REG - Arecor Therapeutics - Interim Results for six months ended 30 June 2023
14/09/2023 07:15
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RNS Number : 3775M Arecor Therapeutics PLC 14 September 2023
Arecor Therapeutics plc
("Arecor", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Strong progress across proprietary portfolio and partnered revenue-generating
collaborations
Cambridge, UK, 14 September 2023: Arecor Therapeutics plc (AIM: AREC), a
globally focused biopharmaceutical company advancing today's therapies to
enable healthier lives, today announces its interim results for the six months
ended 30 June 2023.
Sarah Howell, Chief Executive Officer of Arecor, said: "We have made further,
strong progress across the business towards our ambition to transform patient
care by enhancing existing therapeutic medicines and, in doing so, building a
significant self-sustaining biopharmaceutical company.
"Our revenues increased by 141%, compared to 1H 22, and our belief in the
growth potential of the business is reinforced by significant progress by our
partners under license, as well as development progress across our in-house
proprietary product portfolio. We have seen significant partnering traction
with the first product incorporating the Arestat™ technology, AT220,
progressing towards commercialisation, positive clinical and development
advances from Inhibrx and Hikma, as well as the signing of new
revenue-generating collaborations.
"Through the remainder of 2023 and into 2024, we expect key data from AT278,
achievement of anticipated further partnering milestones and continued
commercial traction for Ogluo®. We look forward, with confidence, to further
material progress in the near- and medium-term towards our long-term ambitions
for the Group."
Operational highlights (including post period events)
• AT278 - Second Phase I clinical trial of ultra-rapid acting,
ultra-concentrated insulin in people with Type 2 diabetes ongoing, with good
progress in recruitment following first patient dosing in March
• AT247 - Phase I clinical data for ultra-rapid acting insulin
delivered by continuous subcutaneous infusion over three days via an insulin
pump, reinforcing potential to enable a fully closed loop artificial pancreas
system, presented at American Diabetes Association (ADA) 83rd Scientific
Sessions meeting in June
• AT307 - the specialty hospital, ready-to-use injectable medicine,
transferred to Hikma in January, and which triggered a milestone payment to
the Group in the period; achieved a recent positive meeting with Food and Drug
Administration confirming abbreviated 505(b)(2) regulatory pathway
• Initiation of Inhibrx' registration-enabling clinical trial of AT292
(INBRX-101)
• Regulatory approval by partner expected in coming months for first
product incorporating Arestat™ technology, AT220
• Three additional revenue generating technology partnerships
entered into with new and existing pharmaceutical and biotech partners,
bringing the total number of new partnerships signed since IPO to 11
• Continued sales growth of Ogluo® with roll-out across additional
key European territories, adding Denmark, Norway and Austria to existing
markets of Germany and the UK; exclusive commercialisation agreement signed
with Goodlife in the BeNeLux region
• Strengthening of robust IP portfolio with key patents granted in
US, Europe, China and India protecting proprietary diabetes portfolio,
enhanced monoclonal antibody platform and high value biologics formulations
• Appointment of Dr. Manjit Rahelu as Chief Business Officer
Financial highlights
• Revenue of £1.7 million increased by 141% (H1 2022: £0.7
million)
• Total income of £2.3 million, increased by 103% (H1 2022: £1.1
million)
• Investment in R&D of £2.9 million (H1 2022: £4.8 million)
• Loss after tax for the period of £4.5 million (H1 2022: £4.4
million)
• Cash, cash equivalents and short-term investments of £8.2 million
at 30 June 2023 (30 June 2022: £13.7 million)
• Post period: R&D tax credit of £1.3 million received on 3
August 2023
Analyst conference call today
Dr Sarah Howell, Chief Executive Officer, and Susan Lowther, Chief Financial
Officer, will host a meeting and webcast for analysts and investors at 11.00
am UK time today. Join the webcast here
(https://www.lsegissuerservices.com/spark/ARECORTHERAPEUTICS/events/13515495-9b30-4b07-a57c-3f7aaa033d60)
. A copy of the interim results presentation will be released later this
morning on the Company website at www.arecor.com. Please contact Consilium
Strategic Communications for details on arecor@consilium-comms.com
(mailto:arecor@consilium-comms.com) / +44 203709 5700.
