REG - Shield Therapeutics - Interim results update and business update
28/09/2023 07:00
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RNS Number : 9177N Shield Therapeutics PLC 28 September 2023
Shield Therapeutics plc
("Shield" or the "Company" or the "Group")
Interim results update and business update
Shield reports strong H1 2023 prescription growth momentum for Accrufer®
Accelerating prescription growth, with expectations for 80% increase in Q3
2023
KPI performance and new market access expansion puts Shield on track to grow
2023 Accrufer® prescriptions to 100,000-130,000
Total H1 2023 revenue and other income of $8.6 million
New $20 million Term Loan and equity financing to accelerate growth and expand
working capital, fortifying plans to reach cash flow break-even by end of 2024
London, UK, 28 September, 2023: Shield Therapeutics plc (LSE: STX), a
commercial stage pharmaceutical company that delivers Accrufer®/Feraccru®
(ferric maltol), an innovative and differentiated specialty pharmaceutical
product, to address a significant unmet need for patients suffering from iron
deficiency (with or without anemia) today provides a business update, covering
recent operational and financing progress, and reported interim financial
results including 50% sequential Q2 2023 US Accrufer® growth and expectations
for 80% sequential growth in Q3 2023.
Shield reported strong, consistent, sequential Accrufer® prescription
momentum for H1 2023, powered by expanded sales and marketing resources from
the commercial partnership with Viatris Inc. (Viatris), supported by
continuous acceleration across the Company's key performance indicators/KPIs,
the refreshed branding campaign and significantly expanded market access.
Total prescriptions for H1 2023 increased 59% compared to H2 2022, totaling
over 26,200 for the first six months of 2023. The average net selling price
per prescription was $119 during H1 2023.
Early indications suggest Accrufer's® growth trajectory will continue to rise
in Q3 2023, exceeding 28,400 prescriptions, representing an ~80% sequential
increase vs Q2. The prescriptions in Q3 2023 are on track to exceed the
total for the entire first six months of the year. Excellent initial results
following the commercial expansion put Shield on track to reach a major
corporate milestone for 2023, with line of sight to total Accrufer®
prescriptions of 100,000 to 130,000. Since the completion of the sales force
expansion in May, Accrufer® has grown an average of 26% month over month
through to the end of August.
Current Business Updates
New market access expansion for Accrufer® increases total covered lives to
123 million
· Recent addition of the two largest Medicaid programs in California
and New York
· Market access lives expanded by ~ 20% heading into Q4 2023
KPIs underscore U.S. Accrufer® growth momentum (all quarters refer to 2023):
· Total prescriptions -- 15,808, increased 51% Q2 vs Q1
· First time writers -- increased 157% Q2 vs Q1
· New prescriptions -- increased 63% Q2 vs Q1
· Repeat writers - 73% of writers who wrote a prescription in Q1 also
wrote one in Q2
Key drivers highlight effective Shield-Viatris partnership and growth
strategy: Shield continues to make excellent progress on its mission of making
Accrufer® the oral iron treatment of choice in the US and beyond, evidenced
by continued execution across key commercial drivers including:
· Fully-deployed Shield/Viatris commercial team poised for continued
growth - The Shield/Viatris commercial team, fully operational since May, is
well poised to target the 12,000+ highest prescribers. Early results, marked
by strong Accrufer® growth, indicate the partnership is working extremely
well.
· Refreshed branding campaign resonating in the field - Shield's
campaign to take "irony out of oral iron" was launched for patients and
prescribers along with the new commercial team, with accompanying new patient
and HCP websites.
· New Chief Commercial Officer adds to the Shield C-Suite: Addition of
Andy Hurley, hired in April, provides dedicated leadership and expertise to
lead the Accrufer® brand and marketing campaign.
Shield Chief Executive Officer Greg Madison commented: "I am pleased to report
that Shield has had an excellent first half of 2023. We successfully initiated
the Accrufer® commercial partnership with Viatris, completed the build out of
the combined team and effectively implemented our new commercial growth
strategy and marketing campaign. Our strong performance, following completion
of the commercial expansion in May, is evidenced by the momentum achieved
across each of our KPIs and consistent, significant prescription growth. These
results reflect the unwavering dedication and deep experience of our
outstanding team and our commitment to make Accrufer® the oral iron of
choice.
