Proximagen Group plc - Preliminary annual results

05 Mar 2012

Preliminary Statement of Annual Results for the Year Ended 30 November 2011

London, UK, 5 March 2012: Proximagen Group plc (AIM: PRX), the rapidly growing company with a focus on the treatment of disorders of the central nervous system (CNS) and inflammatory diseases, is pleased to announce its unaudited preliminary annual results for the year ended 30 November 2011.

Commercial highlights
·      Strategic Partnership Agreement signed with H. Lundbeck A/S, with Lundbeck making a £10.3m equity investment in Proximagen at 180p per share
·      Acquisition of global rights to two CNS drug candidate programmes from GSK designed to treat cognitive decline, pain and Parkinson's disease
·      Collaborative Research and Development Agreement signed with Altacor for Proximagen's PRX00933 programme, exploring its potential as a topical treatment for glaucoma
·      24 further patents granted in 2011, bringing our total granted patents to 285

Research & Development highlights
·      Naluzotan entered a Phase IIa clinical study conducted and funded by the NIH to assess efficacy in patients with temporal lobe epilepsy, the most prevalent epilepsy population unresponsive to current therapies
·      Completion of tonabersat Phase II-enabling studies for epilepsy with Phase IIa due to start in H2 2012
·      Role of our CXCR4 inhibitor as a potential treatment for cancer, as part of a £1.5m EPSRC-funded collaboration involving Imperial College and King's College London
·      VAP-1 inhibitors achieved efficacy in a range of mechanism-related models of disease, including rheumatoid arthritis, multiple sclerosis and cancer
·      Confirmation of the activity of potent PAR2 inhibitors in gold standard model of irritable bowel disease

Financial highlights
·      Strong cash balance of £51.6m (2010: Cash and other financial assets of £48.2m)
·      Investment in R&D of £4.8m (2010: £6.1m), with a further $26m investment committed by our pharmaceutical partners in our programmes

Post-period end highlights
·      Grant awarded under the MJFF's Therapeutics Development Initiative Fall 2011 Program to fund research of Proximagen's D1 programme in Parkinson's disease
·    Phase I clinical trial of oral VAP-1 antagonist for rheumatoid arthritis initiated

Commenting on this announcement, Kenneth Mulvany, Chief Executive Officer of Proximagen Group plc, said: "2011 was one of our most successful years. We advanced several compounds into the clinic and now have four clinical stage drug candidates within a pipeline of fifteen programmes. In the past three years, our pipeline has more than tripled in size and has become more advanced and diverse.  Our commitment to innovation is paying off and in 2012 and 2013 we expect more candidates to enter development than in all previous years combined. During 2011, we attracted additional partners, received further grant funding and welcomed Lundbeck as a strategic equity stakeholder. These activities endorsed our business model of de-risking the pipeline and applying smart financial resources to our operations. We strive to make improvements to healthcare for patients, as well as build value for our shareholders. We are in as strong a position as ever to be reaching these goals as we enter 2012."

For further information, please contact:

Proximagen Group plc

Tel: +44 (0)20 7400 7700

Kenneth Mulvany, Chief Executive Officer


James Hunter, Finance Director




Singer Capital Markets

Tel: +44 (0)20 3205 7500

Nominated Adviser and broker


Shaun Dobson, Claes Spang



Tel: +44 (0)20 7920 2330

Mary-Jane Elliott, Hollie Vile


Chairman's and Chief Executive's statement

2011 was a year of considerable accomplishment and growth for Proximagen, and the future has never looked more promising. We remain one of the best-funded companies in the European biotechnology sector, and our continued strong cash position fuels the important development efforts at Proximagen. The result is a diversified and balanced portfolio of clinical and pre-clinical assets, benefiting from significant partner funding and expertise, whilst we retain valuable territorial rights.

The achievements in 2011 were accomplished against a backdrop of very challenging times for the European life sciences industry and indeed for the wider economy. Throughout last year, difficult capital markets prevailed for many companies in our sector, and pharmaceutical companies struggled to develop new products from internal research and development investment.  Whilst we are proud of all that we achieved during 2011, we are focused on the challenges and opportunities that this environment has created for Proximagen and pharmaceutical companies alike.

With challenges come opportunities

With every challenge comes an opportunity. Proximagen has responded to sector challenges in three ways - by advancing several programmes into the clinic, as well as broadening our portfolio across different therapeutic indications, by innovating with our discovery engine, and by strengthening our financial resources.  In the past three years, Proximagen's pipeline has more than tripled in size. It has also become more advanced and grown more diverse, reflecting Proximagen's ability to pursue treatments in various indications, including CNS, inflammation and oncology.

