Announcement PDF RNS Number : 8807Y N4 Pharma PLC 14 May 2019 14 May 2019 N4 Pharma Plc ("N4 Pharma" or the "Company") Final Results N4 Pharma Plc (AIM: N4P), the specialist pharmaceutical company developing Nuvec®, a novel delivery system for vaccines and cancer treatments, announces the Company's audited results for the year ended 31 December 2018. Nigel Theobald, CEO of N4 Pharma commented: "Nuvec is an exciting potential delivery system for cancer vaccines and therapeutics and the recent placing leaves the Company with sufficient funds to undertake further biology work to generate more evidence of this as part of its data set for future collaboration work and continue the relevant scale up work for the manufacturing of Nuvec®. "We announced in April that we had seen some inconsistent in vivo results compared to the initial in vivo studies and continued in vitro success and have put in place a plan of action to rectify this, so we can then continue with the efficacy work which we raised the funds for. The additional work we are doing at the University of Queensland will not have a material financial cost to the Company and is not expected to impact on our ability to undertake this required efficacy work with the funds recently raised. Whilst this has caused a delay to the efficacy work starting, we believe that the extra data from the University of Queensland will maximise the chances of successful future or repeat studies. These delays often occur in life sciences and there is no substitute for taking the time to ensure we are in the best position with the data available to us before progressing to the next phase. "We also recognise that Nuvec® is now our core asset and, whilst this remains an exciting opportunity, the Board recognises it is prudent to investigate other potential assets. To this end the Board will be proactively exploring opportunities in parallel to the work being undertaken on Nuvec®." Enquiries: N4 Pharma Plc Nigel Theobald, CEO Allenby Capital Limited James Reeve/Asha Chotai Scott PR Georgia Smith Via Scott PR Tel: +44(0)203 328 5656 Tel: +44(0)1477 539 539 About N4 Pharma N4 Pharma is a specialist pharmaceutical company developing a novel delivery system for vaccines and cancer treatments using its unique silica nanoparticle delivery system called Nuvec®. N4 Pharma's business model is to partner with companies developing novel antigens for vaccines and cancer treatments to use Nuvec® as the delivery vehicle to get their antigen into cells to express the protein needed for the required immunity. As these products progress through pre clinical and clinical programs, N4 Pharma will seek to receive up front payments, milestone payments and ultimately royalty payments once products reach the market. N4 Pharma plc Chairman's Report N4 Pharma Plc (the "Company"), is the holding company of N4 Pharma UK Limited ("N4 UK") and N4 Biotech Limited ("N4 Biotech") which form the group (the "Group"). N4 UK is a specialist pharmaceutical company engaged in the development of mesoparticulate silica delivery systems to improve the cellular delivery and potency of vaccines. N4 Biotech was originally formed as a potential vehicle to split the groups' activities between the Company's Nuvec® delivery system and its previous generics products but now remains dormant. Review of operations for the financial year ended 31 December 2018 During the year to 31 December 2018, as anticipated, no revenue was generated by the Group. Other operating income included £72,832 of government grants. The operating loss for the year was £1,417,089 (31 December 2017: £897,825 loss). Throughout the year, £784,404 of new funds were raised through the exercise of warrants and a further £1.05m was raised post year end through the placing of 10,500,000 new ordinary shares (the "Placing"). In addition to the £793,141 of cash at the year end, the recent Placing sees the Company in a robust financial position in respect of its current work streams. Key Operational Events and Opportunities During the year, the Company completed a pilot human clinical trial to establish the pharmacokinetic profile ("PK") of its sildenafil reformulation, which unfortunately did not meet any of the PK endpoints for the target product profile. The results of this trial indicated that additional formulation development followed by further clinical testing was required. The Board, having reviewed the full data report and considered the costs and time required to perform additional reformulation, determined that the risk reward profile to reformulate sildenafil to meet the required drug release profile, exemplified in the patent, would be too great. This result with sildenafil also had similar implications for other patents within the Company's generics portfolio, namely aprepitant and duloxetine. The Board, therefore, took the decision that it was in the best interest of the Company as well as its shareholders to focus the Company's ongoing efforts on Nuvec®, a novel drug delivery system licenced from the University of