For more information, please contact:
Arecor Therapeutics plc www.arecor.com (http://www.arecor.com/)
Dr Sarah Howell, Chief Executive Officer Tel: +44 (0) 1223 426060
Email: info@arecor.com (mailto:info@arecor.com)
Susan Lowther, Chief Financial Officer Tel: +44 (0) 1223 426060
Email: info@arecor.com (mailto:info@arecor.com)
Mo Noonan, Communications Tel: +44 (0) 7876 444977
Email: mo.noonan@arecor.com (mailto:mo.noonan@arecor.com)
Panmure Gordon (UK) Limited (NOMAD and Broker)
Freddy Crossley, Emma Earl (Corporate Finance) Tel: +44 (0) 20 7886 2500
Rupert Dearden (Corporate Broking)
Consilium Strategic Communications
Chris Gardner, David Daley, Lindsey Neville Tel: +44 (0) 20 3709 5700
Email: arecor@consilium-comms.com (mailto:arecor@consilium-comms.com)
Notes to Editors
About Arecor
Arecor Therapeutics plc is a globally focused biopharmaceutical group
transforming patient care by bringing innovative medicines to market through
the enhancement of existing therapeutic products. By applying our innovative
proprietary formulation technology platform, Arestat™, we are developing an
internal portfolio of proprietary products in diabetes and other indications,
as well as working with leading pharmaceutical and biotechnology companies to
deliver enhanced formulations of their therapeutic products. The Arestat™
platform is supported by an extensive patent portfolio. For further details
please see our website, www.arecor.com (http://www.arecor.com)
This announcement contains inside information for the purposes of the retained
UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").
Corporate overview
Arecor's ambition is to transform patient care by enhancing existing
therapeutic medicines and, in doing so, build a significant self-sustaining
biopharmaceutical company. We have continued to make significant progress
towards this goal across all areas of the business during the first half of
2023. We have further built the foundations for future growth through our
portfolio of proprietary and partnered programmes which is progressing
strongly, and our commercial subsidiary, Tetris Pharma, with its scalable
sales, marketing and distribution platform. Revenues have increased by 141%
versus H1 2022. Trading for the full year remains in line with the Board's
expectations subject to continued sales momentum and partnership milestones
anticipated in the remainder of 2023.
We continue to deliver on our strategy for our lead proprietary diabetes
product candidates AT278 and AT247, generating additional clinical data to
further demonstrate their superior profiles compared with gold standard
insulins available to patients today. There remains a very significant patient
need for even faster acting and ultra-concentrated insulins which are key
unmet needs in the pursuit of the development of a fully closed loop
artificial pancreas system, as well as enabling longer wear miniaturised
insulin delivery devices, and their use in high insulin users. In this field,
Arecor's insulins have the potential to significantly improve healthcare
outcomes for people living with diabetes. We continue to build the value of
our insulin programmes through the development of clinical strategies and data
packages which would best realise their future potential and maximise
partnering opportunities and value in the growing diabetes market.
We have also further progressed our in-house proprietary pipeline of
speciality hospital products underpinned by our extensive know-how and
expertise in the delivery of novel ready-to-use ("RTU") and
ready-to-administer ("RTA") formulations for highly complex point-of-care
medicines. There is a growing demand for these superior RTA and RTU products
to enable fast, safe and effective treatment options for patients and
caregivers in the hospital setting. Our proven expertise and track record,
utilising our proprietary technology platform, Arestat™, in developing these
difficult to achieve stable and efficacious liquid formulation product formats
allows us to bring superior products to patients and caregivers, and presents
a clear opportunity for Arecor to negotiate high-value co-development and
commercialisation license collaborations with pharmaceutical partners.
Our three programmes which have progressed through to license - one from our
internal Specialty Hospital Products franchise and two from our technology
partnership model, where we apply the platform to develop novel formulations
of our partners proprietary products - are advancing well under our partners'
control. These partnerships with leading biotech and biopharma companies
validate the need, and demonstrate the opportunity, for the Arestat™
platform and are testament to our world-leading expertise and innovation in
formulation science.
The expansion of our pipeline of revenue-generating technology partnership
deals with leading healthcare companies further validates the strength of our
technology and its value to our partners in the development of enhanced
formulations of their proprietary products which would otherwise be
unachievable. These partnerships, which have continued to build steadily since
Arecor's IPO, provide both near-term revenue at the pre-license stage with
significant future license upside potential.
In Tetris Pharma, the speciality pharmaceutical company we acquired in August
2022, we have an opportunity to accelerate our commercially driven strategy.
Its lead commercial stage diabetes product, Ogluo®, is a ready-to-use
glucagon auto-injector pen to treat severe hypoglycaemia and meets a key
patient need. The sales momentum seen in the UK market, and progress with its
pan-European commercial roll-out, continues to support our belief in the
complementary nature of the Tetris Pharma acquisition and the growth potential
of this important product for people with diabetes.
Operational Review (including post period events)
Internal proprietary pipeline
The Arestat™ enabled novel formulations of insulin within our diabetes
franchise are designed to accelerate insulin absorption post injection,
enabling more precise and effective management of blood glucose levels for
people living with diabetes, particularly around difficult to manage
mealtimes.
