Sinclair Pharma plc
Interim results for the six months ended 31 December 2008
Sinclair announces strong results and records its first profitable H1 since IPO
26th February 2009, Godalming, UK: Sinclair Pharma plc (SPH.L), ("Sinclair" or
the "Company") the international specialty pharma company, today announces its
interim results for the six months ended 31 December 2008.
FINANCIAL HIGHLIGHTS
* Total revenues up 56% to £16.2m (H1 08: £10.4m)
* Gross profit up 77% to £11.8m (H1 08: £6.7m)
* Operating profit of £4.1m after exceptional items (H1 08: Operating loss of
£0.9m)
* Profit Before Tax £3.2m (H1 08: loss of £0.9m)
* EBITDA of £2.2m before exceptional items (H1 08: EBITDA loss of £1.6m )
* Net exceptional credits of £3.2m (H1 08: £1.6m)
* Earnings per share of 4.0p (H1 08:loss per share of 1.1p)
* Cash balance of £2.4m (Dec 07: £0.4m)
OPERATING HIGHLIGHTS
* Revenues through own operations increased 5% to £6.0m (H1 08: £5.7m)
+ European sales and marketing operations strengthened with acquisition
of the minority interest in Laboratorios Novo Pharma SL in Spain
* Revenues through marketing partners increased 118% to £10.2m (H1 08: £4.7m)
* This includes:
+ an increase in product sales of 36% to £3.9m (H1 08: £2.9m),
+ the license of US rights to Atopiclair to Graceway for £2.1m
+ the non-cash out-licensing of early stage gynaecology technology to BMG
Pharma for £3.3m
* 25 new distribution agreements covering 16 products in 14 markets, with a
further 14 signed post period
+ This brings the total number of new deals in this financial year to 39,
representing minimum purchase obligations of €3.5 million in the first
year after product launch
* Strong performance of dermo-cosmetics portfolio with revenues increasing by
70% to £2.3m (H1 08: £1.3m)
Grahame Cook, Non-Executive Chairman, commented:
"We are pleased with Sinclair's achievements this half year. The positive half
year performance demonstrates the ongoing strength of Sinclair's business model
and product portfolio. We have continued to grow sales, launch products and
sign new distribution agreements whilst expanding our product portfolio. We are
confident about continuing our positive progress during the second half of the
year."
- Ends -
For further information please contact:
Sinclair Pharma plc Tel: +44 (0) 1483 410 600
Dr Michael Flynn, CEO
Jerry Randall, CFO
Mariyam Rawat, Director of Communications & Investor relations
investorrelations@sinclairpharma.com
Capital MS&L
Mary Clark, Anna Mitchell Tel +44 (0)20 7307 5340
Chief Executive Officer Michael Flynn and Chief Financial Officer Jerry Randall
will present the company's results at a presentation and conference call for
analysts today at 9.30am which will be held at Teathers, 3rd Floor, Berkeley
Square House, Berkeley Square, London W1J 6BU.
Please contact Joanna Whineray at Capital MS&L for further information on Tel
+44 (0)20 7307 5337.
Notes to Editors:
About Sinclair Pharma Plc www.sinclairpharma.com
Sinclair Pharma plc is an international specialty pharmaceutical company. It
has a growing sales and marketing operation that is already present in France,
Italy, UK, Spain and Portugal, and a complementary marketing partner network
that spans more than 80 countries.
"Safe Harbor" Statement under the US Private Securities Litigation Reform Act
of 1995: Some or all of the statements in this document that relate to future
plans, expectations, events, performances and the like are forward-looking
statements, as defined in the US Private Securities Litigation Reform Act of
1995. Actual results of events could differ materially from those described in
the forward-looking statements due to a variety of factors.
*Sinclair's Dermo-cosmetics portfolio contains the following products:
* B.lift a range of corrective dermatology products which are applied as
creams and gels and which have unique matrices that facilitate the
penetration of the active ingredient, Hexapeptide B, a 'botox' mimicking
molecule, to reverse skin wrinkles.
* B.derm a range of patented products containing hyaluronic acid for
sensitive and hyper reactive skin.
