Silence Therapeutics plc

Earnings Release • Sep 23, 2013

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RNS Number : 6204O

Silence Therapeutics PLC

23 September 2013

SILENCE THERAPEUTICS plc

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013

23 September 2013

Silence Therapeutics Plc (AIM: SLN), a leading international RNAi therapeutics company, today provides a corporate update and announces its interim results for the six months to 30 June 2013.

Ali Mortazavi, Chief Executive, said: "2013 has been a new beginning for Silence Therapeutics. We have been afforded an opportunity by our shareholders with the c£19m fundraise in April to pursue our quest to develop RNAi based therapeutics. We believe that we are on our way towards our promise to new and existing shareholders to create a new generation of biotechnology products."

Operational highlights

During H1:

·     Completed a £19m fundraising in April at 200p per share

·     Appointed Ali Mortazavi as Chief Executive

·     Appointed Annie Cheng as Director of Corporate Development

·     Presented a report on the Phase I trial and discussed Phase Ib/IIa outline at the American Society of Clinical Oncology (ASCO) annual meeting

·     Completed the safety lead-in part of the Atu027 Phase Ib/IIa trial in combination with gemcitabine

·     £24.7m in cash and on deposit at 30 June 2013

Since 1st July:

·     Began dosing patients in Phase IIa for Atu027 in pancreatic cancer

·     Developing DBTC and DACC, our delivery systems for the liver and lung, towards the clinic

·     Investigating potential of Micro RNA (miRNAs) using delivery platforms

·     Appointed Simon Sturge as a non-executive director, bringing over 32 years of senior biotech experience to the board

We are in the process of building a sustainable R&D engine, including adding personnel and strengthening our infrastructure. Additionally, evaluations are ongoing for further Atu027 clinical trials.  In addition, as promised in the spring, we are in the process of assessing non oncology related programs using our delivery expertise.

For further information, please contact:

Silence Therapeutics Ali Mortazavi/Timothy Freeborn T: +44 (0)333 988 0140 [email protected] [email protected]	N+1 Singer Shaun Dobson/Jenny Wyllie T: +44 20 7496 3000 [email protected] [email protected]

OPERATIONAL  STATEMENT

In the first half of 2013 Silence continued its growth, alongside a backdrop of positive news from our space:

·     Progress and broadening of both  our clinical and pre-clinical programs, with exciting new pre-clinical work in lung and liver delivery systems.

·     Further strengthening of our scientific teams, and formation of a specific clinical team.

·     Significant fundraising in April supported by our key shareholders and some new shareholders, allowing us to fund further programs.

·     Strengthening of the board in both executive and non-executive capacities.

·     Ali Mortazavi moved to Chief Executive from Director of Corporate Strategy after leading the April fundraise. Under his guidance the company has raised £30m since August 2012.

·     Annie Cheng was appointed our Director of Corporate Development following the April fundraise after being heavily involved in its planning and marketing. Her experience as a healthcare analyst in both bulge bracket and boutique banks has given her a breadth of industry knowledge.

·     Simon Sturge joined us as a non-executive Director on 21st August. He has been involved in pharmaceuticals and biotechnology for 32 years, including 11 years as Chief Executive of the company which later became Vernalis plc. We are already benefiting from his valuable experience.

·     The £19m placing at 200p (4p pre-consolidation) was approved by shareholders on 29 April 2013. We appreciate the confidence shown by investors in Silence's potential.

·     At the ASCO meeting in Chicago we presented our Phase I data and Phase Ib/IIa plans. In the Phase Ib/IIa study, covering first-line patients with loco-regionally advanced or metastatic pancreatic cancer treated with Atu027 in combination with gemcitabine.

·     We continue to advance our DBTC and DACC delivery systems to enable clinical development.

·     miRNAs are an emerging area of RNA therapeutics.  We have used all three of our delivery platforms in miRNA experiments and we plan to continue and expand this work.

·     In Berlin we have added project managers and created separate clinical and pre-clinical teams. We intend to continue adding experienced scientific staff in Berlin while concentrating commercial activities in London.  

CHAIRMAN'S STATEMENT

"The progress reported here demonstrates that we are delivering on the key commitments made at the April 2013 fundraising.

The Board extends its deepest thanks for the fantastic continued support of its existing shareholders, and the participation of some key new shareholders. This support gives the Board the resource and timeframe to move significantly closer to its stated aim of transforming Silence into a fully-fledged therapeutics company based on our RNAi platform technology."

Jerry Randall ACA MIoD

Chairman

FINANCIAL REVIEW

Revenues were modest in H1 2013 and in line with H1 2012. Research and development spending has increased 11% to £2.1m. Within this there was a shift in the nature of spend. Consulting services have declined while materials costs, for clinical grade drugs, have risen sharply, as has spending with FGK, the clinical research organisation which is carrying out our Atu027 trial in Germany.