We believe our standout H1 2023 results, KPI achievements and expectations for
continued Q3 2023 growth put us on track to reach total 2023 Accrufer®
prescriptions of 100,000 to 130,000. This is a major corporate milestone for
Shield and forms the foundation for future growth. Looking ahead, we have
defined additional initiatives to improve our gross-to-net, continue the
growth in Accrufer® prescriptions and market adoption and expand market
access. Our commercial results provide validation of our strategic plan and
give us access to important growth capital. The new $20 million term loan
announced today and an equity financing of up to $7.4 million will put us on a
steady path to reach our guidance of cash flow breakeven, expected by year-end
2024.
As we enter the fourth quarter of 2023, I am optimistic about the growth
prospects for Accrufer® and Shield. The combination of our high-performance
team, the high-value Viatris partnership, well-crafted growth strategy and
strong balance sheet set the Company up to maximize potential future growth
and value creation opportunities for our investors and key stakeholders."
Global Partners and Pipeline Update
· Norgine (EU+ rights) - Data received from Norgine indicate that in H1
2023, the number of Feraccru® sales packs sold in Europe increased by 19% vs
H2 2022 and 11% vs H1 2022.
· KYE Pharmaceuticals (Canada) - KYE filed a New Drug Submission for
Accrufer™ with Health Canada in Q1 2022, and decision is expected by year
end 2023.
· Korea Pharma (Republic of Korea) - Korea Pharma is currently
enrolling patients in the pharmacokinetic study, which is the only study
required to support approval.
· Beijing Aosaikang Pharmaceutical Co. Ltd. (China, ASK Pharma) -
Patients are currently being enrolled in the pivotal Phase 3 study. While
the pace of enrolment in the Phase 3 program was impacted by COVID-19, these
challenges are now resolved.
Cash and Balance Sheet Items
· Cash on hand of $13.6 million (unaudited) at 30 June 2023, excluding
receipt of selling cost and payment of net revenue shares for Q2 2023 from
commercial partner Viatris
· New financing transactions announced today of a new $20 million term
loan and an equity financing of up to $7.4 million.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 (as it forms part of domestic law by virtue of the European
Union (Withdrawal) Act 2018). Upon the publication of this announcement via
the Regulatory Information Service, this inside information is now considered
to be in the public domain.
For further information please contact:
Shield Therapeutics plc www.shieldtherapeutics.com (http://www.shieldtherapeutics.com/)
Greg Madison, CEO +44 (0) 191 511 8500
Hans-Peter Rudolf, CFO
Nominated Adviser and Joint Broker
Peel Hunt LLP
James Steel/Patrick Birkholm +44 (0)20 7418 8900
Joint Broker
Cavendish Capital Markets Limited
Geoff Nash/ George Dollemore/Nigel Birks/Harriet +44 (0)20 7220 0500
Ward
Financial PR & IR Advisor
Walbrook PR
Paul McManus/Lianne Applegarth/ +44 (0)20 7933 8780 or shield@walbrookpr.com (mailto:shield@walbrookpr.com)
Alice Woodings
Investor Contact (US Advisor)
LifeSci Advisors, LLC
John Mullaly +1 617 429 3548 or jmullaly@lifesciadvisors.com
About Iron Deficiency and Accrufer®/Feraccru®
Clinically low iron levels (aka iron deficiency, ID) can cause serious health
problems for adults of all ages, across multiple therapeutic areas. Together,
ID and ID with anemia (IDA) affect about 20 million people in the US and
represent a $2.3 billion market opportunity. As the first and only FDA
approved oral iron to treat ID/IDA, Accrufer® has the potential to meet an
important unmet medical need for both physicians and patients.
Accrufer®/Feraccru® (ferric maltol) is a novel, stable, non-salt-based oral
therapy for adults with ID/IDA. Accrufer®/Feraccru® has a novel mechanism of
absorption compared to other oral iron therapies and has been shown to be an
efficacious and well-tolerated therapy in a range of clinical trials. More
information about Accrufer®/Feraccru®, including the product label, can be
found at: www.accrufer.com (http://www.accrufer.com) and www.feraccru.com
(http://www.feraccru.com) .
About Shield Therapeutics plc
Shield is a commercial stage specialty pharmaceutical company that delivers
Accrufer®/Feraccru® (ferric maltol), an innovative and differentiated
pharmaceutical product, to address a significant unmet need for patients
suffering from iron deficiency, with or without anemia. The Company has
launched Accrufer® in the US with an exclusive, multi-year commercial
agreement with Viatris. Outside of the US, the Company has licensed the rights
to four specialty pharmaceutical companies. Feraccru® is commercialized in
the UK and European Union by Norgine B.V. (Norgine), which also has marketing
rights in Australia and New Zealand. Shield also has an exclusive license
agreement with Beijing Aosaikang Pharmaceutical Co., Ltd., for the development
and commercialization of Accrufer®/ Feraccru® in China, Hong Kong, Macau and
Taiwan; with Korea Pharma Co., Ltd. for the Republic of Korea (Korea Pharma);
and with KYE Pharmaceuticals Inc. for Canada.