* Papulex is a line of cosmetic products specifically targeted at cleansing,
protecting and keeping acne prone skin in good condition. The patent for
this product was granted this year. It has been developed with a unique
combination of ingredients making them suitable for use alone or in
combination with other acne treatments. The Papulex range is available as a
cream, lotion, Isocorrexion, gel and cleanser.
* Méla'Aura, the first dermo-cosmetic skincare range designed and
manufactured by a pharmaceutical laboratory, specifically for people with
darker skin. It gives dermatologists an adapted response to factors such as
dryness and dyschromia. The Méla'Aura range contains a variety of creams
and lotions for both hair and body.
* The derma omnium product range which includes Affina Lift, Genongles and
Bio-Taches. The Bio-Taches range has been developed to treat
hyperpigmentation. Bio-Taches cream contains Biotanoid which is
particularly rich in Arbutin which promotes the inhibition of the enzyme
which is responsible for the synthesis of brown pigment spots.
* The portfolio also includes Fadiamone, Effadiane and Claro
CHIEF EXECUTIVE'S REVIEW
Overview
The first six months of this financial year saw continued progress for
Sinclair, with revenues growing by 56% despite the challenges presented by the
turbulent economic environment. This growth was underpinned by a steady stream
of revenues from products marketed by our own sales and marketing operations,
our extensive marketing partner network, and a significant contribution from
licensing and royalty payments. Careful management of our resources has enabled
us to end the six month period with a cash balance of £2.4m.
The achievements of the first half demonstrate the success of our core strategy
and further advance Sinclair toward realising its ambition of becoming a world
class specialty pharma company.
Operational review
Sales & Marketing
Sinclair's sales and marketing operations
We experienced continued growth in revenues through our own sales and marketing
operations, which rose by 5%.
UK
We have restructured the UK business to focus on specialty dermatology sales.
This resulted in lower sales for the half year but a stronger performance is
anticipated in the second half aided by doubling the sales force through the
collaboration with York Pharma. The team has successfully launched Atopiclair
lotion in the UK and has achieved its first hospital formulary listings in the
UK.
France
The French operation continues to deliver on its strategy and generated £4.7m
in revenues during the six months to 31 December 2008 which represents an
increase of 15% year on year (H1 08 £4.1m).
Spain
Sinclair firmly established its presence in Spain through the acquisition of
the remaining shares in Laboratorios Novo Pharma S.L. This move was
strengthened with the appointment of Santiago Calavia Torres as Operations
Manager of Dermatology and renaming the entity to Sinclair Pharma Espana.
Italy
Following organisational restructuring in Italy at the end of the last
financial year, Sinclair Srl in Italy contributed £0.8m to group revenues
during the period and successfully launched Sebclair Shampoo and Sebclair Scalp
Fluid. It also welcomed Paolo Prioglio as its Sales and Marketing Director.
Marketing partner network
Sinclair's marketing partner network spans over 82 countries and leverages the
experience and local knowledge of our partners to extend the commercial reach
of our product portfolio. This network is managed by our business development
and alliance management team and continues to be a very important part of the
business.
The first half saw the continued geographical expansion of Sinclair's product
distribution with 118% growth in revenues through marketing partners. Product
sales increased 36% to £3.9m. Licensing payments contributed £5.8m to revenues
(H1 08: £1.5m). These include the licence of US rights to Atopiclair to
Graceway for £2.1m and the out-licensing of early stage gynaecology technology
to BMG Pharma for £3.3m.
During the half year, there were 19 launches in 11 markets covering seven
product ranges including the Decapinol and Aloclair product ranges. By
extending the commercial presence of our product portfolio on a global basis,
we aim to provide patients all around the world with an effective solution to
their oral health and dermatological needs.
Sinclair continues to increase its global footprint and during the period
signed 25 new distribution agreements covering 16 products in 14 markets. We
continue our expansion in emerging markets, signing a distribution agreement in
Pakistanwith Ismara, covering 19 Sinclair products. Eight of these agreements
saw the commercialisation of new pipeline products including Herpclair (for
herpes simplex virus), Sinlice (for head lice), Decapinol Perio (for management
of gum pockets in periodontal disease) and T-Go (for the relief of teething in
infants).