Administration expenses in H1 rose £0.25m to £1.38m, but there was an underlying fall of £0.14m due to the non-cash impact of share option amortisation, which rose £0.39m to £0.57m, £0.50m within administration expenses and £0.07m within R&D.

There were no impairment charges in H1 2013, versus £20.57m in H1 2012. We remain confident that the remaining £7.73m of goodwill on our balance sheet does not exceed its recoverable amount.

There was a net cash inflow of £10.76m, versus a net cash ouflow of £2.72m in H1 2012, reflecting the £18.72m net proceeds from share issues. Our closing cash position at 30 June 2013 was £19.72m, up from £0.95m at 30 June 2012.  At 30 June 2013 the underlying closing cash position was £24.72m, as £5.00m is on deposit until May 2014 with Investec Bank plc and is included within in Trade and Other Receivables. The rate of interest on this deposit is linked to the sterling euro exchange rate. Our cash is banked with RBS in the UK and Commerzbank in Germany.

RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The risks (identified and outlined in the Annual Report and Accounts 2012 in the Directors' Report on pages 13-15, which does not form part of this interim statement), include:

·     Clinical and regulatory risk - our drug trials may not be successful.

·     Competition and intellectual property risk - several companies are developing RNAi technology. Intellectual property may expire before products are successful commercially.

·     Economic and financial risk - with no recurring revenue, the Group is reliant on receiving additional funds.

These risks have not changed since the date of the Annual Report.

SILENCE THERAPEUTICS PLC

CONSOLIDATED INCOME STATEMENT

SIX MONTHS ENDED 30 JUNE 2013

	Six months ended		Six months ended	Year ended
	30 June 2013		30 June 2012	31 December 2012
	(Un-audited)		(Un-audited)	(Audited)
	£000s		£000s	£000s
Revenue		41	37	163
Research and development costs		(2,110)	(1,893)	(3,378)
Gross loss		(2,069)	(1,856)	(3,215)
Impairment of intangible assets		-	(20,565)	(20,486)
Administrative expenses		(1,382)	(1,128)	(2,613)
Operating loss		(3,451)	(23,549)	(26,314)
Finance income		45	9	18
Gain on sale of fixed assets		-	14	12
Loss for the period before taxation		(3,406)	(23,526)	(26,284)
Taxation		-	-	-
Retained loss for the period after taxation		(3,406)	(23,526)	(26,284)
Loss per ordinary equity share (basic and diluted)		(8.4p)	(205.0p)	(135.0p)

All transactions, with the exception of the impairment of intangible assets relating to Intradigm Corporation, arose from continuing activities.

SILENCE THERAPEUTICS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SIX MONTHS ENDED 30 JUNE 2013

	Six months ended	Six months ended	Year ended
	30 June 2013	30 June 2012	31 December 2012
	(Un-audited)	(Un-audited)	(Audited)
	£000s	£000s	£000s
Loss for the period after taxation	(3,406)	(23,526)	(26,284)
Other comprehensive income:
Exchange differences arising on consolidation of foreign operations	(456)	(696)	(714)
Total comprehensive income for the period	(3,862)	(24,222)	(26,998)

SILENCE THERAPEUTICS PLC

CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2013

	30 June	30 June	31 December
	2013	2012	2012
	(Un-audited)	(Un-audited)	(Audited)
	£000s	£000s	£000s
Non‑current assets
Property, plant and equipment	165	181	157
Goodwill	7,733	7,289	7,333
Other intangible assets	420	513	526
	8,318	7,983	8,016
Current assets
Trade and other receivables	5,354	113	148
Investments held for sale	2	-	2
Cash and cash equivalents	19,718	950	8,909
	25,074	1,063	9,059
Current liabilities
Trade and other payables	(931)	(981)	(959)
Total assets less current liabilities	32,461	8,065	16,116
Net assets	32,461	8,065	16,116
Capital and reserves attributable to the company's equity holders
Share capital	2,351	5,771	1,872
Capital reserves	113,625	80,981	94,849
Translation reserve	2,779	2,342	2,323
Profit and loss account	(86,294)	(81,029)	(82,928)
Total equity	32,461	8,065	16,116

SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 JUNE 2013
(Un-audited)	Share		Capital	Translation	Profit and	Total
	Capital		Reserves	Reserve	loss account
	£000s		£000s	£000s	£000s	£000s
At 1 January 2013		1,872	94,849	2,323	(82,928)	16,116
Recognition of share-based payments		-	574	-	-	574
Transfer upon:
- exercise of warrants in period		-	(32)	-	34	2
- lapse of vested options in period		-	(6)	-	6	-
Shares issued in period, net of expenses		479	18,240	-	-	18,719
Transactions with owners		479	18,776	-	40	19,295
Loss for six months to 30 June 2013		-	-	-	(3,406)	(3,406)
Other comprehensive income
Exchange differences  on consolidation of foreign operations		-	-	456	-	456
At 30 June 2013		2,351	113,625	2,779	(86,294)	32,461

SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SIX MONTHS TO 30 JUNE 2012
(Un-audited)	Share	Capital	Translation		Profit and	Total
	Capital	Reserves	Reserve		loss account
	£000s	£000s	£000s		£000s	£000s
At 1 January 2012	5,771	81,141	3,038		(57,772)	32,178
Recognition of share-based payments	-	109	-		-	109
Issuance of warrants	-	-	-		-	-
Transfer upon:
- exercise of options in period	-	-	-		-	-
- lapse of vested options in period	-	(269)	-		269	-
Shares issued in period, net of expenses	-	-	-		-	-
Transactions with owners	-	(160)	-		269	109
Loss for six months to 30 June 2012	-	-	-		(23,526)	(23,526)
Other comprehensive income					-
Exchange differences on consolidation of foreign operations	-	-	(696)		-	(696)
At 30 June 2012	5,771	80,981	2,342		(81,029)	8,065

SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2012
(Audited)	Share	Capital	Translation	Profit and
	capital	reserves	reserve	loss account	Total
	£000s	£000s	£000s	£000s	£000s
At 1 January 2012	5,771	81,141	3,037	(57,772)	32,177
Recognition of share‑based payments	-	656	-	-	656
Transfer to capital redemption reserve	(5,194)	5,194	-	-	-
Transfer upon:
- lapse of vested options in the period	-	(1,128)	-	1,128	-
Shares issued in period, net of expenses	1,295	8,986	-	-	10,281
Transactions with owners	(3,899)	13,708	-	1,128	10,937
Loss for the year to 31 December 2012	-	-	-	(26,284)	(26,284)
Other comprehensive income
Exchange differences on consolidation of foreign operations	-	-	(714)	-	(714)
At 31 December 2012	1,872	94,849	2,323	(82,928)	16,116

SILENCE THERAPEUTICS PLC
CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2013
		Six months ended	Six months ended	Year ended December
		30 June 2013	30 June 2012	2012
		(Un-audited)	(Un-audited)	(Audited)
		£000s	£000s	£000s
Loss before taxation		(3,406)	(23,526)	(26,284)
Adjustments for:
Impairment of intangible assets		-	20,565	20,486
Depreciation charges		27	36	63
Amortisation charges		152	104	189
(Gain) on sale of property, plant and equipment		-	(14)	(12)
Charge for the period in respect of share-based    payments		574	109	656
Charge for warrants		-	-	32
Foreign exchange movement		11	1	-
Finance and other income		(45)	(9)	(18)
		(2,687)	(2,734)	(4,888)
(Increase)/decrease in trade and other receivables		(5,169)	53	17
(Decrease)/increase in trade payables		(78)	2	(5)
Cash absorbed by operations		(7,934)	(2,679)	(4,876)
Interest paid		-	-	-
Net cash outflow from operating activities		(7,934)	(2,679)	(4,876)
Cash flows from investing activities
Investment in assets held for sale		-	-	39
Proceeds from the sale of property, plant and equipment		-	16	15
Interest received		15	6	15
Proceeds from sale of assets held for sale		-	39	-
Additions to property, plant and equipment		(27)	-	(3)
Additions to intangible assets		(17)	(104)	(199)
Net cash used in investing activities		(29)	(43)	(133)
Cash flows from financing activities
Net proceeds from issue of share capital		18,719	-	10,248
Net cash generated from financing activities		18,719	-	10,248
Net increase/(decrease)  in cash and cash equivalents		10,756	(2,722)	5,240
Cash and cash equivalents at beginning of period		8,909	3,688	3,688
Net  increase/(decrease) in cash and cash equivalents		10,756	(2,722)	5,240
Effect of exchange rate fluctuations on cash held		53	(16)	(19)
Cash and cash equivalents at end of period		19,718	950	8,909
Cash and cash equivalents include
Instant access bank accounts		19,718	950	8,909
		19,718	950	8,909

SILENCE THERAPEUTICS PLC

NOTES TO THE FINANCIAL STATEMENTS

SIX MONTHS ENDED 30 JUNE 2013

1. Basis of Preparation and Accounting Policies

This condensed consolidated interim financial information for the six months ended 30 June 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 - 'Interim Financial Reporting' as adopted by the European Union.