Recruitment of Type 2 subjects for the second Phase I clinical study of AT278,
our ultra-rapid, ultra-concentrated insulin candidate, is progressing well.
We are currently considering increasing the number of subjects within the
study from 32 to 42 to increase the power of the study, and in turn, to
increase the value of the results for patients with high insulin needs. If
implemented, this will result in a short delay in the reporting of results
into early 2024 and we will provide more details in the coming weeks. The
randomised, double-blind Phase I cross-over study in people with Type 2
diabetes receiving one subcutaneous dose (0.5 U/kg) of AT278, in a euglycemic
clamp setting, compares the pharmacokinetic (PK) and pharmacodynamic (PD)
profile with NovoRapid® and Humulin® R U-500. AT278 has the potential to
disrupt the market for insulin treatment as the first concentrated, yet very
rapid acting insulin, and thereby become the gold standard insulin for the
growing population of people with diabetes with high daily insulin needs. It
has the potential to be a critical enabler in the development of next
generation miniaturised insulin delivery systems that are beginning to
dominate segments of the market.
In June, the positive results from the second Phase I clinical trial
investigating Arecor's ultra-rapid acting insulin product candidate, AT247,
when delivered by continuous subcutaneous infusion, were shared in a poster
presentation at the American Diabetes Association (ADA) 83rd Scientific
Sessions meeting. The data clearly demonstrates faster insulin absorption
than the currently available, gold standard, rapid acting insulins,
NovoRapid® and Fiasp®, reinforcing AT247's potential to enable even more
effective disease management for people with Type I diabetes. The availability
of a truly ultra-rapid acting insulin is a critical step towards a fully
closed loop artificial pancreas system, a potentially life changing treatment
option for people living with diabetes that has the potential to improve
health outcomes and reduce the significant burden of managing this chronic
disease.
Our Specialty Hospital Products franchise is developing medicines that are
administered within the hospital setting by health care professionals,
particularly during the treatment of serious infections, cancer and emergency
care. Leveraging our Arestat™ technology, we are developing RTU and RTA
medicines within this franchise, which provide significant benefits at the
point of care by avoiding complex reconstitutions procedures and in doing so
enabling fast, safe and effective treatment options for patients and
caregivers. These products provide future high-value licensing opportunities
to Arecor.
Partnership agreements
The Group's three licensed programmes, under milestone and royalty-based
agreements or equivalent, have also advanced. Arecor continues to expect the
first product incorporating its Arestat™ technology, AT220, to be
commercialised by its partner under a royalty-generating license agreement in
a multi-billion dollar market. Our partner has taken key regulatory steps
towards commercialisation and, while timing of launch is in our partner's
control, we anticipate first sales could come in late 2023 or the early months
of 2024.
Hikma continues to progress AT307, a RTU injectable medicine after its
milestone-triggering transfer from Arecor in January. A positive
pre-investigational new drug application (pre-IND) meeting between Hikma and
the FDA confirms development of AT307 in the US under the FDA's abbreviated
505(b)(2) regulatory pathway. This pathway provides companies with an
abbreviated regulatory review process when evidence of safety and clinical
efficacy generated for an originator product is deemed suitable to be relied
upon in new marketing applications. This also further validates a fundamental
assumption within our business that the abbreviated 505(b)(2) pathway can be
utilised across our specialty hospital portfolio, where we are developing
enhanced, RTU and RTA formulations of existing therapeutic products.
Inhibrx is advancing towards dosing of the first patient in a
registration-enabling trial of AT292 (INBRX-101), an Arestat™ formulated
optimized recombinant human AAT-Fc fusion protein, for treatment of patients
with emphysema due to alpha-1 antitrypsin deficiency, which would trigger a
milestone to Arecor under the terms of the license agreement. The initial
read-out from the Inhibrx ElevAATe trial is expected to occur in late 2024,
and if successful, will potentially provide the final data required for a
regulatory submission for this product.
We continue to build a strong portfolio of pre-license technology partnerships
in which our partners fully fund the development work with the option for each
partner to acquire rights to the new proprietary formulation and associated
intellectual property under a technology licensing model. This offers the
potential for Arecor to generate significant future revenue through associated
milestone and royalty payments, or equivalent. We have established three new
revenue generating portfolio collaborations so far in 2023 bringing the total
technology partnerships with the Group to 11 since IPO, including:
1. In February, we entered into an additional formulation study
agreement with an existing top five global pharmaceutical partner, building on
a collaboration formed in 2022, to develop improved, stable, high
concentration, liquid formulations of its proprietary product.