Product review
Sinclair has a broad portfolio of products on the market for treating skin and
dental conditions, including the growing range of dermo-cosmetics products. The
products are available through prescriptions and over-the-counter (OTC) and are
at the beginning of their commercial lives. With a broad and growing range of
products Sinclair becomes less susceptible to any single product
underperformance.
Oral Health
Decapinolwas developed for treating and preventing gingivitis and plaque.
During the half year period it generated revenue of £0.2m (H1 08: £0.1m) with a
number of launches in various export markets during the period. In the US we
are closely working with Orapharma to support their launch preparations of
Decapinol in the next financial year.
The Decapinol range was expanded with the addition of the "Decapinol Suite".
This innovative system includes two different options for treating local
periodontal pockets. The first step is professional intervention with Decapinol
Perio, composed of a unique ergonomically designed applicator that is used with
Perio-Vialswhich contain Decapinol solution. The second step is follow-up
domiciliary care with Decapinol gel. These two formulations can be used along
the margins of the sub and supra-gingival and into interdental spaces
Aloclair, Sinclair's product for the relief of mouth ulcers is available in a
rinse, gel and spray format. During the period the global roll out of Aloclair
continued with launches in six markets including Mexico. Aloclair delivered
revenues of £1.0m this half year (H1 08: £0.4m).
Dermatology
Sinclair's dermatology portfolio comprises three product groups: prescriptions,
over-the-counter (OTC) and dermo-cosmetics (which may be promoted to doctors,
pharmacists and the public). This allows us to develop a tailored strategy for
each channel taking into consideration the different patient and promotional
needs.
Atopiclair is a non-steroidal cream registered in the US and EU for the
management of symptoms of atopic dermatitis and contact dermatitis.
Sinclair signed an agreement to sell the US distribution rights and license the
patent for use in atopic dermatitis, pertaining to Atopiclair cream and lotion,
to its US marketing partner Graceway for £2.1m ($3.1million). The payment is
equivalent to the royalties Sinclair would have anticipated to receive from
Graceway over the next five years. Atopiclair sales in the US had been impacted
by the economic environment, in common with other atopic dermatitis treatment
sales in the US.
Atopiclair delivered £1.1m revenue for the period (H1 08: £0.9m). Total
revenues for the year are anticipated to increase as a result of three new
launches in the first half and a number of distribution agreements signed for
Atopiclair during the last 12 months.
Sebclairis a non steroidal treatment for seborrheic dermatitis, a common skin
condition that affects areas of the body with a high concentration of sebaceous
glands. Following the initiation of commercial rollout Sebclair delivered
revenues of £0.3m (H1 08: £0.05m).
Dermo-cosmetics
Sinclair's dermo-cosmetic portfolio* continued its strong growth with revenues
increasing by 70% to £2.3m (H1 08: £1.3m). Revenue contributors in the
dermo-cosmetics range include the B.Lift and B.Derm corrective dermatology
products which generated revenues of £0.3m (H1 08: £0.05m). The B.Lift range
contain unique matrices that facilitate the penetration of the active
ingredient, Hexapeptide B, a 'Botox' mimicking molecule, to reverse skin
wrinkles. The B.Derm range contains hyaluronic acid for sensitive and hyper
reactive skin. Seven new distribution deals have been signed for these products
during the period.
ThePapulex range for acne also experienced growth, generating revenues of £0.5m
(H1 08: £0.4m). This range is specifically targeted at cleansing, protecting
and keeping acne prone skin in good condition. It has been developed with a
unique combination of ingredients making it suitable for use alone or in
combination with other acne treatments. The Papulex range is available as a
cream, lotion, Isocorrexion, gel and cleanser.
Pipeline development
During the period we expanded the future potential of our pipeline and signed
two product development and commercialization deals with BMG Pharma, a
privately-owned US-based company. BMG will be developing and registering a
number of women's health products from Sinclair's pipeline. Sinclair has
in-licensed a range of skin anti-infection products based on patented silver
nanotechnology from BMG. These innovative deals present Sinclair with
significant pipeline development opportunities and new product assets.