This condensed consolidated interim financial information has been neither reviewed nor audited. The interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the six months ended 30 June 2012 are not the Company's statutory accounts for that financial year. The 2012 full year accounts have been reported on by the Company's auditors and delivered to the Registrar of companies. The report of the auditors was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2.  Going concern

The financial statements have been prepared on a going concern basis that assumes that the Group will continue in operational existence for the foreseeable future. 

During the period the Group met its day-to-day working capital requirements through existing cash resources. The Group had a net cash inflow in the six months ended 30 June 2013 of £10.76m and at 30 June 2013 had cash balances of £19.72m. In addition there was £5m held on deposit at Investec Bank plc which matures in May 2014. The directors have reviewed the working capital requirements of the Group for the next 12 months from the date of the approval of these interim financial statements and are confident that these can be met. 

NOTES TO THE FINANCIAL STATEMENTS (continued)
SIX MONTHS ENDED 30 JUNE 2013
3.  Segment Reporting
Six Months Ended 30 June 2013
Business Segments		RNAi Therapeutics		Unallocated Corporate items			Consolidated
		£000s		£000s			£000s
Revenue		41		-			41
Operating results		(2,397)		(1,054)			(3,451)
Finance and other income (net)		-		45			45
Net loss for the period		(2,397)		(1,009)			(3,406)
Segment assets		10,105		23,287			33,392
Segment liabilities		(784)		(147)			(931)
Costs to acquire property, plant and equipment		(26)		(1)			(27)
Costs to acquire other intangible assets		(17)		-			(17)
Depreciation and amortisation		178		1			179
Charge for non-cash expenses		504		70			574
Six Months Ended 30 June 2012
Business Segments		RNAi Therapeutics			Unallocated Corporate items			Consolidated
		£000s			£000s			£000s
Revenue		37			-			37
Operating results		(22,691)			(858)			(23,549)
Finance and other income (net)		16			7			23
Net loss for the period		(22,675)			(851)			(23,526)
Segment assets		8,356			690			9,046
Segment liabilities		(808)			(173)			(981)

Costs to acquire property, plant and equipment	-	-	-
Costs to acquire other intangible assets	104	-	104
Depreciation and amortisation	139	1	140
Charge for non-cash expenses	20,565	-	20,565

In accordance with IFRS 8 'Operating Segments', the identification of the Group's operating segments is based on internal management reporting as reviewed by the senior management team in order to assess performance and allocate resources.

The Group is managed on a business segment basis - RNAi Therapeutics and unallocated corporate items. Transfer prices between segments are set on an arm's length basis. Segment revenue and profit include transfers between segments, which are eliminated on consolidation. The operations, segment assets and liabilities of the RNAi Therapeutics segment are located in Germany and the US. The remaining operations segment assets and liabilities are located in the United Kingdom.

In accordance with IAS 36 Impairment of Assets, the carrying value of goodwill is assessed comparing its carrying value to its recoverable amount. The recoverable amount is calculated by the Directors as being the value in use. For the purpose of impairment testing of goodwill, the Directors perform risk adjusted discounted cash flow analysis of the RNAi Therapeutics business segment, the cash generating unit that encompasses Silence Therapeutics AG and Intradigm Corporation.

The goodwill in the RNAi Therapeutics segment, which totals £7.73 million, is supported by the value in use of the on-going business.

4.         Earnings per share

The loss per share is based on the loss for the period after taxation attributable to equity holders of £3.41m (year ended 31 December 2012 - loss £26.28m; six months ended 30 June 2012 - loss £23.53m) and on the weighted average of  40,766,920 ordinary shares in issue during the period (year ended 31 December 2012 -19,688,121; six months ended 30 June 2012 -11,542,290). 

The options outstanding at 30 June 2013, 31 December 2012 and 30 June 2012 are considered to be non-dilutive in that their conversion into ordinary shares would decrease the net loss per share.  Consequently, there is no diluted loss per share to report for the periods reported.

5.        Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

On 26 June 2013 the company paid £70,000 to cancel warrants for 66,600 shares issued to Darwin Strategic Limited ('Darwin'). The exercise price was 75p and the terms agreed  reflected the fair value of the warrants at that time. Ali Mortazavi, Chief Executive of Silence Therapeutics plc, owns 37% of Darwin. Separately Silence signed a one year agreement on commercial terms in April 2013 to pay Darwin £25,000 over twelve months in return for services preparing corporate presentations.

At 30 June 2013 the Company was owed £20,309 by Jerry Randall, Chairman. This followed a settlement in February with HM Revenue and Customs where remuneration paid to a service company was reclassified as emoluments taxable at source. Silence settled the liability in February, without penalty, and gave Mr Randall six months to claim back tax paid via the service company. Mr Randall repaid the balance due to Silence in full in August, as agreed.

This information is provided by RNS

The company news service from the London Stock Exchange

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