

Consolidated statement of changes in equity

For the year ended 31 January 2013

                            Share    Share    Warrant  Retained 
                             capital   premium   reserve   earnings   Total
                            £000      £000      £000      £000       £000
As at 1 February 2011        66        7,654     420       (7,867)    273
Total comprehensive income
for year
Loss for the financial       —         —         —         (3,242)    (3,242)
year
Total comprehensive income   —         —         —         (3,242)    (3,242)
for year
Transactions with owners,
recorded directly in
equity
Issue of ordinary shares     72        17,610    —         —          17,682
Issue and exercise of        —         288       (288)     —          —
warrants
Equity-settled share-based   —         —         —         11         11
payment transactions
Total contributions by and   72        17,898    (288)     11         17,693
distribution to owners
As at 31 January 2012        138       25,552    132       (11,098)   14,724
As at 1 February 2012        138       25,552    132       (11,098)   14,724
Total comprehensive income
for year
Loss for the financial       —         —         —         (4,178)    (4,178)
year
Total comprehensive income   —         —         —         (4,178)    (4,178)
for year
Transactions with owners,
recorded directly in
equity
Issue of ordinary shares     —         15        —         —          15
Equity-settled share-based   —         —         —         19         19
payment transactions
Total contributions by and   —         15        —         19         34
distribution to owners
As at 31 January 2013        138       25,567    132       (15,257)   10,580

Company statement of changes in equity

For the year ended 31 January 2013

                            Share    Share    Warrant  Retained 
                             capital   premium   reserve   earnings   Total
                            £000      £000      £000      £000       £000
As at 1 February 2011        66        7,654     420       (5,043)    3,097
Total comprehensive income
for year
Loss for the financial       —         —         —         (3,242)    (3,242)
year
Total comprehensive income   —         —         —         (3,242)    (3,242)
for year
Transactions with owners,
recorded directly in
equity
Issue of ordinary shares     72        17,610    —         —          17,682
Issue and exercise of        —         288       (288)     —          —
warrants
Equity-settled share-based   —         —         —         11         11
payment transactions
Total contributions by and   72        17,898    (288)     11         17,693
distribution to owners
As at 31 January 2012        138       25,552    132       (8,274)    17,548
As at 1 February 2012        138       25,552    132       (8,274)    17,548
Total comprehensive income
for year
Loss for the financial       —         —         —         (4,178)    (4,178)
year
Total comprehensive income   —         —         —         (4,178)    (4,178)
for year
Transactions with owners,
recorded directly in
equity
Issue of ordinary shares     —         15        —         —          15
Equity-settled share-based   —         —         —         19         19
payment transactions
Total contributions by and   —         15        —         19         34
distribution to owners
As at 31 January 2013        138       25,567    132       (12,433)   13,404

Balance Sheets

As at 31 January 2013

                                   Group                Company
                                     2013      2012       2013      2012
                           Notes    £000       £000       £000       £000
Non-current assets
Property, plant and         2        150        137        150        137
equipment
Intangibles                 3        378        337        3,202      3,161
Investments                         —          —          —          —
                                   528        474        3,352      3,298
Current assets
Tax receivable                       845        577        845        577
Trade and other                      320        311        320        311
receivables
Fixed-term deposits                  5,550      7,750      5,550      7,750
Cash and cash                       4,225      6,156      4,225      6,156
equivalents
                                   10,940     14,794     10,940     14,794
Total assets                        11,468     15,268     14,292     18,092
Current liabilities
Trade and other payables            888        544        888        544
                                   888        544        888        544
Total liabilities                   888        544        888        544
Net assets                          10,580     14,724     13,404     17,548
Equity
Share capital               4        138        138        138        138
Share premium               4        25,567     25,552     25,567     25,552
Warrant reserve             4        132        132        132        132
Retained earnings           4        (15,257)   (11,098)   (12,433)   (8,274)
Total equity attributable to         10,580     14,724     13,404     17,548
equity holders of the Company