R&D update
Product Registrations
During the first half of FY09 we achieved two new product registrations in the
EU. These registrations were the EU approval of Decapinol Perio vials for the
management of gum pockets in periodontal disease and Dermachronic foam for the
treatment of sensitive skin or chronic skin conditions such as atopic
dermatitis, xerosis, psoriasis and eczema.
Clinical publications
Sinclair continues to be committed to generating robust clinical data to
support its portfolio of innovative products. As a result three new
publications were generated and ten clinical abstracts were presented at the
17th Congress of the European Academy of Dermatology and Venereology (EADV)
during September 2008 in Paris.
Financial Review
Highlights
Sinclair recorded its first profitable half year at the EBITDA level since IPO,
recording an EBITDA profit of £2.2m before exceptional items (H1 08: loss of £
1.6m) and basic earnings per share of 4.0p (H1 08: loss per share of 1.1p)
after exceptional items. The results for the six months ended 31st December
2008 show total revenues of £16.2m (H1 08: £10.4m) for the Group. Gross profit
increased by 77% to £11.8m (H1 08: £6.7m) whilst the operating profit for the
six months was £4.1m, after exceptional items (H1 08: operating loss of £0.9m).
This strong performance was driven by sustained sales growth from Sinclair's
own sales operations, as well as its partners, and by a significant
contribution from licence fees and ongoing royalty payments.
Revenue
Total revenue for the six months increased 56% to £16.23m (H1 08: £10.4m).
Product revenue for the six months increased 15% to £9.9m (H1 08: £8.6m).
Growth was driven by a number of products including Decapinol and Aloclair.
Direct sales through own sales and marketing operations
Revenue through Sinclair's own sales and marketing operations increased 5% to £
6.0m (H1 08: £5.7m).
Revenue from our sales & marketing operations was driven by a 15% growth of the
French business and progressive growth of the Italian, Spanish and Portuguese
operations. The UK business was restructured in July 2008 to focus on specialty
dermatology sales in place of sales to dispensing doctors, following the
changes in UK legislation which resulted in the cessation of the dispensing
doctors market. This resulted in lower sales for the half year but a stronger
performance is anticipated in the second half as a result of doubling the sales
force with the York Pharma collaboration and hospital formulary listings.
A breakdown of the contribution from Sinclair's own sales and marketing
operations for the period are summarised below:
H1 09 H1 08
£m £m
France 4.7 4.1
Italy 0.8 0.6
UK 0.2 0.8
Spain & Portugal 0.3 0.2
Total 6.0 5.7
Revenue through marketing partner network
Revenue from our marketing partners for the six month period generated revenues
of £10.2m, an increase of 118% year on year (H1 08: £4.7m). A breakdown is
summarised below:
H1 09 H1 08
£m £m
Product sales 3.9 2.9
Royalties 0.5 0.3
License fees and milestones 5.8 1.5
Total 10.2 4.7
Product sales through marketing partners have grown 36% year on year. This
growth has been primarily driven by Aloclair, Decapinol and Sebclair
During the six months Sinclair recognised license fees and milestones of £5.8m
(H1 08: £1.5m). The main components of this are the agreement with Graceway for
the sales of US distribution rights to Atopiclair Cream and Lotion for £2.1m,
and the non-cash licensing agreement with BMG Pharma for the license of
Sinclair's gynaecological portfolio which contributed £3.3m.
Exceptional items
During the six months there were some exceptional items recorded which were
outside the normal trading activities of the company:
* Foreign exchange gains of £4.4m were recorded during the period on the
translation of an intra-group loan balance as a result of Sterling's
weakening against the Euro.
* Charges of £0.7m in total were recorded for the UK and Italian business
units following a restructuring exercise to optimise efficiency.
* Costs of £0.5m were incurred in relation to the strategic opportunity that
was pursued during the summer.
Operating expenses
Selling, marketing and distribution costs increased to £5.1m from £3.6m last
year. This reflects our increased focus on sales and marketing as well as the
Sterling's weakness which added £0.5m to reported costs.
Administrative expenses and pre exceptional items increased to £5.9m a rise of
just 6%. This includes increases in amortisation and the cost of share-based
payments of £0.6m. Underlying administrative expenses excluding amortisation
and share-based payment costs fell by 2% in the period when the impact of
foreign exchange changes are removed, reflecting our continued commitment to
growing the business while keeping costs under tight control.
