RNS Number:0154T
Theratase PLC
09 December 2003
For Immediate Release 9 December 2003
THERATASE PLC
Preliminary Results
for the Year Ended 30 September 2003
Theratase plc, one of the world's leading manufacturers and suppliers of
specialist enzymes to the diagnostic and pharmaceutical industries, today
announces its preliminary results for the year ended 30 September 2003.
KEY POINTS
* Turnover, in line with expectations, at #6.3m (2002: #7.0m)
* Profit before tax was #2.2m (2002: #2.5m), in line with market
expectations.
* Earnings Per Share were 4.54p (2002: 5.11p)
* AM-Pharma BV joint venture made excellent progress, with the completion of
successful Phase I and Phase IIa clinical trials in the treatment of sepsis
using alkaline phosphatase
* Commencement of extended Phase IIa clinical trials of alkaline
phosphatase, by AM-Pharma BV expected soon
* On-going discussions with ISTA Pharmaceuticals Inc. to supply
hyaluronidase for use for use as a spreading agent to facilitate the
absorption and dispersion of other drugs in relation to ISTA's second filing
of a New Drug Application with the US FDA for Vitrase
* The Board is proposing to make an expected total payment to preference
shareholders of #1.448m. This results in cumulative payments to preference
shareholders slightly ahead of expectations under the schedule agreed in
2000
Dr. John Chesham, Chief Executive of Theratase plc, commenting on the results,
said:
" During the past year we have seen significant progress and exciting
developments with our therapeutic projects. While the Board anticipates that
trading conditions in our core business will remain tough for the current year,
we believe that the Group is well positioned to compete effectively in this
environment and that overall prospects are good."
- ENDS -
For further information, please contact:
Theratase
John Chesham, Chief Executive Tel: +44 (0) 1495 790 678
Colin Anderson, Finance Director Tel: +44 (0) 20 7863 8819
Buchanan Communications
Charles Ryland / James Strong Tel: +44 (0) 20 7466 5000
Chairman's statement
The Group has successfully met market expectations and remains amongst the most
highly profitable and cash generative companies in the Techmark Mediscience
sector. This was despite the fact that 2003 was a year of consolidation in the
face of trading conditions which have continued to be difficult. Turnover for
the year was #6.3 million (2002: #7.0 million) and pre-tax profits were #2.2
million (2002: #2.5 million). Basic earnings per share, calculated after the
expected write off of the Group's investment in AM-Pharma were 4.54p (2002:
5.11p). Adjusted earnings per share without this write off would have been 5.57p
(2002: 6.97p).
The Group is a specialist pharma/diagnostic company whose continuing strategy is
to use an appropriate proportion of its profits and cash flow to invest in
research and development through joint ventures. This strategy was advanced this
year. Excellent progress has been made with our partner AM-Pharma B.V., which
successfully completed Phase I and Phase IIa clinical trials in May and is
expected to commence an extended Phase IIa clinical trial in patients with
sepsis in January 2004. AM-Pharma's lead product for the treatment of sepsis
uses alkaline phosphatase ("AP") supplied by the Group's main trading subsidiary
Biozyme Laboratories Limited. The AP project together with exciting pre-clinical
data on the use of anti-microbial peptides ("AMP's") to treat fungal infections
is generating much interest and AM Pharma B.V. remains confident that it will
raise additional funds to take its projects forward.
Theratase also has a relationship which has been on going for five years with
ISTA Pharmaceuticals Inc, a Nasdaq quoted company specialising in the treatment
of ophthalmic conditions. ISTA has submitted New Drug Applications for two
Vitrase products, one for the treatment of vitreous haemorrhage and the other
for use as a spreading agent to facilitate the dispersion and absorption of
other drugs. Biozyme supplies hyaluronidase to the first of these Vitrase
products and is in discussions to supply hyaluronidase to the second of these
Vitrase products.
The Group has for some time been seeking an appropriate acquisition that offers
synergistic benefits and is cash generative with the potential for growth. We
continue to focus on this area and it remains a central ambition of the Group to
achieve further growth via this route. We will continue to update shareholders
as we pursue our corporate strategy.