2. In July, we entered into a collaboration to support the ongoing
development of a biosimilar product with a leading biopharmaceutical company.
This follows an earlier technology partnership with the same company.
3. In August, we signed an agreement with a top 10 pharmaceutical
company to develop an enhanced antibody formulation for one of its
investigational drugs.
Tetris Pharma
The European commercial roll out of key diabetes product, Ogluo®, continues
to gain traction with growing sales in the UK, and additional launches in
Austria, Denmark and Norway during the first half of 2023 complementing
existing markets in Germany and the UK. As planned, Ogluo® sales now
represent a significant proportion of total Tetris Pharma sales and, as a
result of our commercial strategies and focus, we have seen continuing growth
in the UK as our primary market. We anticipate this momentum in Ogluo® sales
to continue through the remainder of 2023 and beyond.
The team at Tetris Pharma is focused on accelerating market adoption of
Ogluo® to maximise its value in launched countries. Earlier this month,
Tetris Pharma established an exclusive commercialisation agreement with
Goodlife, who will act as sole partner for the import, marketing and
distribution of Ogluo® in the BeNeLux region. Goodlife is expected to launch
the product in The Netherlands during H1 2024.
With Ogluo®, Tetris Pharma is targeting market share within an existing
c.£100 million market across the licensed territory. The momentum we are
seeing, and the increasingly pan-European focus of our commercial efforts,
provide the Group with continued confidence in Ogluo®. Sales of Gvoke® in
the US (Ogluo® is sold by Xeris Pharmaceuticals, Inc. in the US under the
registered name Gvoke®) also remain strong with latest quarter on quarter
growth of 36% and, while the market dynamics clearly differ, the US experience
provides further support for the Group's belief in the growth potential of the
product in the UK and Europe.
Intellectual Property portfolio
Arecor's broad and robust global patent portfolio has >75 granted patents
across key territories protecting both the Arestat™ technology platform as
well as the enhanced versions of therapeutic medicines that we develop
leveraging Arestat™. To date, during 2023, the portfolio was bolstered with
the addition of five key patents:
· In February, the Indian Patent Office granted a patent (IN412485)
protecting novel formulations of the Group's proprietary insulin products,
AT247 and AT278, until 2038.
· In February, the United States Patent and Trademark Office granted
two patents (US11534402 and US11534403) protecting the novel formulations of
high-concentration adalimumab until 2038.
· In June, the European Patent Office granted a key patent (EP3518892),
protecting novel formulations of AT278 and AT247.
· In June, the China National Intellectual Property Administration
granted a further patent (CN110582285) protecting AT278 and AT247.
Finance
The consolidated financial results for the period ended 30 June 2023 reflect
the performance of Arecor Therapeutics plc and its trading subsidiaries;
Arecor Limited and Tetris Pharma Ltd.
The acquisition of Tetris Pharma Ltd occurred on 4 August 2022 and therefore
its results are not included in the comparatives for the six-month period to
30 June 2022. The full year comparatives to 31 December 2022 include five
months of trading by Tetris Pharma Ltd for the post-acquisition period.
Total income for the six months to 30 June 2023 of £2.3 million (H1 2022:
£1.1 million) reflected increased revenue and grant income. Revenue
recognised in the period of £1.7 million (H1 2022: £0.7 million), included
sales of pharmaceutical products of £1.2 million (H1 2022: Nil).
Other operating income of £0.6 million (H1 2022: £0.4 million) was grant
income received from a £2.8 million grant awarded by Innovate UK in March
2021.
Investment in R&D of £2.9 million (H1 2022: £4.8 million) was lower than
the prior period and reflected the costs of the current clinical trial for
AT278. R&D expenditure in the period ended 30(th) June 2022 included the
US Phase I clinical trial for AT247 and the second clinical study for AT278
which was initiated in the first quarter of 2023.
Sales, General and Administrative costs of £4.4 million (H1 2022: £1.6
million) increased over the prior period and included expenditure on product
sales and distribution by Tetris Pharma Ltd which was nil in the six months to
30 June 2022. On a like for like basis the SG&A costs for the period
excluding Tetris Pharma Ltd were £1.9 million (H1 2022: £1.6 million)
The total loss after tax for the six-month period was £4.5 million (H1 2022:
£4.4 million).
The Group ended the first half of the year with cash, cash equivalents and
short-term investments of £8.2 million (30 June 2022: £13.7 million).
We continue to manage cash carefully as part of our working capital. There
were two notable post period end receipts; £0.4 million grant receivable in
early July (2022: £0.1 million) for costs incurred in H1 and £1.3 million
R&D tax credit for the year ended 31 December 2022 (2022: £0.8 million)
which was received in early August. The increased R&D tax credit was due
to the level of R&D expenditure in the year ended 31 December 2022 which
included costs of the US AT247 clinical study and AT278 preparatory work for
the study initiated in 2023.