Operating profit
Sinclair recorded an operating profit for the six months of £4.1m (H1 08:
operating loss of £0.9m) after exceptional items.
Taxation
The tax credit of £0.4m (H1 08: charge of £0.02m) results from the increase in
the value of the deferred tax asset linked to the value of product rights
acquired with Groupe CS Dermatologie in 2006.
Liquidity & capital resources
Sinclair had cash balances of £2.4m on 31December 2008 (Dec 07: £0.4m). Net
cash inflow during the six months was £0.8m (H1 08: outflow of £3.2m), which
included cash inflow from operations of £1.5m (H1 08: outflow of £2.3m) and
cash used in investing activities of £2.5m (H1 08: £2.2m). Cash inflow from
financing was £1.7m (H1 08: £1.3m), which includes £1.0m, net of expenses, from
an institutional placing of new shares in December 2008.
Earnings per share
Sinclair recorded a basic earnings per share of 4.0p (H1 08: loss per share of
1.1p).
Additions to intangible assets
Additions to intangible assets were £5.7m including from the addiition of the
silver nanotechnology arm to the skincare portfolio (£3.3m) and in-licensed
zinc technology, both of which are non cash transactions. These additions
resulted in an increased amortisation charge of £1.1m (H1 08: £0.6m).
Board and Management changes
In November 2008, Steve Harris stepped down as Non-Executive Chairman. Grahame
Cook, previously the Senior Independent Director, was appointed as
Non-Executive Chairman.
We also announced the appointment of Dr Ross Macdonald as Vice President of
Business Development for North America & South Pacific, responsible for
developing new commercial opportunities for Sinclair with a particular focus on
dermatology products in that region. In December Sinclair welcomed Santiago
Calavia as Operations Manager, Dermatology of the newly created Sinclair Pharma
Espana and Paolo Prioglio as Sales and Marketing Director of Italy Srl.
Outlook
We are pleased to have recorded our first H1 profit at the EBITDA level since
Sinclair's IPO in December 2003. We continue to seegood progress across all
parts of our business with an increase in product sales, new product launches,
licence approvals and new distribution agreements. This progress has resulted
in the generation of a steady stream of revenues for the Sinclair Group and
demonstrates the ongoing strength of Sinclair's business model and product
portfolio.
Sinclair's existing pipeline of products has been bolstered by the technology
and commercialisation agreements with BMG Pharma. The deals present Sinclair
with significant pipeline development opportunities and new product assets. We
believe they will make a valuable and lucrative contribution to our broad
portfolio of innovative products.
The implementation of a short term strategy with clear focus on our long term
ambitions and diligent management of our cash resources has enabled us to grow
revenues by 56% and end the six month period with a £2.4m cash balance.
Combined with our renewed efforts to enhance our internal capabilities,
Sinclair remains well positioned to meet the challenges of the market place
without compromising our deliverables or strategic goals.
In summary, the achievements of the first half demonstrate the success of our
core strategy and further advanced Sinclair toward realising its ambition of
becoming a world class specialty pharma company. We are confident about
continuing our positive progress during the second half of the year.
Dr. Michael Flynn Jerry Randall ACA
Chief Executive Officer Chief Financial Officer
Unaudited Consolidated Income Statement
For the six months ended 31 December 2008
Unaudited Unaudited
Six months ended 31 December 2008 Six months ended 31 December 2007
Notes Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
items items items items
(note 5) (note 5)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 16,245 - 16,245 10,434 - 10,434
Cost of sales (4,413) - (4,413) (3,762) - (3,762)
Gross profit 11,832 - 11,832 6,672 - 6,672
Selling, marketing (5,075) - (5,075) (3,629) - (3,629)
and distribution
costs
Administrative (5,886) 3,179 (2,707) (5,548) 1,642 (3,906)
expenses
Operating profit/ 871 3,179 4,050 (2,505) 1,642 (863)
(loss)
Finance income 6 79 - 79 32 - 32
Finance costs 6 (960) - (960) (79) - (79)
Profit/(loss) before (10) 3,179 3,169 (2,552) 1,642 (910)
taxation
Taxation 395 - 395 (22) - (22)
Profit/(loss) for 385 3,179 3,564 (2,574) 1,642 (932)
the period
Attributable to:
Minority interest - - - - - -
Equity holders of 385 3,179 3,564 (2,574) 1,642 (932)
the Company
385 3,179 3,564 (2,574) 1,642 (932)
Earnings/(loss) per 7 0.4p 3.6p 4.0p (3.0)p 1.9p (1.1)p
share (basic)
Earnings/(loss) per 7 0.4p 3.4p 3.8p (3.0)p 1.9p (1.1)p
share (diluted)
The notes on pages 13 to 18 form an integral part of this condensed
consolidated interim financial information.