Statements of cash flow

For the year ended 31 January 2013

                                      Group              Company
                                        2013     2012      2013     2012
                                Notes   £000      £000      £000      £000
Cash flows from operating
activities
Loss for the year                       (4,178)   (3,242)   (4,178)   (3,242)
Adjustments for:
Depreciation, amortisation      2,3     194       81        194       81
and impairment
Loss on disposal of fixed               1         —         1         —
assets
Financial income                        (223)     (191)     (223)     (191)
Financial expenses                      —         26        —         26
Equity-settled share-based              19        11        19        11
payment expenses
Taxation                               (846)     (621)     (846)     (621)
                                        (5,033)   (3,936)   (5,033)   (3,936)
Increase in trade and other             (52)      (116)     (52)      (116)
receivables
Increase in trade and other             344       429       344       429
payables
Tax received                           578       386       578       386
Net cash from operating                (4,163)   (3,237)   (4,163)   (3,237)
activities
Cash flows from investing
activities
Interest received                       266       99        266       99
Acquisition of property,        2       (60)      (139)     (60)      (139)
plant and equipment
Acquisition of other            3       (189)     (128)     (189)     (128)
intangible assets
Decrease / (increase) in               2,200     (7,750)   2,200     (7,750)
fixed-term deposits
Net cash from investing                2,217     (7,918)   2,217     (7,918)
activities
Cash flows from financing
activities
Net proceeds from issue of      4       15        17,682    15        17,682
share capital
Repayment of loan notes                 —         (1,049)   —         (1,049)
Loan notes interest paid               —         (249)     —         (249)
Net cash from financing                15        16,384    15        16,384
activities
Net (decrease)/increase in              (1,931)   5,229     (1,931)   5,229
cash and cash equivalents
Cash and cash equivalents at           6,156     927       6,156     927
1 February
Cash and cash equivalents at           4,225     6,156     4,225     6,156
31 January

Notes

1. Basis of preparation

The preliminary announcement has been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards as adopted by the EU (“adopted IFRSs”), IFRIC interpretations and
the Companies Act 2006 applicable to companies reporting under IFRS. It does
not include all the information required for full annual accounts.

The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 January 2013 or 2012. The financial
information for 2012 is derived from the statutory accounts for 2012 which
have been delivered to the Registrar of Companies. The auditor has reported on
the 2012 accounts; their report was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts
for 2013 will be finalised on the basis of the financial information presented
by the Directors in this preliminary announcement and will be delivered to the
Registrar of Companies in due course.

The preliminary announcement has been prepared using the accounting policies
published in the Group’s accounts for the year ended 31 January 2012, which
are available on the Company’s website at www.etherapeutics.co.uk, with the
exception of the following amendment which became effective during the year
and was adopted by the Group, albeit with no impact on the Group’s loss for
the year or equity;

• ‘Deferred Tax: Recovery of Underlying Assets – Amendment to IAS 12’
introduces an exception to the current measurement principles of deferred tax
assets and liabilities arising from investment property measured using the
fair value model in accordance with IAS 40 Investment Property.

2 Property, plant and equipment

                                  Plant and  Fixtures     
                                   equipment   and fittings   Total
Group and Company                  £000        £000           £000
Cost
Balance at 1 February 2011         115         40             155
Additions                          45          94             139
Balance at 31 January 2012         160         134            294
Balance at 1 February 2012         160         134            294
Additions                          29          31             60
Disposals                          (90)        (29)           (119)
Balance at 31 January 2013         99          136            235
Depreciation
Balance at 1 February 2011         107         32             139
Depreciation charge for the year   10          8              18
Balance at 31 January 2012         117         40             157
Balance at 1 February 2012         117         40             157
Depreciation charge for the year   24          22             46
Eliminated on disposals            (90)        (28)           (118)
Balance at 31 January 2013         51          34             85
Net book value                                              
At 1 February 2011                 8           8              16
At 1 February 2012                 43          94             137
At 31 January 2013                 48          102            150
                                                                    

3 Goodwill and intangible assets – Group and Company

               Group                          Company
                          Patents                       Patents    
                           and                             and
                Goodwill   trademarks   Total   Goodwill   trademarks   Total
               £000       £000         £000    £000       £000         £000
Cost
Balance at 1    —          389          389     2,824      389          3,213
February 2011
Other
acquisitions    —          128          128     —          128          128
– internally
developed
Balance at 31   —          517          517     2,824      517          3,341
January 2012
Balance at 1    —          517          517     2,824      517          3,341
February 2012
Other
acquisitions    —          189          189     —          189          189
– internally
developed
Balance at 31   —          706          706     2,824      706          3,530
January 2013
Amortisation
and
impairment
Balance at 1    —          117          117     —          117          117
February 2011
Amortisation
charge for      —          3            3       —          3            3
the year
Impairment      —          60           60      —          60           60
charge
Balance at 31   —          180          180     —          180          180
January 2012
Balance at 1    —          180          180     —          180          180
February 2012
Amortisation
charge for      —          7            7       —          7            7
the year
Impairment      —          141          141     —          141          141
charge
Balance at 31   —          328          328     —          328          328
January 2013
Net book
value
At 1 February   —          272          272     2,824      272          3,096
2011
At 1 February   —          337          337     2,824      337          3,161
2012
At 31 January   —          378          378     2,824      378          3,202
2013

Amortisation and impairment charge

Amortisation has been charged on patents for which the registration process is
complete. Where the process is incomplete no charge has been raised.