Contingent consideration
The acquisition of Tetris Pharma Ltd included up to a further £4.0 million
contingent consideration which may become payable, consisting of three earn
out payments, subject to Tetris Pharma Ltd achieving sales and EBITDA targets
in each of the three years following completion.
The additional consideration is considered to be contingent on future
performance which is uncertain and therefore was not included in the
assessment of goodwill in the audited financial statements for the year ended
31 December 2022.
The first earn out payment was subject to Tetris Pharma Ltd achieving
mid-single-digit million-pound net sales and a low single-digit million-pound
EBITDA loss in the 12-month period following completion.
Earn out accounts, prepared by an independent accountant, have determined that
the first earn out target was not achieved and therefore a payment of £1.0
million contingent consideration for the first earn out period was not
triggered.
Summary and outlook
We have seen further substantial progress across our in-house proprietary
products pipeline, partnered portfolio and commercial operations during the
period as we build a broad, robust platform from which to become a significant
self-sustaining biopharmaceutical company.
We are pleased to report that revenue recognised in H1 has materially
increased compared to the comparative period to 30 June 2022. Trading for the
full year remains in line with the Board's expectations subject to continued
sales momentum and partnership milestones anticipated in the remainder of
2023.
Revenue in the period included milestone and sales of pharmaceutical products
in addition to formulation development revenue reported in the comparative
period to 30 June 2022. This gives a broad revenue mix without a dependency on
a single product or revenue stream.
As our partnered programmes progress we will recognise further milestone
revenue and with the expected commercial launch of AT220, annually recurring
royalties which would bring a solid revenue foundation and more clarity to
forward looking forecasts. Our partnered programmes are under the direction of
our partners and the timing of revenue recognition is outside of our direct
control which can result in recognition occurring in different financial
periods compared to our expectations.
We anticipate a number of further milestones from these existing partnerships
through the remainder of the year and beyond. Whilst we continue to actively
engage with our partners to understand their plans, our focus is on delivering
consistent year on year revenue growth.
With the expected commercial launch of the first product incorporating the
Arestat™ technology, AT220, additional milestones from existing
partnerships, and the signing of new revenue-generating agreements anticipated
through the remainder of 2023 and into 2024, as well as key data from AT278
and continued commercial traction for Ogluo(®), we look forward with
confidence to further material progress in the near- and medium-term towards
our long-term ambitions for the Group.
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Consolidated Statement of Comprehensive Income
Notes Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
£000 £000 £000
Revenue 3 1,669 693 2,403
Other operating income 609 429 1,132
Total Income 2,278 1,122 3,535
Research and Development (2,858) (4,763) (8,613)
Sales, General and Administrative 4 (4,375) (1,587) (5,552)
Operating loss (4,955) (5,228) (10,630)
Finance income 164 3 109
Finance expense 6 (10) (9) (21)
Loss before tax (4,801) (5,234) (10,542)
Taxation 7 273 867 1,282
Loss for the period (4,528) (4,367) (9,260)
Basic and diluted loss per share (£) 8 (0.15) (0.16) (0.32)
There were no other items of comprehensive income during the periods under
review.