Queensland. The Company subsequently stopped working on generating the required data needed to maintain the sildenafil and associated patents and handed back the licence to these patents to OPAL IP. The decision to close the Generics division was made in the knowledge that Nuvec® had demonstrated promising results in relevant in vivo and in vitro models and had the potential to develop into a significant opportunity for the Company. The decision was therefore taken to focus available resources on this opportunity. Consequently, research with Nuvec® as a delivery system for DNA and mRNA based vaccines is continuing. A significant property of Nuvec® which is worth noting is that it acts as a natural adjuvant system, thereby removing the need to add additional adjuvants in the vaccine formulation process. N4 Biotech was formed as a potential vehicle to split the groups' activities between its Nuvec® delivery system and its previous generics products. Since the closure of the generics division, this split is unnecessary so N4 Biotech will remain as dormant and will not be used. The Company is continuing to confirm and extend the Nuvec® dataset and the post year end raise of additional funds will allow it to undertake further research on the efficacy of Nuvec® in both a virology and oncology setting with the aim of using this data to enable it to seek commercial pre-clinical collaborations with owners of DNA and mRNA sequences developing vaccines and cancer treatments. In September 2018, the Board appointed Dr Allan Hey as Head of CMC Development and in November 2018 appointed Dr Melody Janssen as a Consultant to oversee the biological aspects of the Nuvec® research program. The focus for the Company's Nuvec® delivery system continues to be on generating data which will enable the Company to engage commercially with pharmaceutical and biotech companies who are looking to utilise novel delivery systems, such as Nuvec®, to improve the efficacy of their own DNA and mRNA vaccines that they have in development. In order to build a strong case with which to engage with potential partners, the Board has regularly reviewed the data obtained in experimental studies conducted by both collaborators and contract research organisations ("CROs") engaged by the Company. As part of that review, it has become clear that not only were there a number of variables between the studies (as determined by the collaborator or CRO) such as dosage, injection volume and source of antigen, but also the handling and preparation of Nuvec® may have differed materially from the original protocols used by the University of Queensland ("UQ") and then subsequently developed by N4 Pharma. Consequently, the Directors have decided that, in order to maximise the chances of success for future or repeat studies, the methodology used in the original UQ's studies needs to be more extensively documented. This methodology will form the basis of the technical transfer to other collaborators and will ensure collaborators and CROs use a standard methodology with their subsequent work. To that end, the Company has commissioned UQ to repeat its original studies to demonstrate repeated strong antibody response with the standard test antigen Ovalbumin ("OVA") and, in doing so, document extensively the preparation steps for Nuvec® prior to injection. This study at UQ will provide a validated testbed against which future enhancements can be benchmarked. Subject to this work achieving the targeted in vivo efficacy, the program to add further efficacy data to our data package will recommence. As outlined above, the Directors believe that by reverting to the original source of Nuvec® and more completely defining UQ's preparation of Nuvec®, it will greatly enhance the potential for success and understanding of comparable studies moving forward as well as assisting with potential collaboration opportunities in this significant market. Despite the current setback with regard to the in vivo reproducibility of results, the in vitro results continue to show excellent results with DNA and mRNA antigens and fully support the potential of Nuvec® as a novel delivery system. The business model and potential for Nuvec® remains the same in that we aim to efficiently spend sufficient funds to develop our platform to the point where we can secure licence payments for the use of our delivery system and ultimately achieve royalties on any products developed using Nuvec®. Future Prospects In the short to medium term, we will continue to focus our efforts on building a robust data set for Nuvec® which demonstrates its efficacy in a number of key non-clinical models. In addition, the safety profile of Nuvec® will be evaluated in appropriate nonclinical tests to confirm the known safe profile of mesoparticulate silica. Funds will also be utilised to move towards a good manufacturing practise ("GMP") ready manufacture ahead of clinical trials with partners, as and when needed. In pharmaceutical Research & Development there is no quick fix or alternative to doing