In February 2003 we made the first scheduled preference dividend payment in
accordance with the agreed rescheduling that took place in 2000. I am pleased to
announce that the Board is recommending to shareholders a further payment to
preference shareholders in line with the agreed payment schedule. This will
leave two further payments to be made subject to shareholder approval and the
availability of distributable reserves.
On behalf of the Board I would like to thank all our staff in the UK and the USA
for their continued efforts on the Group's behalf, which are essential to the
Group's continuing success.
Chief Executive's report
Financial Review
As expected, conditions in the Group's traditional diagnostics business have
remained challenging throughout this year. The mainly US based diagnostic
companies which are our major customers have continued to drive down inventory
levels, and have reduced innovation in new products. Increasing international
regulatory concerns have continued to affect our business, meaning that we have
had to switch away from North American sourced raw material to material of equal
quality sourced from the Southern Hemisphere. Manufacturing efficiencies
introduced by our major glucose oxidase ("GO") customer and financial and
contractual difficulties at a further GO customer have limited growth. Biozyme
is active in trying to replace this revenue with new customers for GO. In
addition we have not been helped by the strength of sterling against the US
dollar.
Turnover
While diagnostic enzymes continue to represent the vast majority of sales, the
proportion of sales represented by therapeutic enzymes is rising, and this year
represents 8% of the total Group turnover (2002: 5%). Geographically, we
continue to export the vast majority of our sales: this year exports, mainly to
the US and continental Europe, represented 75% of sales.
Profit before tax
The Group has one of the most efficient businesses in the diagnostics and
pharmaceutical sector despite the added cost of running a US FDA GMP compliant
plant for the manufacture of our therapeutic enzymes. As a result we have
excellent margins and our profit before tax of #2.19 million represents an
almost 35% return on sales.
Taxation
The tax charge on the operating results was #0.723 million for 2003, (2002:
#0.871 million) giving an effective tax rate of 33%. The effective tax rate is
higher than the standard rate in the UK due to the profits earned overseas, and
also the effect of writing off the Group's investment in AM-Pharma as it is
incurred. This write off does not attract tax relief as it is treated as a
capital payment.
Earnings per share
Earnings per share for the year were 4.54p (2002: 5.11p). This is as a result of
the Group continuing to take a prudent view of its investment in AM-Pharma and
writing off its investment as it is incurred. The effect this year on both pre
and post tax profits is #0.270 million (2002: #0.483 million). Adjusted earnings
per share without this write off would have been 5.57p (2002: 6.97p).
Net Assets and cash
Net Assets have increased compared to last year at #2.528 million (2002: #1.916
million) which reflects the funds available for the redemption of Preference
Shares earmarked for February 2004. Net cash balances remain a healthy #2.015
million (2002: #2.489 million) despite the payment of #1.566 million to
preference shareholders in February 2003.
Dividend and Capital Redemption
The Board is proposing to make an expected total payment to preference
shareholders of #1.448m. This is made up of the following:
The Board is recommending a preference dividend payment of 24p payable in
February 2004. This consists of payment of dividend arrears amounting to 16p a
share, and a payment of accruing dividend for the year to 30th September 2003 of
8p a share. In total, these dividends amount to #0.854m and have been included
as proposed dividends within these financial statements.
The redemption of 578,000 #1 cumulative redeemable preference shares due to be
redeemed on 30th September 2003 will also take place in February 2004. The Board
is also recommending a further dividend payment on the preference shares to be
redeemed in February 2004 of 2.805p per share. This is a payment of accruing
dividend for the period from 1 October 2003 to redemption, as required by the
Company's Articles of Association. The redemption and the accrued dividend to
redemption will be reflected in the 2004 financial statements.
The cumulative payments made to preference shareholders after this proposed
payment will total #3.014m, slightly ahead of the payments due under the
schedule agreed in 2000.