Accrufer®/Feraccru® has patent coverage until the mid-2030s.
Accrufer®/Feraccru® are registered trademarks of Shield Therapeutics.
Forward-Looking Statements
This press release contains forward-looking statements. All statements
contained in this press release that do not relate to matters of historical
fact should be considered forward-looking statements. These forward-looking
statements are based on management's current expectations and include
statements related to the commercial strategy for Accrufer®/Feraccru®. These
statements are neither promises nor guarantees, but involve known and unknown
risks and uncertainties, many of which are beyond our control, that may cause
actual results and performance or achievements to be materially different from
management's expectations expressed or implied by the forward-looking
statements, including, but not limited to, risks associated with the Company's
business and results of operations, competition and other market factors.
The forward-looking statements made in this press release represent
management's expectations as of the date of this press release, and except as
required by law, the Company disclaims any obligation to update any
forward-looking statements contained in this release, even if subsequent
events cause its views to change.
Operational Review
Commercialisation of Accrufer® / Feraccru®
USA
Following the completion of the co-commercialization agreement with Viatris in
late December 2022, we successfully recruited, hired and trained a new
50-person sales team along with six regional managers, all of whom are
employees of Shield. This effort ran in parallel with our new partner Viatris,
having a designated 50-person sales team on their own, and together, we held a
National Sales Meeting in mid-May as the final training for the combined
100-person field sales force. That team is tasked to call on approximately
12,000 high prescribing HCP's
In the first half of 2023, we generated 26,284 prescriptions for Accrufer®
with the second quarter recording a volume increase of 50% versus the first
quarter, a strong early indication of the potential of this expanded
commercial team and high sensitivity of promotional efforts. The number of
prescriptions generated during the first half of 2023 exceeds the total for
all prescriptions written in 2022. The average net selling price in the first
half of 2023 declined slightly relative to H2 2022 at $119 per prescription
(H2: 2022 $124), and we are planning to undertake a variety of initiatives to
increase this net price during H2 2023 and into 2024.
Europe
Feraccru® is commercialised in Europe by our license partner Norgine BV. The
product is currently sold in Germany, the United Kingdom and the Nordics.
The number of Feraccru® packs sold by Norgine in Europe increased by 11% in
H1 2023 compared with H1 2022 and by 19% compared with H2 2022. The most
notable volume increase incurred in the United Kingdom and Germany with 19%
and 16% increases, respectively, now representing 88% of the total Feraccru®
packs sold in Europe. Maybe to include the new initiative to shift targeting
beyond GI giving additional sales potential as shown in the US.
Asia and Canada
In China, our license partner Beijing Aosaikang Pharmaceutical Co., Ltd. ("ASK
Pharm") is currently enrolling patients in the pivotal Phase 3 study (required
by regulatory authority). There were delays in recruiting primarily due to
COVID related challenges within China.
Korea Pharma Co. Ltd. ("Korea Pharma") is currently enrolling patients in the
PK study, which is the only study required prior to submission for approval.
This study is targeted to complete enrolment by year end.
KYE submitted a New Drug Submission ("NDS") during the first half of 2022,
which was accepted by Health Canada in July 2022. The submission is currently
under review by Health Canada and decision is expected in the H2 2023.
Product development
Shield has agreed a Feraccru®/Accrufer® Paediatric Investigational Plan
(PIP)/Pediatric Development Plan (PDP) with the EMA/FDA, respectively, both
culminating in the conduct of a study to evaluate the safety, tolerability and
efficacy of the product in infants, children and adolescents. This study is
currently enrolling patients across its sites.
Outlook
During the second half of 2023, we are planning to continue the momentum on
prescription growth we started to achieve in our US business during the second
quarter. At the same time, we will focus on improving the profitability by
reducing the gross-to-net discount with the goal of increasing the average net
selling price. In addition, we will continue to support our license partners
across the globe in their efforts to obtain regulatory approvals for
Accrufer®/Feraccru® and their commercialisation efforts to increase market
shares.