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Consolidated Statement of Financial Position
Notes 30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£000 £000 £000
Assets
Non-current assets
Intangible Assets 1,815 26 1,918
Goodwill 1,484 - 1,484
Property, Plant and Equipment 720 346 838
Other receivables 48 48 48
4,067 420 4,288
Current assets
Trade and other receivables 9 4,671 1,466 2,215
Inventory 1,564 68 1,131
Current tax receivable 1,598 1,642 1,325
Cash and cash equivalents 10 6,610 13,717 4,765
Short term investments 10 1,619 - 8,041
16,062 16,893 17,477
Current liabilities
Trade and other payables 11 (6,254) (2,568) (3,526)
Lease liabilities (116) (127) (202)
(6,370) (2,695) (3,728)
Non-current liabilities
Lease liabilities (51) (42) (86)
Deferred tax (496) - (496)
(547) (42) (582)
Net Assets 13,212 14,576 17,455
Equity 12
Share capital 306 278 306
Share premium account 28,976 23,348 28,976
Share-based payment reserve 1,143 912 893
Other reserves 11,455 11,455 11,455
Merger relief reserve 2,014 - 2,014
Foreign exchange reserve 14 - (8)
Retained earnings (30,696) (21,417) (26,181)
Shareholder's funds 13,212 14,576 17,455
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Consolidated Statement of Changes in Equity
Share-based payment reserve Merger relief reserve Other reserves Foreign exchange reserve Retained
losses
Share capital Share premium Total
equity
£000 £000 £000 £000 £000 £000 £000 £000
For the period ended 30 June 2022
Balance at 1 January 2022 278 23,348 519 - 11,455 - (17,051) 18,549
Loss for the period - - - - - - (4,367) (4,367)
Total comprehensive loss for the period - - - - - - (4,367) (4,367)
Transactions with owners:
Share-based compensation - - 393 - - - - 393
Total transactions with owners - - 393 - - - (4,367) (3,974)
Balance at 30 June 2022 (Unaudited) 278 23,348 912 - 11,455 - (21,417) 14,576
For the period ended 31 December 2022
Balance at 1 July 2022 278 23,348 912 - 11,455 - (21,417) 14,576
Loss for the period (4,894) (4,894)
Total comprehensive loss for the period (4,894) (4,894)
Transactions with owners
Share-based compensation 111 111
Issue of shares on acquisition of Tetris Pharma Ltd 7 2,014 2,021
Issue of shares for working capital purposes 20 5,980 6,000
Share Issue expense (352) (352)
Issue of shares on exercise of share options 1 1
Reserve Transfer (130) 130 -
Foreign Exchange movements (8) (8)
Total transactions with owners 28 5,628 (19) 2,014 - (8) 130 7,773
Balance at 31 December 2022 (audited) 306 28,976 893 2,014 11,455 (8) (26,181) 17,455
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Consolidated Statement of Changes in Equity (continued)
Share-based payment reserve Merger relief reserve Other reserves Foreign exchange reserve Retained
losses
Share capital Share premium Total
equity
£000 £000 £000 £000 £000 £000 £000 £000
For the period ended 30 June 2023
Balance at 1 January 2023 306 28,976 893 2,014 11,455 (8) (26,181) 17,455
Loss for the period - - - - - - (4,528) (4,528)
Total comprehensive loss for the period - - - - - - (4,528) (4,528)
Transactions with owners:
Share-based compensation - - 263 - - - - 263
Reserve Transfer - - (13) - - - 13 -
Foreign Exchange movements - - - - - 22 - 22
Total transactions with owners - - 250 - - 22 (4,515) 7,773
Balance at 30 June 2023 (unaudited) 306 28,976 1,143 2,014 11,455 14 (30,696) 13,212
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Consolidated Statement of Cash Flows
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
£000 £000 £000
Cash flow from operating activities
Loss before tax (4,801) (5,234) (10,542)
Finance income (164) (3) (109)
Finance costs 10 9 21
Share-based compensation 263 393 503
Depreciation 198 85 248
Amortisation 103 4 93
Foreign exchange movements 132 76 (69)
(4,259) (4,670) (9,855)
Changes in working capital
(Increase)/ decrease in inventory (433) (68) 587
(Increase)/ decrease in trade and other receivables (2,456) (43) (48)
Increase/(decrease) in trade and other payables 2,728 427 (2,198)
Tax received - - 734
(161) 316 (925)
Net cash used in operating activities (4,420) (4,354) (10,780)
Cash flow from investing activities
Acquisition of subsidiary net of cash acquired - - 284
Purchase of property, plant & equipment (73) (100) (299)
Purchase of intangible assets - - (46)
Short term investments 6,422 - (8,041)
Interest received 164 3 109
Net cash used in investing activities 6,513 (97) (7,993)
Cash flow from financing activities
Issue of ordinary shares - - 6,000
Share issue costs - - (352)
Capital payments on lease liabilities (114) (63) (165)
Interest paid on lease liabilities (10) (9) (21)
Repayment of working capital facility - - (295)
Other interest paid - - (7)
Net cash (used in) / generated by financing activities (124) (72) 5,160
Net (decrease) / increase in cash and cash equivalents 1,969 (4,523) (13,613)
Exchange (losses) / gains on cash and cash equivalents (124) (76) 62
Cash and cash equivalents at beginning of period or financial year 4,765 18,316 18,316
Cash and cash equivalents at end of period or financial year 6,610 13,717 4,765
Arecor Therapeutics plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Notes to the financial information
COMPANY INFORMATION
Arecor Therapeutics plc ("Arecor" or the "Company") is a public limited
company registered in England and Wales at Chesterford Research Park, Little
Chesterford, Saffron Walden, CB10 1XL with registered number 13331147.
The principal activity of the Company is to act as a holding company. The
Group has two wholly owned trading subsidiaries; Arecor Limited and Tetris
Pharma Ltd.
Tetris Pharma Ltd and its wholly owned subsidiary Tetris Pharma B.V were
acquired on 4th August 2022.