Unaudited consolidated balance sheet
31 December 31 December 30 June
2008 2007 2008
Notes £'000 £'000 £'000
Non-current assets
Goodwill 8 55,394 46,019 48,110
Intangible assets 9 22,729 13,387 14,811
Property, plant and equipment 2,052 1,843 1,827
Non-current tax assets 1,000 1,617 708
Other non-current assets 374 502 317
81,549 63,368 65,773
Current assets
Inventories 4,266 3,165 3,380
Trade and other receivables 10 13,218 6,982 14,469
Current tax receivables 57 50 1,580
Cash and cash equivalents 2,400 411 1,052
19,941 10,608 20,481
Total assets 101,490 73,976 86,254
Current liabilities
Financial liabilities - borrowings 12 (4,009) (1,681) (3,108)
Trade and other payables 11 (13,730) (8,962) (11,666)
Deferred income (440) (280) (566)
Current tax liabilities (131) (22) (86)
(18,310) (10,945) (15,426)
Non-current liabilities
Financial liabilities - borrowings 12 (5,187) (1,639) (4,140)
Non-current tax liabilities - (1,296) -
Deferred income (357) (429) (357)
(5,544) (3,364) (4,497)
Total liabilities (23,854) (14,309) (19,923)
Net assets 77,636 59,667 66,331
Equity
Share capital 1,034 935 935
Share premium account 23,131 21,472 21,472
Merger reserve 50,474 50,474 50,474
Other reserves 9,846 2,358 4,198
Retained deficit (6,849) (15,583) (10,760)
Total shareholders' equity 77,636 59,656 66,319
Minority interests - 11 12
Total equity 77,636 59,667 66,331
The notes on pages 13 to 18 form an integral part of this condensed
consolidated interim financial information.
Unaudited consolidated statement of changes in equity
Share Share Merger Other Retained Attributable Minority Total
capital premium reserve deficit to equity interest
reserves holders of equity
the parent
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 935 21,472 50,474 271 (14,775) 58,377 11 58,388
2007
Exchange differences - - - 2,087 - 2,087 - 2,087
arising on
translation of
overseas subsidiaries
Loss for the period - - - - (932) (932) - (932)
Total recognised - - - 2,087 (932) 1,155 - 1,155
income/(expense) for
the period
Share based payments - - - - 124 124 - 124
- value of employee
services
Balance at 31 935 21,472 50,474 2,358 (15,583) 59,656 11 59,667
December 2007
Exchange differences - - - 1,840 - 1,840 - 1,840
arising on
translation of
overseas subsidiaries
Profit for the period - - - - 4,269 4,269 1 4,270
Total recognised - - - 1,840 4,269 6,109 1 6,110
income for the period
Share based payments - - - - 554 554 - 554
- value of employee
services
Balance at 30 June 935 21,472 50,474 4,198 (10,760) 66,319 12 66,331
2008
Exchange differences - - - 5,648 - 5,648 - 5,648
arising on
translation of
overseas subsidiaries
Profit for the period - - - - 3,564 3,564 - 3,564
Total recognised - - - 5,648 3,564 9,212 - 9,212
income for the period
Share based payments - - - - 347 347 - 347
- value of employee
services
Issue of share 99 1,722 - - - 1,821 - 1,821
capital
Share issue expenses - (63) - - - (63) - (63)
Purchase of minority - - - - - - (12) (12)
interest
Balance at 31 1,034 23,131 50,474 9,846 (6,849) 77,636 - 77,636
December 2008
The notes on pages 13 to 18 form an integral part of this condensed
consolidated interim financial information.