Financial Review
As announced on 6 September 2023, the Company decided to change its
presentational currency from Pounds Sterling to US Dollars (or dollars), as
most of its revenues and operating expenses are denominated in dollars due to
the continuing focus on its US-based commercial operations. As a result, the
interim results for the six months ending 30 June 2023 have been published in
dollars, and the comparative prior year figures have been restated to the same
currency.
Revenue
Revenue in the first six months of 2023 (H1 2023) amounted to $4.3 million (H1
2022: $2.6 million), of which $3.7 million (H1 2022: $1.7 million) was derived
from Accrufer® sales in the US. The balance of $0.6 million (H1 2022: $0.7
million) represents royalties from Norgine in respect of sales of Feraccru®
in Europe. In addition, the Group reports $4.3 million (H1 2022: nil) of
other operating income, representing the previous deferred portion of the
upfront payment from Viatris Inc., Shield's co-promote partner in the US,
received at the end of 2022 and now recognized in H1 2023.
Cost of sales
Cost of sales in H1 2023 amounted to $2.1 million (H1 2022: $1.1 million).
The H1 2022 cost of sales comprises manufacturing costs of the prescriptions
sold in the US and in Europe, plus the 45% share of the US net product
revenues payable to Viatris and 5% royalty on net sales, payable to Vitra
Pharmaceuticals Ltd (Vitra) under the 2010 Asset Purchase Agreement.
Vitra was the original owner of the intellectual property underpinning
Accrufer® / Feraccru® and, under the terms of the 2010 Asset Purchase
Agreement, is entitled to receive either a 5% royalty on net sales or 10% of
any licence upfront and sales milestones. For the Norgine licence agreement
Vitra chose to receive a royalty of 5% of net sales; for the ASK Pharm
agreement Vitra opted to receive 10% of the upfront receipt and any subsequent
milestones.
Selling, general and administrative expenses
Selling, general and administrative expenses were $17.7 million in H1 2023 (H1
2022: $15.2 million) of which $0.5 million (H1 2022: $1.3 million) represents
the amortization of intangible assets. Excluding amortization, the underlying
costs increased by 24% from $13.9 million in H1 2022 to $17.2 million in H1
2023, which is directly attributable to the expansion of the US commercial
business in connection with the implementation and commencement of the
co-promote partnership with Viatris.
Research and development
In H1 2023, $0.4 million (H1 2022: $1.3 million) development costs were
expensed in the statement of profit and loss. In addition, $1.5 million (H1
2022: $1.5 million) of development expenditure were recorded directly to the
balance sheet in accordance with the underlying conditions for capitalization,
which are disclosed in the detail in the notes of the Company's annual report.
These development costs and expenditure have been spent in connection with the
ongoing pediatric study.
Tax
The tax charge of $0.8 million (H1 2022: $0.5 million) represents the tax
accrual for income taxes due in the US in connection with the Group's
commercial activities.
Loss for the period
The loss for H1 2023 was $12.6 million (H1 2022: $15.1 million).
Balance sheet
Intangible assets at 30 June 2023 were $15.2 million (31 December 2022: $14.2
million), comprised of $14.1 million (31 December 2022: $1.2 million) of
capitalised Accrufer®/Feraccru® development expenditure and $1.2 million (31
December 2022: $1.2 million) expenditure for related patents and trademarks to
strengthen the Group's intellectual property.
Inventory at 30 June 2023 amounted to $2.7 million (31 December 2022: $1.8
million), which comprises finished product available for sale.
Trade and other receivables increased to $9.3 million at 30 June 2023 from
$6.5 million at 31 December 2022. This increase can be directly attributable
to the higher sales volume in the US.
The current tax asset of $0.6 million (31 December 2022: $0.5 million)
represents anticipated R&D tax credits.
Cash and cash equivalents at 30 June 2023 amounted to $13.6 million (31
December 2022: $3.4 million). Effective 28 September 2023, the Company
finalized a credit agreement for $20 million with SWK Holdings. The facility
has a five-year term and is secured over the Group's US intellectual property
rights associated with Accrufer®. Interest will be payable at a rate of 9.25%
above the Secured Overnight Financing Rate ("SOFR"). The first eight quarters
from the effective date are interest only periods; thereafter, the loan will
be amortized at a fixed amount of $1 million per quarter. The proceeds from
this loan facility will be used 1) to repay the remaining balance of $5.7
million (31 December 2022: $7.2 million) on the AOP shareholder loan, 2) on
commercial programs and initiatives to accelerate the launch curve and
increase the average net selling price, and 3) on further investment in
working capital to pre-finance inventory and trade receivable build-up.