things in a methodical way and to the required standards to advance the product through key milestones towards a point of commercialisation or a deal with a partner. The Company is prioritising the key pieces of research it feels are required to advance its data and to enable it to seek such collaborations and will provide updates as each element completes. In addition to completing the studies at UQ to confirm the original in vivo results and then extending the Nuvec® dataset, the board of directors will actively look to add or acquire additional assets to the Company's portfolio. These would ideally but not exclusively be in the same broad therapeutic area, with a view to developing a portfolio of options for development. The Board believes maintaining a portfolio of options will increase the Company's ability to maximise shareholder value. The recent fundraising leaves the Company with a strong cash position to continue to develop the Nuvec® dataset and chemistry, manufacturing and controls ("CMC") scale up work, whilst looking for other opportunities to add to its portfolio. On behalf of the Board, I would like to thank all of our shareholders for their continued patient support and look forward to providing further updates on our progress. By order of the Board David Templeton Chairman 13 May 2019 Consolidated Statement of Comprehensive Income for the year ended 31 December 2018 Notes Year ended 31 Year ended 31 December 2018 £ December 2017 £ Government grant income 72,832 109,913 Gross Profit 72,832 109,913 (846,176) (643,745) - (409,808) (316,632) (281,298) (1,417,089) (897,825) (1,023,734) (5,299) - Research and development costs General and administration costs Reorganisation costs Operating loss for the year Deemed cost of acquisition Finance expenditure Gain on sale of investment 6 (981) 27,693 Loss for the year before tax 4 (1,390,377) (1,926,858) Taxation 5 205,534 89,874 (1,184,843) (1,836,984) Other comprehensive income net of tax - - Total comprehensive loss for the year attributable to equity owners of N4 Pharma Plc (1,184,843) (1,836,984) Basic Diluted 89,440,373 91,305,287 64,783,082 65,811,509 Basic loss per share Diluted loss per share (1.32p) (1.30p) (1.26p) (1.24p) Loss for the year after tax Loss per share attributable to owners of the parent Weighted average number of shares: Consolidated Statement of Financial Position as at 31 December 2018 Assets Non-current assets Investments Current assets Trade and other receivables Cash and cash equivalents Notes 31 December 2018 £ 31 December 2017 £ 6 - - 7 276,926 793,141 1,070,067 132,700 1,326,272 1,458,972 1,070,067 1,458,972 (159,666) (30,457) (190,123) (143,788) (35,430) (179,218) Total Assets Liabilities Current liabilities Trade and other payables Accruals and deferred income 8 Total assets less current liabilities 879,944 1,279,754 - - 879,944 1,279,754 8,634,675 9,328,848 81,909 (14,138,244) 279,347 (3,306,591) 8,579,396 8,513,670 147,635 (14,138,244) 299,045 (2,121,748) 879,944 1,279,754 Non-current liabilities Amounts falling due after more than one year Net Assets Equity Share capital Share premium Share option reserve Reverse acquisition reserve Merger reserve Retained earnings 10 10 10 Total Equity Consolidated Statement of Changes in Equity for the year ended 31 December 2018 (i) Year ended 31 December 2018 Balance at 1 January 2018 Total comprehensive loss for the year Share issue Share option reserve At 31 December 2018 (ii) Year ended 31 December 2017 Balance at 1 January 2017 Total comprehensive loss for the year Share Capital Share Premium £ £ 8,579,396 55,279 8,634,675 Share Option Reserve £ Reverse Acquisition Reserve £ 147,635 8,513,670 815,178 - (65,726) 9,328,848 81,909 (14,138,244) - - - (14,138,244) Merger Reserve Retained Earnings Total Equity £ £ £ (2,121,748) 1,279,754 (19,698) - (1,184,843) - (1,184,843) 850,759 (65,726) 279,347 (3,306,591) 879,944 299,045 Share Capital Share Premium Share Option Reserve Reverse Acquisition Reserve Merger Reserve Retained Earnings Total Equity £ £ £ £ £ £ £ 100 - - - - Share issue 8,561,253 8,643,010 Cost of share issue Share option reserve Group Reconstruction At 31 December 2017 18,043 8,579,396 (129,340) 8,513,670 - - 147,635 147,635 - - (284,764) (284,664) (1,836,984) (1,836,984) - - - 17,204,263 - - - (14,138,244) (14,138,244) 299,045 299,045 (2,121,748) (129,340) 147,635 (13,821,156) 1,279,754 Consolidated Statement of Cash Flow for the year ended 31 December 2018 Year ended 31 December 2018 £ Year ended 31 December 2017 £ Operating activities Loss before tax Interest Deemed cost of acquisition (1,390,377) 981 - Share based payments to employees Gain on sale of investments (1,926,858) 629 (27,693) Operating loss before changes in working capital (1,416,460) Movements in working capital: Increase in trade and other receivables Increase in trade, other payables and accruals Taxation 5,299 1,023,734 (897,825) (9,266) (109,513) 10,905 56,538 70,574 - Cash used in operations (1,344,247) (950,800) Net cash flows used in operating activities (1,344,247) Investing activities Cash acquired on reverse acquisition Sale of investments (950,800) 27,693 402,990 - Net cash flows from investing activities 27,693 402,990 Financing activities Interest paid Net proceeds of ordinary share issue Cost of share issue (981) 784,404 - (5,299) 1,988,970 (129,340) Net cash flows from financing activities 783,423 1,854,331 (533,131) 1,306,521 1,326,272 19,751 793,141 1,326,272 Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at 31 December 6 Notes to the consolidated financial statements for the year ended 31 December 2018 1. Accounting policies 1.1 Reporting entity N4 Pharma Plc (the "Company"), is the holding company for N4 Pharma UK Limited ("N4 UK"), and N4 Biotech Limited ("N4 Biotech"), and together form the group (the "Group"). N4 UK is a specialist pharmaceutical company engaged in the development of mesoparticulate silica delivery systems to improve the cellular delivery and potency of vaccines. The nature of the business is not deemed to be impacted by seasonal fluctuations and as such performance is expected to be consistent. The Company is domiciled in England and Wales and was incorporated and registered in England and Wales on 6 July 1979 as a public limited company and its shares are admitted to trading on AIM (LSE: N4P). The Company's registered office is located at 6th Floor, 60 Gracechurch Street, London, EC3V 0HR. The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The consolidated financial statements comply with the Companies Act 2006 and give a true and fair view of the state of affairs of the Group. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements. 1.2 Measurement convention The consolidated financial statements are prepared on the historical cost basis, except for the following item in the consolidated statement of financial position and consolidated statement of comprehensive income: · · · · Share-based payments related to investment acquisition are measured at fair value shown in the Merger Reserve. Share-based payments related to employee costs are measured at fair value shown in the Statement of Comprehensive Income. Share Warrants and Options are measured at fair value using the Black Scholes model (see note 9). Equity investments are measured at fair value. The consolidated financial statements are presented in Great British Pounds ("GBP" or "£"). 1.3 Going concern These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern. The Directors consider that the Group will have access to adequate resources, as set out below, to meet both operational requirements for at least 12 months from the date of approval of these consolidated financial statements. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements. The Group currently has no source of operating cash inflows, other than interest and grant income, and has incurred net operating cash outflows for the year ended 31 December 2018 of £1,344,247 (2017: £950,800 outflow). At 31 December 2018, the Group had cash balances of £793,141 (2017: £1,326,272) and a surplus in net working capital (current assets, including cash, less current liabilities) of £879,944 (2017: £1,279,754). On 14 February 2019 the group raised £1,050,000 from a share placing before expenses. The Group continues to take steps to manage operational expenditure effectively and to manage the cash required for budgeted activities and working capital for at least 12 months from the date of approval of the consolidated financial statements. Close monitoring of current and forecast expenditure is undertaken by the board and key executive decisions discussed at monthly board meetings. 1.4 Basis of consolidation On 3 May 2017, the Company became the legal parent of N4 UK through a reverse takeover transaction ("RTO" or "reverse takeover"). The Company was not a business as defined by IFRS 3 prior to the transaction and as such was outside of the scope of IFRS 3, Business Combinations. The consolidated financial statements comparatives present the substance of the transaction in accordance with IFRS2. Transactions eliminated on consolidation Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. 1.5 Revenue Revenue is recognised to the extent this it is probable that economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the lower of value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes and duties. The Group has not recognised any revenue to date. 1.6 Government grant income Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the consolidated statement of comprehensive income on a systematic basis over the periods in which the Group recognises and expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the income statement in the period in which they become receivable. 