Operating Review
Diagnostic products
The core trading business within Theratase continues to be Biozyme Laboratories
which produces high quality, high activity enzymes from natural sources that are
sold to manufacturers of diagnostic and laboratory tests. Amongst our main
markets are diabetes monitoring, where enzymes are incorporated into test strips
for use with instruments which measure blood glucose levels, and
immunodiagnostics. The main product sold into the diabetes monitoring market is
GO, for which we remain the market leader, following the renewal in May 2003 of
our contract with Lifescan Europe, a subsidiary of Johnson & Johnson, which is a
market leader in diabetes monitoring. Lifescan Europe has introduced
manufacturing efficiencies at their plant in Inverness and consequently their GO
consumption has declined. We are confident that the efficiencies will work
through in the current year and significant growth in its product will return
thereafter. Our lead products for the immunodiagnostics market are alkaline
phosphatase and horseradish peroxidase. These enzymes are used, typically in kit
form, to enable the detection to a very high degree of sensitivity of, for
example, hormones or viral infections.
The diagnostics sector is characteristically stable with customer-supplier
relationships, once established, usually remaining constant for the life of a
given test. This is due to the requirement to obtain new regulatory approvals in
the event of material changes to components of tests already approved.
Therapeutic products
Sepsis and Endotoxin Induced Inflammation
AM-Pharma BV, based in the Netherlands, in which the Group has a 8.92%
shareholding, announced in May that it had successfully completed Phase I and
Phase IIa clinical trials for its lead product for the treatment of sepsis. The
key ingredient for this product is alkaline phosphatase, exclusively supplied by
Biozyme. An extended Phase IIa study is expected to commence in January 2004
with the aim of demonstrating efficacy in patients suffering from sepsis.
Results are anticipated in the first half of 2004. Progress to date on the
sepsis project coupled with encouraging pre-clinical data on the use of
anti-microbial peptides ("AMP's") for the treatment of life threatening fungal
infections has generated considerable interest in AM-Pharma which remains
confident that it will be successful in raising second round funding in the near
term.
A total cost of #0.966 million has now been invested by the Group in AM-Pharma
and no further contributions are currently committed to.
Ophthalmic applications
Biozyme supplies hyaluronidase to ISTA Pharmaceuticals Inc for use in its
formulated products.
ISTA's product Vitrase, for the treatment of the eye condition vitreous
haemorrhage completed Phase III clinical trials in the early part of 2003. The
US FDA has issued an "approvable" letter to ISTA indicating that this product is
essentially acceptable but that additional work needs to be done to finally
approve it for marketing in the USA. Discussions between ISTA and the US FDA to
determine the scope of the required additional work are continuing. In August
2003, ISTA announced that it had filed a second New Drug Application ("NDA") for
Vitrase, seeking approval for its use as a spreading agent to facilitate the
dispersion and absorption of other drugs. The main market for this application
would be ophthalmology. We anticipate that approval of this second NDA will
pre-date that for the vitreous haemorrhage application, and that approval if
given will be in the early part of 2004.
The Group has invested significant amounts of time and money in bringing one of
its two manufacturing plants in Blaenavon up to the standard required for it to
be compliant with the US FDA's guidelines on Good Manufacturing Practice. In
February 2003 an inspector appointed by the FDA recommended approval of our
facilities for the manufacture of hyaluronidase.
Outlook
During the past year we have seen significant progress and exciting developments
with our therapeutic projects. While the Board anticipates that trading
conditions in our core business will remain tough for the current year, we
believe that the Group is well positioned to compete effectively in this
environment and that overall prospects are good.
The Group's medium to long term strategy is to become a clearly focused
specialist supplier of biochemicals to the much larger pharmaceutical market as
well as to the diagnostic market while protecting the outstanding profitability
of the core business. The Board believes this strategy will reap rewards in the
future, and that the potential benefits outweigh the risks. We remain confident
that it will succeed in this respect through both internal development and
acquisition.