We continue to invest in innovation and our commitment to innovation is beginning to pay off.  Proximagen is poised to introduce more drug candidates into development in 2012 and 2013 than in all its previous years combined. Our pipeline now contains fifteen programmes, four of which are clinical stage, with the potential for three further programmes to enter the clinic before the end of 2013.  At Proximagen, we have maintained a strong balance sheet by focusing our investment on programmes with the best commercial prospects and by leveraging the considerable commitment in our programmes by our partners Upsher-Smith, Lundbeck and the NIH, valued at some $26m.   We were pleased to welcome Lundbeck, one of the leading global pharmaceutical companies focused on diseases of the CNS, as a strategic partner and shareholder.  Our partnership with Lundbeck strengthened our financial resources through their £10.3m equity investment and furthers our stated objective of building closer ties with industry at a time when "Big Pharma" are seeking to augment their R&D outputs through externalization.

The best possible R&D

"Science first" has long been the guiding principle at Proximagen. Much has been written about innovation in our industry. We claim no superior insights and we know that innovation in science is challenging, especially for diseases of the CNS where the human brain is complex and elegant beyond description. In our industry, creating and sustaining an environment where innovation can consistently and successfully happen is a difficult task. While this challenge is daunting, our commitment to bringing novel drugs to patients is unwavering and, with this in mind, Proximagen is focused on innovation.

Our progress in R&D has been truly impressive.  Indeed, 2011 proved to be our most productive year to date in our laboratories with the identification of five development candidates, complementing the discovery of exciting leads in our earlier stage programmes.  We had 24 patents granted in 2011, bringing the number of our granted patents up to 285, protecting all aspects of our R&D efforts. Three of our drug candidates are currently in active clinical trials:  tonabersat, naluzotan and VAP1, which started its Phase I trial recently. We also announced the signing of a Collaborative Research and Development Agreement with Altacor to progress Proximagen's PRX00933 programme for the topical treatment of glaucoma. Datamonitor values the current glaucoma market at over $5bn where current therapies have modest effects in lowering intra-ocular pressure. Thus new drugs, particularly with modes-of-action that can be used adjunctively to prostaglandins and beta-blockers, are needed. We received a grant from the prestigious Michael J Fox Foundation in support of our D1 PAM programme in Parkinson's disease and cognition. Additionally, Proximagen is collaborating with Imperial College and King's College, London to develop theranostic nanoparticles for efficient delivery of our CXCR4 antagonists to treat cancer. This collaboration complements and expands Proximagen's cancer franchise, building on the on-going activities to develop CCR2, VAP-1 and CXCR4 antagonists as anti-metastatic and tumour-sensitising agents.

Pipeline advancement

In 2011, we saw the advancement of naluzotan (a selective 5-HT1a agonist) into the clinic for the treatment of refractive epilepsy.  This programme was acquired by Proximagen in 2009 and subsequently partnered with the US National Institutes of Health, who are fully funding and running a placebo-controlled, double blind, crossover study. This proof of concept study will measure reduction in seizure frequency as the primary end-point and is due to report results in 2013. Interestingly, research also indicates that 5-HT1a agonists have antidepressant effects, so we anticipate that naluzotan will be particularly effective for treating epilepsy patients with depression, one of the most common epilepsy co-morbidities. Further clinical investigation of this drug is planned, looking at age-related macular degeneration and sexual dysfunction. Despite some encouraging data in Parkinson's disease, the decision was taken to discontinue development of this programme for levodopa-induced dyskinesia, as better treatment modalities may render our drug obsolete for treating dyskinesia by the time it gains marketing approval.

Tonabersat was advanced considerably during the year.  Tonabersat is a putative gap junction blocker that inhibits intercellular signalling and cortical spreading depolarisation (CSD), a phenomenon which is heavily implicated in the pathophysiology of epilepsy. Through its anti-convulsant screening programme, the NIH confirmed the efficacy of tonabersat in models of epilepsy where impressive data was generated showing a potent and differentiated profile. Clinical efficacy in refractive epilepsy has already been demonstrated by tonabersat's close analogue, carabersat. CSD, which manifests itself as a wave of abnormal neuronal activity, is propagated over the brain by intercellular gap junctions. CSD has recently been shown in the clinic to underlie the damage seen in several related neurological disorders which have a high unmet medical need that could open the potential of this drug to treat a variety of currently untreatable conditions.  The programme is further de-risked through the extensive safety package, where tonabersat has been shown to be safe and well tolerated in 1,800 patients.