Impairment testing

The goodwill in the Company balance sheet arose following the hive up of the
trade and assets of InRotis Technologies Limited on 15 November 2007.

The goodwill is allocated to drug development activities of the Group. In
assessing goodwill impairment, recoverable amount is based on fair value less
costs to sell.

The Group carries out a review at each balance sheet date to establish the
economic value of each drug in the patent portfolio. If the economic value of
a patent is believed to be lower than the carrying value, the carrying value
is reduced accordingly. The economic value is based on estimated future income
potential taking into account technical and commercial risks and external
information on the likely market demand and penetration for the drugs. The
Directors also consider that the market capitalisation of the Group is a
market indicator of the value of future income streams. There is a risk that
should these estimations require significant downward revision there would be
a material adverse impact on the income statement in any one year.

4 Capital and reserves

Reconciliation of movement in capital and reserves:

                            Share    Share    Warrant  Retained  Total
                             capital   premium   reserve   earnings   equity
Group                        £000      £000      £000      £000       £000
Balance at 1 February 2010   65        7,573     420       (5,572)    2,486
Total recognised income      —         —         —         (2,313)    (2,313)
and expense
Issue of share capital       1         81        —         —          82
Equity-settled share-based   —         —         —         18         18
payment transactions
Balance at 31 January 2011   66        7,654     420       (7,867)    273
Balance at 1 February 2011   66        7,654     420       (7,867)    273
Total recognised income      —         —         —         (3,242)    (3,242)
and expense
Issue of share capital       72        17,610    —         —          17,682
Issue and exercise of        —         288       (288)     —          —
warrants
Equity-settled share-based   —         —         —         11         11
payment transactions
Balance at 31 January 2012   138       25,552    132       (11,098)   14,724
Balance at 1 February 2012   138       25,552    132       (11,098)   14,724
Total recognised income      —         —         —         (4,178)    (4,178)
and expense
Issue of share capital       —         15        —         —          15
Equity-settled share-based   —         —         —         19         19
payment transactions
Balance at 31 January 2013   138       25,567    132       (15,257)   10,580

                                     No. of ordinary shares
                                      2013         2012
Share capital                         ‘000          ‘000
On issue at 1 February                138,126       66,008
Issued for cash                       72            72,118
On issue at 31 January – fully paid   138,198       138,126

                                                                2013  2012
                                                                £000   £000
Allotted, called up and fully paid
138,198,359 (2012: 138,126,467) ordinary shares of £0.001 each   138    138
                                                                138    138
Shares classified as liabilities                                 —      —
Shares classified in shareholders’ funds                         138    138
                                                                138    138

The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share atmeetings of the
Company.

During the period, exercise of options over 47,770 ordinary shares by staff
and the issue of 24,122 ordinary shares to Non-Executive Directors in payment
of their fees led to an increase of £72 inshare capital and a credit of
£15,252 to the share premium account.

The warrant reserve relates to the following warrants:

                            No. of         No. of     No. of      No. of
        Exercise            warrants       warrants   warrants    warrants
Issue  price     Expiry  outstanding   issued    exercised  outstanding
date               date     at the         during     during      at the end
        £                   beginning of   the year   the year    of
                            the year                              the year
March              16
2009    0.260      March    198,332        —          —           198,332
                   2014
March              4
2011    0.260      March    677,409        —          —           677,409
                   2014

5 Subsequent events

In March 2013, the Company raised £40.0m (£38.8m net of related expenses)
through placings of 125,000,000 new ordinary shares of 0.1p. Shareholder
approval was provided at a general meeting on 27 February; 4,750,000 shares
were duly issued on that day, and a further 120,250,000 on 28 February, with
all new shares admitted to trading on AIM by 1 March. All the new shares carry
the same rights as the 138,198,359 ordinary shares in issue at the end of the
year. The new shares represented 90.4% of the Company’s issued ordinary share
capital immediately prior to the placings.

Contact:

e-Therapeutics plc
 
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