Trade and other payables decreased from $11.4 million at 31 December 2022 to
$8.1 million at 30 June 2023. This difference is largely due to the deferred
portion of the Viatris upfront payment in the amount of $4.3 million, which
was included in the year-end payables balance and recognized as other
operating income in the first half of 2023.
Cash flow
The net cash outflow from operations in H1 2023 was $19.9 million (H1 2022:
$14.3 million). The H1 2023 loss for the period was $12.6 million but, after
adjusting for various non-cash items, the actual cash outflow from this loss
was $10.8 million (H1 2022: $13.2 million). Working capital cash outflows
increased from $1.1 million in H1 2022 to $9.1 million in H1 2023, mainly due
to the underlying volume increase of the US commercial business.
Capitalised development expenditure of $1.5 million in H1 2023 (H1 2022: $1.5
million) was the main driver of the net cash outflow from investing activities
of $1.3 million (H1 2022: $1.3 million).
The cash inflow from financing activities of $30.1 million (H1 2022: $0.1
million) is primarily attributable to the net proceeds from the equity placing
in the amount of $20.2 million (H1 2022: nil) and the proceeds from the
convertible shareholder loan from AOP in the amount of $10 million (H1 2022:
nil), both of which were completed in January 2023.
Going concern
For the reasons set out in detail under Note 2 of the attached condensed
interim financial statements as of and for the six months ended 30 June 2023,
the Directors believe that it remains appropriate to prepare the financial
statements on a going concern basis.
Financial outlook
During the second half of 2023, management expects a further increase in net
product revenue from Accrufer® sales in the US. That increase will be driven
by a continuing increase in prescription volume, plus a modest increase in the
net selling price through several initiatives specifically targeted to reduce
the gross-to-net discount. Whereas several of these initiatives will be
implemented during 2023, it is expected that an acceleration in the
improvement in gross-to-net discounts will be achieved through 2024 with an
average net sales price of between $220 and $240 being targeted by 2025. In
addition, we expect a continuing steady increase in royalties from product
sales by our European license partner Norgine.
Consolidated statement of profit and loss and other comprehensive income
for the six months ended 30 June 2023
Note Year
Six months ended ended
30 June Six months ended 31 December
2023 30 June 2022
(unaudited) 2022 (audited)
$000 (unaudited) $000
$000
Revenue 4 4,334 2,614 5,492
Cost of sales (2,085) (1,139) (3,038)
Gross profit 2,249 1,475 2,454
Other operating income 4,298 - 859
Operating costs - selling, general and administrative expenses 5 (17,654) (15,205) (33,611)
Operating loss before impairment and research and development expenditure (30,298)
(11,107) (13,730)
Impairment of intangible assets - - (17,748)
Research and development expenditure (434) (1,313) (1,315)
Operating loss 4 (11,541) (15,043) (49,361)
Financial income 4 326 381 811
Financial expense 4 (578) - (403)
Loss before tax (11,793) (14,662) (48,953)
Taxation 4,6 (812) (456) (447)
Loss for the period (12,605) (15,118) (49,400)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations 1,441
894 2,583
Total comprehensive expenditure for the period (11,711) (12,535) (47,959)
Loss per share
Basic and diluted loss per share (in US cents) 7 $(0.02) $(0.07) $(0.21)
(1)
Group balance sheet
at 30 June 2023
Note
30 June 30 June 3
1
2023 2022 D
e
(unaudited) (unaudited) c
e
$000 $000 m
b
e
r
2
0
2
2
(
a
u
d
i
t
e
d
)
$
0
0
0
Non-current assets
Intangible assets 8 15,239 32,912 14,208
Property, plant and equipment 327 373 238
15,566 33,285 14,446
Current assets
Inventories 9 2,695 1,730 1,757
Trade and other receivables 9,262 5,449 6,487
Current tax asset 550 224 526
Cash and cash equivalents 13,594 2,934 3,402
26,101 10,337 12,172
Total assets 41,667 43,622 26,618
Non-current liabilities
Convertible shareholder loan (5,705) - (6,683)
Fair value of loan conversion feature - - (562)
(5,705) - (7,245)
Current liabilities
Trade and other payables (8,080) (3,839) (11,443)
Lease liabilities (67) - (107)
Other liabilities (713) (117) (1.278)
(8,860) (3,956) (12,828)
Total liabilities (14,565) (3,956) (20,073)
Net assets 27,102 39,666 6,545
Equity
Share capital 10 (13,734) (4,017) (5,371)
Share premium (173,087) (147,927) (149,458)
Merger reserve (42,966) (42,966) (42,966)
Currency translation reserve (10,603) (10,851) (9,709)
Deposit for shares - - 100
Accumulated deficit 213,288 166,095 200,859