Consolidated profit and loss account
for the year ended 30 September 2003
2003 2002
#000 #000
Turnover 6,291 6,965
Cost of sales (2,433) (2,807)
Gross profit 3,858 4,158
Administrative expenses (1,664) (1,722)
Operating profit 2,194 2,436
Other interest receivable and similar income 51 69
Interest payable and similar charges (56) (20)
Profit on ordinary activities before taxation 2,189 2,485
Tax on profit on ordinary activities (723) (871)
Profit for the financial year 1,466 1,614
Dividends proposed on non equity shares (854) (1,566)
Additional finance costs of non-equity shares - (284)
Release of provision for additional finance costs 570 1,566
Retained profit for the financial year attributable to ordinary 1,182 1,330
shareholders
Earnings per ordinary share 4.54p 5.11p
Adjusted earnings per ordinary share 5.57p 6.97p
Diluted earnings per ordinary share 4.46p 4.96p
Consolidated balance sheet
at 30 September 2003
2003 2002
#000 #000 #000 #000
Fixed assets
Tangible assets 1,020 928
Investments - -
1,020 928
Current assets
Stocks 922 976
Debtors 969 1,568
Cash at bank and in hand 2,015 2,489
3,906 5,033
Creditors: amounts falling due within one year (2,206) (3,712)
Net current assets 1,700 1,321
Total assets less current liabilities 2,720 2,249
Creditors: amounts falling due after more than one
year
(133) (156)
Provisions for liabilities and charges (59) (177)
Net assets 2,528 1,916
Capital and reserves
Called up share capital 4,861 4,861
Share premium account 39 39
Profit and loss account (2,372) (2,984)
Shareholders' funds 2,528 1,916
Equity (1,030) (2,211)
Non-equity 3,558 4,127
2,528 1,916
Consolidated cash flow statement
for the year ended 30 September 2003
2003 2002
#000 #000
Net cash inflow from operating activities 2,058 2,264
Returns on investment and servicing of finance (1,571) 51
Taxation paid (761) (952)
Capital expenditure and financial investment (190) (249)
Net cash (outflow)/inflow before financing (464) 1,114
Financing (10) 5
Issue of shares for cash - 31
(Decrease)/increase in cash in the year (474) 1,150
Notes:
1. Earnings per ordinary share have been based on the profit
attributable to equity shareholders (after net appropriations in respect of
preference shares of #284,000) of #1,182,000 (2002: #1,330,000) and 26,061,558
ordinary shares being the weighted average number of shares in issue for the
year to 30 September 2003 (2002: 26,004,058). The adjusted earnings per ordinary
share has been calculated by adding back the provision for impairment of the
investment in AM-Pharma Holdings BV amounting to #270,000 (2002: #483,000) and
the weighted average number of shares in issue of 26,061,558 (2002: 26,004,058).
2. The calculation of the diluted earnings per ordinary share of 4.46p
(2002: 4.96p) was based on the weighed average of 26,521,642 (2002: 26,806,661)
ordinary shares, which takes into account the dilutive share options, and profit
after tax of #1,182,000 (2002: #1,330,000).
3. The financial information set out above does not constitute the
statutory accounts for the year ended 30 September 2003 and 30 September 2002.
Statutory accounts for 2002 have been delivered to the Registrar of Companies.
4. The auditors have reported on the 2003 accounts; their report was
unqualified.
5. No ordinary dividend is proposed for the year. The Directors propose
a preference dividend of 24p per preference share in respect of arrears of
preference dividend due on 30 September 2003; a preference dividend of 8p per
preference share in respect of preference dividends due on 30 September 2003 and
a preference dividend of 2.085p on the 578,000 preference shares due to be
redeemed on 30 September 2003. The total cost of the preference dividends are
#870,000. The preference dividends will be paid to preference shareholders on 6
February 2003.
6. Following approval at the AGM, copies of the Report and Accounts for
the year ended 30 September 2003 will be posted to shareholders shortly and
thereafter may be obtained from the Company Secretary at Theratase plc,
Trafalgar House, 11-12 Waterloo Place, London, SW1Y 4AU.
This information is provided by RNS
The company news service from the London Stock Exchange
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