Proximagen's PRX00933 programme has amassed a considerable clinical dossier, having been well-characterised as an orally administered treatment for satiety in over 480 patients. The 5-HT2c class of receptors is an acknowledged target for weight loss.  The specific nature of PRX00933 gives it the potential to avoid side-effects associated with some weight loss drugs. Moreover, the candidate would be following an earlier development candidate, Arena Pharmaceuticals' lorcaserin, also a 5-HT2c agonist, into the market. The FDA advisory panel meeting on the anti-obesity drug candidate Qnexa held in February 2012 has generated considerable commercial interest in Proximagen's Phase III-ready programme, especially considering that PRX00933 has already demonstrated significant weight loss in Phase II clinical trials, whilst exhibiting an excellent safety and tolerability profile.

Our VAP-1 antagonist is a first in class orally administered small molecule for rheumatoid arthritis (RA), multiple sclerosis (MS) and cancer.  The drug candidate, which acts by stopping leukocyte trafficking to inflamed areas, was shown to be highly efficacious in models of RA that have strong translational correlation with efficacy in clinical trials.  Extensive research has also been conducted to determine its role in metastatic tumour infiltration.  The lead molecule began Phase I clinical development earlier this year. This trial is a Single Ascending Dose (SAD) study in 30-40 patients. Assessment of safety, pharmacokinetics, and tolerability will occur for 24 hours post-dosing with an additional measurement of pharmacodynamic markers of VAP-1 activity also being taken. The SAD study will be followed by a Multiple Ascending Dose study and we plan to continue clinical development of PRX167700 through a Proof of Concept trial in RA.

Proximagen acquired a series of α7 receptor positive allosteric modulators (PAMs) from GSK during the period. Acetylcholine (ACh) is essential for memory acquisition and retrieval, and α7 is one of the most abundant nicotinic ACh receptors in the brain.  Since acquisition, α7 receptor agonists have been shown to be pro-cognitive in clinical trials for schizophrenia and Alzheimer's disease. Although these agonists have validated the a7 receptor as a target, they run the risk of receptor desensitization, whereas positive allosteric modulators offer a potentially novel way of activating α7 receptors without receptor desensitization.  Our α7 PAM programme has the potential to be first-in-class for cognition.

In addition to a number of other CNS and inflammation programmes in development, Proximagen is developing novel approaches to combating the resistance of tumours to even the most modern of anti-cancer therapies.  In mid-2011, in collaboration with the University of Oxford, we demonstrated that Proximagen's compounds can exploit novel mechanisms of inhibiting tumour growth and metastatic spread.  For instance, our CXCR4 antagonists inhibit the growth of certain aggressive human tumours both in vitro and in vivo.  This programme is being strengthened by an EPSRC collaboration which will enable us to exploit the targeting capabilities of the nanoparticles currently under development.   Also in collaboration with the University of Oxford, we demonstrated that Proximagen's VAP-1 antagonists inhibit the metastatic colonization of tissues.  Since metastases are the major causes of mortality and morbidity in cancer patients, we are continuing to investigate this property of our compounds.

Investing in our business

Proximagen seeks to build long-term value for its shareholders by investing in basic research and pipeline development, whilst retaining an appropriate cash balance. In 2011, we invested heavily in R&D with a significant proportion of that investment accounted for by the costs involved in preparing VAP-1 for its first-time-in-human studies. We will also be investing in initiatives centred around enabling novel mechanism drugs to be targeted to the most suitable indication, the design of in vivo studies to support development, and the identification of PK-PD relationships, all of which are designed to support the rapid achievement of value inflections in pre-clinical and clinical development.

Lundbeck's investment generated £10.3m of net new funds and Proximagen consequently ended the year with more than £51m of cash, leaving it sufficiently resourced to fund growth for the foreseeable future.   Our large cash balance is made possible by a number of our programmes benefitting from $26m of development commitment from our pharmaceutical partners.  We also secured other sources of non-dilutive funding, such as grant funding from the prestigious Michael J Fox Foundation in support of our D1 PAM programme and participation in a £1.5m EPSRC-funded collaboration for oncology. We continue to explore ways to de-risk the funding of our programmes, thereby seeing our programmes progress whilst maintaining financial strength.

Innovation from outside is just as important

Strategic acquisitions have helped us grow and we will use our considerable financial strength to acquire or license innovative programmes that address important unmet medical needs.  We also strongly believe in partnerships with larger companies and the role they can play in the long-term success of Proximagen.

As our existing programmes progress successfully, so we will be looking to fortify our pipeline further.  We have been active in looking at new opportunities externally, and in our assessment of them, we look critically to see whether the key elements of underlying scientific rationale, intellectual property position, development data and valuation are all aligned.  We have learnt to be patient and are prepared to wait until the right opportunities are identified rather than take undue risk with our capital over an opportunity that fails to meet our demanding selection criteria. However, we remain confident that suitable assets are available.