Total equity (27,102) (39,666) (6,545)
Group statement of changes in equity
for the six months ended 30 June 2023
Share Share Merger Currency translation Retained Total
capital Deposit premium reserve reserve earnings $000
$000 For shares $000 $000 $000 $000
$000
Balance at 1 January 2022 (audited) 4,574 - 147,927 42,966 8,268 (152,371) 51,364
Loss for the year - - - - - (49,400) (49,400)
Other comprehensive income:
Foreign currency translation differences - - - - 1,441 - 1,441
Total comprehensive expense for the year - - - - 1,441 (49,400) (47,959)
Transactions with owners, recorded directly in equity
Share options exercised 42 - 62 - - 104
Prepaid shares for equity placing (100) (100)
Loan conversion 755 1,469 - - - 2,224
Equity-settled share-based payment transactions - - - - - 912 912
Balance at 31 December 2022 (audited) 5,371 (100) 149,458 42,966 9,709 (200,859) 6,545
Loss for the period - - - - (12,605) (12,605)
Other comprehensive income:
Foreign currency translation differences - - - 894 - 894
Total comprehensive expense for the period - - - - 894 (12,605) (11,711)
Transactions with owners, recorded directly in equity
Equity placing 5,422 100 14,648 - - - 20,170
Loan conversion 2,941 8,981 - - - 11,922
Equity-settled share-based payment transactions - - - - 176 176
Balance at 30 June 2023 (unaudited) 13,734 - 173,087 42,966 10,603 (213,288) 27,102
Group statement of cash flows
for the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
$000 $000 $£000
Cash flows from operating activities
Loss for the period (12,605) (15,118) (49,400)
Adjustments for:
Depreciation and amortisation 524 1,318 2,848
Equity-settled share-based payment expenses 176 967 912
Financial income (326) (381) (869)
Financial expense 578 - 469
Impairment of intangible assets - - 17,735
Income tax 813 - 437
(10,840) (13,214) (27,868)
(Increase)/decrease in inventories (938) 258 215
Increase in trade and other receivables (3,612) (1,410) (2,787)
Increase/(decrease) in trade and other payables (3,364) 52 7,271
Decrease in other liabilities (1,142) (19) 1,262
Income tax (paid)/received - - (427)
Fair value conversion option - - 843
Net cash flows from operating activities (19,896) (14,333) (21,491)
Cash flows from investing activities
Financial income 326 320 36
Acquisitions of intangible assets - - -
Acquisition of tangible assets (178) (43) (64)
Capitalised development expenditure (1,466) (1,542) (2,221)
Net cash flows from investing activities (1,318) (1,265) (2,249)
Cash flows from financing activities
Cash raised from equity placing 20,170 - -
Interest paid - - (403)
Leases - interest payment - - (5)
Proceeds from convertible shareholder loan 10,000 - 10,000
Deposit for shares - - (100)
Proceeds of share options exercised - 69 105
Change in lease assets and liabilities (new leased assets) - - (76)
Total cash outflow from leases (40) (190) (152)
Net cash flows from financing activities 30,130 (121) 9,369
Net increase/(reduction) in cash 8,916 (15,719) (14,371)
Effect of exchange rate fluctuations on cash held 1,276 2,252 1,372
Cash and cash equivalents at beginning period 3,402 16,401 16,401
Cash and cash equivalents at period end 13,594 2,934 3,402
Notes
for the six months ended 30 June 2023
1. General information
Shield Therapeutics plc (the "Company") is incorporated in England and Wales
as a public limited company. The Company trades on the London Stock Exchange's
AIM market, having been admitted on 26 February 2016.
The Company is domiciled in England and the registered office of the Company
is at Northern Design Centre, Baltic Business Quarter, Gateshead Quays NE8
3DF.
The financial statements in this interim report comprise the Company and its
subsidiaries (together referred to as the 'Group'). The Group is engaged in
the late-stage development and commercialization of clinical stage
pharmaceuticals to treat unmet medical needs.
This interim report, which is not audited, has been prepared in accordance
with the measurement and recognition criteria of EU Adopted International
Financial Reporting Standards. It does not include all the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group as at and
for the year ended 31 December 2022. This financial information does not
constitute statutory financial statements as defined in Section 435 of the
Companies Act 2006. The comparative figures for the year ended 31 December
2022 are not the Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditors was unqualified. The
auditor has reported on those accounts; their report was unqualified and did
not contain a statement under Section 498 (2) or (3) of the Companies Act
2006.