1.7 Expenses Financing income and expenses Financing expenses comprise interest payable and finance charges and net foreign exchange losses that are recognised in the consolidated statement of comprehensive income (see foreign currency accounting policy note 1.13). Financing income comprises interest receivable on funds invested and net foreign exchange gains. Interest income and interest payable is recognised in the consolidated statement of comprehensive income as it accrues, using the effective interest method. Foreign currency gains and losses are reported on a net basis. Research and development Research costs are charged against the consolidated statement of comprehensive income as they are incurred. Certain development costs will be capitalised as intangible assets when it is probable that the future economic benefits will flow to the Group. Such intangible assets will be amortised on a straight-line basis from the point at which the assets are ready for use, over the period of the expected benefit, and are reviewed for impairment at each year end date. Other development costs are charged against income as incurred since the criteria for their recognition as an asset is not met. The criteria for recognising expenditure as an asset are: § It is technically feasible to complete the product; § Management intends to complete the product and use or sell it; § There is an ability to use or sell the product; § It can be demonstrated how the product will generate probable future economic benefits; § Adequate technical, financial and other resources are available to complete the development, use and sale of the product; and § Expenditure attributable to the product can be reliably measured. The costs on an internally generated intangible asset comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee costs incurred on technical development, testing and certification, materials consumed and any relevant third-party cost. The costs of internally generating developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired intangible assets. However, until completion of the development project, the assets are subject to impairment testing only. 1.8 Taxation Taxation Taxation for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised directly in equity. Current or deferred taxation assets and liabilities are not discounted. Current tax Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the consolidated statement of financial position date. Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the consolidated statement of financial position date. Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in consolidated financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. 1.9 Earnings per share The Group presents basic and diluted earnings or loss per share data for its ordinary shares. Basic earnings/loss per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted earnings/loss per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options and warrants granted. 1.10 Operating segments Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire plant and equipment, and intangible assets other than goodwill. The Group operated in one business segment, that of the development and commercialisation of medicines via its delivery system called Nuvec®. No revenue has yet been generated by any of the work undertaken by the Group. The Directors consider that there are no identifiable business segments that are subject to risks and returns different to the core business. The information reported to the Directors, for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the Group. 1.11 Classification of financial instruments issued by the Group In accordance with IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: (a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and (b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these consolidated financial statements for called up share capital and share premium account exclude amounts in relation to those shares. Where a financial instrument that contains both equity and financial liability components exists these components are separated and accounted for individually under the above policy. 1.12 Non-derivative financial instruments Non-derivative financial instruments comprise investments, trade and other receivables, cash and cash equivalents and trade and other payables. Investments Investments are equity investments recognised initially at cost and subsequently revalued to their fair value. Fair value is determined by reference to published price quotations in the AIM market. Gains and losses arising from changes in the fair value are recognised in profit or loss within other income or other expenses. Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. Cash and cash equivalents Cash and cash equivalents are basic financial assets and comprise cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Any overdrafts are shown within borrowings in current liabilities. 1.13 Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group's entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the consolidated statement of financial position date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the consolidated statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. 1.14 Impairment A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if obj