1. BASIS OF PREPARATION
The financial statements for the period ended 30 June 2023 incorporate the
results of Arecor Therapeutics plc and its trading subsidiaries. The
consolidated interim financial statements for the period to 30 June 2023 are
unaudited and were approved by the board of directors on 13 September 2023.
The consolidated interim financial statements have been prepared in accordance
with UK-adopted International Accounting Standards ("IFRS") in conformity with
the requirements of the Companies Act 2006. The financial information has been
prepared on the basis of IFRS that the Directors expect to be applicable at 31
December 2023.
The financial information contained in these interim financial statements does
not constitute statutory accounts as defined in section 434 of the Companies
Act 2006. These interim financial statements do not include all of the
information and disclosures required in the annual financial statements. The
financial information for the six months ended 30 June 2023 and 30 June 2022
is unaudited.
Financial statements for year ended 31 December 2022 have been filed with the
Registrar of Companies for Arecor Therapeutics plc (Company registration
number 13331147). The audit report for this period, previously filed, was
unmodified.
All intra-Group transactions, balances, income and expenses have been
eliminated in full on consolidation.
Tetris Pharma Ltd was acquired by Arecor Therapeutics plc on 4(th) August 2022
and is therefore not included in the comparatives for the six-month period to
30 June 2022. The full year comparatives to 31 December 2022 contain five
months of trading by Tetris Pharma Ltd for the post-acquisition period.
The financial information is presented in Sterling, which is the functional
currency of the Group and has been rounded to the nearest £000.
2. PRINCIPAL ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with the
accounting policies set out in the audited financial statements for the period
ended 31 December 2022 and IFRS. There have been no changes to the accounting
policies or the application of the accounting standards during the period of
review.
a) Going Concern
The Directors have reviewed current cash and short- term investments together
with forecast receivables to support forecast operating expenditure and
planned investment in R&D. Sensitivities included the impact of reduced
receivables and mitigating actions. The review indicated that in potential
downside scenarios, cash flow forecasts extended to a period beyond 12 months
from the date of approval of the consolidated interim results.
In reaching their decision to prepare these unaudited interim financial
statements on a going concern basis, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing these
unaudited interim financial statements.
3. REVENUE AND OPERATING SEGMENTS
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
UK 1,190 101 1,136
Switzerland 77 33 240
Rest of Europe 124 22 108
USA 248 492 784
India 30 135
Rest of World - 45 -
Total revenue 1,669 693 2,403
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision makers. Information
reported includes revenue by project, expenditure by type and department,
cashflows and EBITDA for the Group.
The Board of Directors has been identified as the chief operating decision
makers, who are responsible for allocating resources, assessing the
performance of the operating segment and making strategic decisions.
Accordingly, the Directors consider there to be a single operating segment.
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Formulation development projects 342 693 1,352
Milestones from licence agreements 108 - -
Sale of pharmaceuticals 1,219 - 1,051
Total revenue 1,669 693 2,403
Revenue from formulation development projects has been recognised as the
performance obligations set out in agreements are satisfied over time.
Revenue from Milestones defined in license agreements has been recognised when
a milestone is achieved.
Sales of pharmaceuticals are product sales which have been recognised as the
rights and obligations pertaining to those items are transferred to the buyer.
4. SALES, GENERAL AND ADMINISTRATIVE COSTS
Operating expenditure which is not considered as Research and Development is
treated as Sales, General and Administrative costs. This includes Finance, HR,
Administrative and sales and marketing and Business Development teams,
building facilities, sale of pharmaceutical products and costs relating to the
Board of Directors.
5. SHARE BASED COMPENSATION
The Company operates an All-Employee Share Option Plan (AESOP) and grants
share options to eligible employees. The options vest over time.
The Company's Long Term Incentive Plan (LTIP) is principally used to grant
options to Executive directors and senior management. The LTIP options vest
after three years subject to meeting performance criteria as defined in the
option agreement. These can be a combination of both operational objectives
and share price performance compared to a benchmark. These performance
conditions are approved by the Board on each occasion prior to the grant of
the options. Ordinary shares acquired on exercise of the LTIP options are
subject to a holding period of a minimum of one year from the date of vesting.
The movement in share options in the period was as follows:
Number of Options
Balance at 31 December 2021 1,414,944
Options lapsed (13,497)
Balance at 30 June 2022 1,401,447
AESOP options granted 312,750
LTIP options granted 270,000
AESOP options exercised (131,433)
Options lapsed (224,961)
Balance at 31 December 2022 1,627,803
AESOP options granted 86,250
LTIP options granted 190,000
AESOP options exercised (7,471)
Options lapsed (235,167)
Balance at 30 June 2023 1,661,415
Shared Based Payment charges to the Statement of Comprehensive Income £000
Period to June 2023 263
Period to June 2022 393
Year to December 2022 504
6. FINANCE EXPENSES
In the period ended 30 June 2023, the finance expenses of £10,000 were
interest costs on finance leases (period ended 30 June 2022: £9,000).