Well-worked partnerships can deliver benefits by way of pooled expertise and resource, financial support, and risk-sharing.  The company currently has six partnerships in place, covering larger pharmaceutical companies, strategic partnerships and charitable organisations.  We expect the environment to remain conducive to strengthening existing partnerships as well as building new ones, particularly as larger pharmaceutical companies increasingly look to organisations such as Proximagen for sourcing new therapies capable of strengthening their portfolio of patent protected drugs.

Promise for the future

The challenges facing the life sciences sector in Europe, particularly the UK, are substantial, but our opportunities are far greater. Proximagen has built an organisation with a broad, de-risked portfolio spanning various therapeutic areas.  We have innovative scientists, pursuing a number of promising programmes in new disease areas, from cancer to inflammation to Alzheimer's disease. If and when these programmes lead to new therapeutic candidates, we have the ambition to develop and deliver them to patients in certain key territories.

We have many other assets to draw upon. Proximagen has strong relationships with leading pharmaceutical companies and scientific leaders. We also have a unique strength in our values-based culture. Proximagen's people point to the company's values as the reason they joined us and the reason they stay.  In our research and clinical trial enrollment and execution, we hold ourselves and our partners to the highest standards of ethical behavior. We are each thorough, transparent and principled in governance, communications and our commitment to patient care.

Over the years, we have had a consistent strategy and we remain convinced that our strategy will serve us well in 2012 and beyond. Investing heavily in our pipeline, fostering high performing employees who share our values, delivering superior value to our owners, and striving to be a leader in the therapeutic areas we serve are fundamental. We know that the environment for our industry is challenging and that there are some factors beyond our control.  Despite these uncertainties, we entered 2012 focused on what we need to do, prepared for whatever the year brings and confident that we have the right team, resources and strategy to succeed.

Peter Allen                                           Kenneth Mulvany
Chairman                                               Chief Executive Officer
5 March 2012

Financial review

We were pleased to welcome Lundbeck onto our register of shareholders in September after they subscribed for 5.7m new shares at 180p per share.  This issue raised £10.3m of net new funds and the Group consequently ended the year with over £51m of cash.   A number of our programmes continued to benefit from our partners' funding and we were pleased to be awarded a grant of $151,000 in December 2011 by the prestigious Michael J Fox Foundation in support of our D1 PAM programme.  We continue to explore ways to de-risk the funding of our programmes, thereby seeing our programmes progress whilst maintaining financial strength.

Cash and treasury

Cash resources (made up of cash and cash equivalents, and other financial assets) at the year-end totalled £51.6m (2010: £48.2m). Given the economic environment and liquidity issues generally prevailing in Europe, we reduced the number and duration of term deposits held by the company during the year.  However, the Group still achieved an effective interest rate of 1.19% (2010: 1.11%), and we continue to actively monitor our treasury policy and position.

The principal cash flows in the year were as follows:

·      Operating cash outflow: £7.9m (2010: £8.0m)
·      Purchase of assets: £0.5m (2010: £0.1m)

·      Issue of ordinary shares under the Strategic Partnership Agreement with Lundbeck: £10.3m (2010: £nil)
·      Income tax received: £0.9m (2010: £0.5m)
·      Interest received: £0.6m (2010: £0.5m)

Statement of Comprehensive Income

Research and development expenditure during the year was £4.8m (2010: £6.1m). The year on year reduction principally reflects the variability in the financial requirements of our programmes. Administrative expenses totalled £3.1m (2010: £2.8m).The increase is accounted for in part by inflationary pressures, the increased costs of supporting our enlarged patent estate and the increased share option charge recognised in the year. Finance income of £0.5m was broadly comparable with £0.6m in 2010, although as highlighted above the liquidity of our funds was improved without reducing our effective interest rate. The tax credit of £1.0m (2010: £0.9m) represents amounts that are expected to be received under current legislation on research and development tax credits. In 2010, our claim for R&D tax credits were limited to the amount of PAYE and NI each subsidiary had paid to HMRC during the year.  However, in 2011 this PAYE and NI limit was higher due to increased staff numbers and costs.

Statement of Financial Position

Net assets at the year-end totalled £52.6m (2010: £48.3m) and the principal movements in the Statement of Financial Position during the year were:
·      an increase in intangible assets of £0.4m
·      a reduction in trade and other receivables of £0.3m
·      an increase in cash resources of £3.4m
·      a reduction in trade and other payables of £0.8m

The increase in intangible assets relates to the acquisition during the year of rights to certain drug development assets.

Group reorganisation

The business and assets of Cambridge Biotechnology Limited were successfully integrated into Proximagen Limited during the year and all of the Group's research and development activities are now performed by Proximagen Limited at our Cambridge facility.

James Hunter
Finance Director
5 March 2012

For full announcement, please see RNS.