The interim report was approved by the board of directors on 27 September
2023.
2. Accounting policies
The accounting policies applied in these interim financial statements are
consistent with those of the annual financial statements for the year ended 31
December 2022, as described in those annual financial statements, except for
the change in the Company's presentation currency which is further described
below.
Change in reporting currency
The Company's presentation currency has changed from Pound Sterling
('Sterling' or '£') to US Dollars ('$' or 'US$') effective 1 January 2023.
This is on the basis that an increasing proportion of the Company transactions
are denominated in US Dollars. We consider that this change will give
investors and other key stakeholders a clearer understanding of the Company's
performance over time.
Following this change in accounting policy the impact was applied
retrospectively and thus the comparatives in the consolidated financial
statements were restated in US Dollars, as required by IAS 8. The procedures
used for this restatement were formed based on the requirements of IAS 21 and
were as follows:
· Share capital, share premiums and other reserves are translated
at historic rates prevailing at the dates of transactions.
· Other assets and liabilities are translated into US Dollars at
closing rates of exchange.
· Trading results are translated into US Dollars at the average
rate for the financial period.
· For differences resulting from the assets and the results for the
period have been presented in the foreign exchange reserve, a component within
shareholders' equity.
· Cumulative currency translation adjustments are presented as if
the Group had used US Dollars as the presentation currency of its consolidated
financial statements since that date.
Going concern
At 30 June 2023, the Group held $13.6 million in cash. On 28 September 2023,
the Company announced a new credit facility in the amount of $20 million from
SWK Holdings. The Company further announced an equity fundraise of up to $7.4
million before expenses.
The Group is planning to use these funds to repay the remaining balance of the
existing convertible shareholder loan from AOP Health International Management
AG, undertake further investments in the commercial business to accelerate the
launch curve and help increase the net sales price, and invest in the working
capital needs of the Group.
The Directors have considered the funding requirements of the Group through
the preparation of detailed cash flow forecasts for the period to December
2024, including the prospective Accrufer® sales revenues and the related
commercial operating costs. These forecasts show that the Group's monthly cash
flows start to turn positive by the end of 2024 and that the fundraise
detailed above should provide sufficient cash to allow the business to
continue in operations for at least twelve months from the balance sheet date.
The Directors have considered scenarios in which sales revenues fall below
base case forecasts. In these circumstances mitigating actions such as
reduction of discretionary selling and marketing expenditure could be taken to
preserve cash. The Directors also believe that other forms of finance, such as
debt finance or royalty finance are likely to be available to the Group.
Based on the above factors, the Directors believe that it remains appropriate
to prepare the financial statements on a going concern basis.
3. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group's accounting policies, management is required
to make judgments, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources.
The significant judgments made in relation to the financial statements are:
Development expenditure
Development expenditure is capitalised when the conditions referred to in Note
2 of the Company's annual report are met.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods. The significant estimates which may lead to material
adjustment in the next accounting period are:
Valuation of intellectual property associated with Accrufer®/Feraccru®
The valuation of intellectual property associated with Accrufer®/Feraccru®
(including patents, development costs and the Company's investment in Shield
TX (Switzerland) AG) is based on cash flow forecasts for the underlying
business and an assumed appropriate cost of capital and other inputs in order
to arrive at a fair value for the asset. The realisation of its value is
ultimately dependent on the successful commercialisation of the asset. In the
event that commercial returns are lower than current expectations this may
lead to an impairment. No impairment has been recognised to date.
Deferred tax assets
Estimates of future profitability are required for the decision whether or not
to create a deferred tax asset. To date no deferred tax assets have been
recognised.
4. Segmental reporting
The following analysis by segment is presented in accordance with IFRS 8 on
the basis of those segments whose operating results are regularly reviewed by
the Chief Operating Decision Maker (considered to be the Board of Directors)
to assess performance and make strategic decisions about the allocation of
resources. Segmental results are calculated on an IFRS basis.
A brief description of the segments of the business is as follows:
· Accrufer®/Feraccru® - development and commercialisation of the
Group's lead Accrufer®/Feraccru® product
· PT20 - development of the Group's secondary asset (all related
assets were written off effective 31 December 2022)
Operating results which cannot be allocated to an individual segment are
recorded as central and unallocated overheads.