7. TAXATION
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
R&D Tax credit receivable 273 867 1,282
Total taxation 273 867 1,282
On 1 April 2023 the UK Governments rates of tax relief for loss making SME
R&D tax credits decreased from 14.5% to 10%. On the same date, the tax
relief for the RDEC scheme increased from 13% to 20%. The Group utilises both
schemes and has calculated the balance receivable based on the applicable
rates for expenditure incurred before and after the date of transition.
8. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss attributable to
ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period.
Given the Company's reported loss for the periods and financial year, share
options were not taken into account when determining the weighted average
number of ordinary shares in issue during the year as they would be
anti-dilutive, and therefore the basic and diluted loss per share are the
same.
Basic and diluted loss per share
Period ended Period ended Year ended
30 June 2023 30 June 31 December 2023
2022
Loss for the period (£000) (4,528) (4,367) (9,260)
Weighted average number of ordinary shares (number) 30,619,091 27,835,024 28,936,088
Loss per share from continuing operations (£ per share) (0.15) (0.16) (0.32)
9. TRADE AND OTHER RECEIVABLES
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Trade receivables 3,688 157 664
Other receivables 175 273 273
Grant receivables 423 83 562
Prepayments 385 953 716
Total Trade and other receivables 4,671 1,466 2,215
The growth in Trade receivables of £3.7 million reflects the gross sales of
pharmaceutical products by Tetris Pharma Ltd, which were nil in the period
ended 30 June 2022.
Trade receivables for pharmaceutical products are gross of rebates payable to
wholesalers. Rebates are reported in Trade payables and accruals.
Grant receivables of £0.4 million reflect the timing of reimbursement of
expenditure incurred in the first half of the year and an increase over the
prior period grant receivable of £0.1 million.
10. CASH AND CASH EQUIVALENTS AND SHORT TERM INVESTMENTS
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Cash and cash equivalents 6,610 13,717 4,765
Short term investments 1,619 - 8,041
Total cash, cash equivalents and short term investments 8,229 13,717 12,806
Short term investments relate to balances held in either fixed term accounts
with a six-month maturity or notice accounts with a 95 day notice period.
All significant cash, cash equivalents and short-term investments are
deposited in the UK with large international banks.
11. TRADE AND OTHER PAYABLES
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Trade payables 2,779 1,508 1,709
Other tax and social security 123 97 120
Other creditors 1,172 - 217
Contract liabilities 682 188 206
Accruals 1,498 775 1,274
Total Trade and other payables 6,254 2,568 3,526
The growth in Trade payables and Accruals include rebate amounts due to
wholesalers on the sales of pharmaceutical products by Tetris Pharma Ltd,
which were nil in the prior period ended 30 June 2022.
Other creditors of £1.2 million includes VAT payable and stock provisions
which were nil in the prior period.
12. EQUITY
Share Capital
At 30 June 2023 At 30 June 2022 At 31 December 2022
Number Number Number
Allotted, called up and fully paid
Ordinary shares of £0.01 30,625,654 27,835,024 30,618,183
Total share capital 30,625,654 27,835,024 30,618,183
At 30 June 2023 At 30 June 2022 At 31 December 2022
£'000 £'000 £'000
Allotted, called up and fully paid
Ordinary shares of £0.01 306 278 306
Total share capital 306 278 306
13. EVENTS AFTER THE BALANCE SHEET DATE
In accordance with a Sale and Purchase Agreement dated 1(st) August 2022, the
acquisition of Tetris Pharma Ltd included contingent consideration of three
earn out payments, which may become payable on the first, second and third
anniversary following completion.
The first earn out payment was subject to Tetris Pharma Ltd achieving
mid-single-digit million-pound net sales and a low single-digit million-pound
EBITDA loss in the 12-month period following completion.
Earn out accounts were prepared by an independent accountant and have been
provided to the previous shareholders of Tetris Pharma Ltd. The earn out
accounts determined that the first earn out target was not achieved and
therefore contingent consideration of £1,000,000 for the first earn out
period was not triggered.
14. COPIES OF THE INTERIM REPORT
Copies of the consolidated interim financial statements are available to the
public free of charge from the Company at Chesterford Research Park, Little
Chesterford, Saffron Walden, CB10 1 XL during normal business hours for 14
days from today.
Copies are also available on the Company's website at www.arecor.com.
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