Six months ended 30 June 2023 (unaudited) Year ended 31 December
2022
(audited)
Accrufer®/ Feraccru® Central and unallocated $000 Accrufer®/ Feraccru® Central and unallocated $000
$000 PT20 Total $000 PT20 Total
$000 $000 $000 $000
Revenue 4,334 - - 4,334 5,492 - - 5,429
Operating loss (865) - (10,676) (11,541) (27,635) (18,625) (3,101) (49,361)
Financial income 326 811
Financial expense (578) (403)
Tax (812) (447)
Loss for the period (12,605) (49,400)
The revenue analysis in the table below is based on the country of
registration of the fee-paying party. $3.7 million revenue (year ended 31
December 2022: $3.5 million) was derived from Accrufer® sales in the US, $0.6
million (year ended 31 December 2022: $1.8 million) from royalties, and $Nil
(year ended 31 December 2022: $0.2 million) from license upfront and milestone
payments from commercial partners.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
$000 $000 $£000
USA 3,742 1,664 3,539
The Netherlands 592 752 1,766
Canada - 193 181
South Korea - 5 6
4,334 2,614 5,492
5. Operating costs - selling, general and administrative expenses
Operating costs are comprised of:
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Selling costs 11,793 9,855 19,964
General and administrative expenses 5,366 4,006 10,743
Depreciation and amortization 495 1,344 2,904
17,654 15,205 33,611
6. Taxation
The Group's tax charge for the six months ended 30 June 2023 was $0.8 million
(H1 2022: $0.5 million), mostly related to the Group's commercial activities
in the US.
7. Loss per share
The basic loss per share of $0.02 (H1 2022: $0.07) has been calculated by
dividing the loss for the period by the weighted average number of shares of
702,902,306 in issue during the six months ended 30 June 2023 (six months
ended 30 June 2022: 216,015,815).
Although there are potentially dilutive ordinary shares these would not serve
to increase or reduce the loss per ordinary share, as the Group is
loss-making. There is therefore no difference between the loss per ordinary
share and the diluted loss per ordinary share.
8. Intangible assets
Accrufer®/ Accrufer®/
Feraccru® Feraccru® Phosphate Therapeutics licences
patents and trademarks development costs $000
Group $000 $000 Total
$000
Cost
Balance at 1 January 2022 (audited) 2,490 14,023 32,651 49,164
Additions - externally purchased - 2,222 - 2,222
Impairment of intangible assets (212) - (32,651) (32,863)
Balance at 31 December 2022 (audited) 2,278 16,245 - 18,523
Additions - externally purchased - 1,466 - 1,466
Balance at 30 June 2023 (unaudited) 2,278 17,711 - 19,989
Accumulated amortisation
Balance at 1 January 2022 (audited) 884 2,529 13,363 16,776
Charge for the period 164 738 1,754 2,656
Impairment of intangible assets - - (15,117) (15,117)
Balance at 31 December 2022 (audited) 1,048 3,267 - 4,315
Charge for the period 47 388 - 435
Balance at 30 June 2023 (unaudited) 1,095 3,655 - 4,750
Net book values
30 June 2023 (unaudited) 1,183 14,056 - 15,239
31 December 2022 (audited) 1,230 12,978 - 14,208
9. Inventories
Group
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Finished goods 2,695 1,730 1,757
2,695 1,730 1,757
10. Share capital
Six months ended 30 June 2023 Six months ended 30 June 2023 Year ended Year ended 31 December 2022
Number 31 December 2022
000 $000 Number $000
000
At beginning of period 259,388 5,371 215,885 4,574
Exercise of share options - - 2,348 35
Conversion of loan 158,805 2,941 41,155 762
Equity placing 294,844 5,422 - -
Total shares authorised and in issue at end of period - fully paid 713,037 13,734 259,388 5,371
No share options were exercised during the six months ended 30 June 2023 (six
months ended 30 June 2022: 307,438)
11. Subsequent events
On 28 September 2023, the Company announced a new credit facility in the
amount of $20 million from SWK Holdings. The facility has a five-year term and
is secured over the Group's US intellectual property rights associated with
Accrufer®. Interest will be payable at a rate of 9.25% above the Secured
Overnight Financing Rate ("SOFR"). The first eight quarters from the effective
date are interest only periods; thereafter, the loan will amortize at a fixed
amount of $1 million per quarter. The credit agreement with SWK Holdings
includes financial covenants in respect to minimal liquidity and minimum
revenue targets.
The Company further announced on 28 September 2023, an equity fundraise of up
to $7.4 million before expenses.
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