Unaudited consolidated cash flow statement
Six months Six months
ended ended
31 December 31 December
Notes 2008 2007
£'000 £'000
Net cash inflow/(outflow) from operati 13 14 (2,213)
ons
Interest paid (413) (51)
Interest paid on finance leases (33) (28)
Taxation recovered/(paid) 1,978 (50)
Net cash generated from/(used in) 1,546 (2,342)
operating activities
Investing activities
Interest received 382 32
Purchases of property, plant and (464) (52)
equipment
Proceeds from sale of property, plant - 10
and equipment
Purchase of intangible assets (1,824) (2,154)
Payment of contingent consideration (237) -
regarding Groupe CS Dermatologie
Purchase of minority interest (317) -
Net cash used ininvesting activities (2,460) (2,164)
Financing activities
Repayments of obligations under (108) (110)
finance leases
Proceeds from borrowings 1,284 1,654
Repayments of borrowings (811) (288)
Proceeds from issue of share capital 1,383 -
Share issue costs (63) -
Net cash from financing activities 1,685 1,256
Net increase/(decrease)in cash,cash 771 (3,250)
equivalentsand bank overdrafts
Cash, cash equivalents and bank (354) 2,604
overdrafts at 1 July
Exchange gains on cash and bank 42 211
overdrafts
Cash, cash equivalents and bank 459 (435)
overdrafts at end of period
Cash, cash equivalents and bank
overdrafts includes:
Cash and cash equivalents 2,400 411
Bank overdrafts (1,941) (846)
Cash,cash equivalents and bank 459 (435)
overdrafts
The notes on pages 13 to 18 form an integral part of this condensed
consolidated interim financial information.
Notes to the unaudited condensed consolidated interim financial information
1. General Information
These interim financial results do not comprise statutory accounts within the
meaning of Section 434-436 of the Companies Act 20065. Statutory accounts
(within the meaning of s240 of the Companies Act 1985) for the year ended 30
June 2008 were approved by the board of directors on 31 October 2008 and
delivered to the Registrar of Companies. The report of the auditors on those
accounts was unqualified but did contain a material uncertainty in respect of
going concern, and did not contain any statement under Section 237 of the
Companies Act 1985.
The Company is a limited liability company, incorporated and domiciled in the
United Kingdom. The address of the registered office is: Unit 4, Godalming
Business Centre, Woolsack Way, Godalming, Surrey, GU7 1XW. The Company has its
primary listing on the London Stock Exchange and a secondary listing on
Euronext in Paris.
This condensed consolidated interim financial information was approved for
issue on 25 February 2009.
2. Basis of preparation
This condensed consolidated interim financial information for the half-year
ended 31 December 2008 has been prepared in accordance with the Disclosures and
Transparency Rules of the Financial Services Authority and with IAS 34,
`Interim financial reporting' as adopted by the European Union. The condensed
consolidated interim financial report should be read in conjunction with the
annual financial statements for the year ended 30 June 2008, which have been
prepared in accordance with IFRSs as adopted by the European Union.
Going concern
The Group had net cash balances of £0.5m at 31 December 2008. The Directors
expect a net cash outflow in the twelve months to 31 December 2009 and
recognise that there will be a need to have increased facilities.
The condensed consolidated interim financial information has been prepared on
the going concern basis which assumes that the Group will continue in
operational existence for the foreseeable future. The Directors have reviewed
the working capital requirements of the Group for the next 12 months, and are
confident that the further facilities required can be obtained. The Directors
have also identified a number of steps that could be taken to improve the
working capital situation, should further facilities not be available in the
timeframe required. The condensed consolidated interim financial information
does not reflect any adjustments that would be required if it were to be
prepared on a basis other than the going concern basis.
3. Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 June 2008, as described in those
annual financial statements, and the following new accounting standards and
interpretations.
The following interpretation to published standards is mandatory for accounting
periods beginning on or after 1 January 2008 but is not relevant to the group's
operations:
IFRIC 11, 'IFRS 2 - Group and treasury share transactions' - The company's
accounting policy for share based compensation arrangements is already in
compliance with the interpretation.
IFRIC 12, 'Service concession arrangements'; and
IFRIC 13, 'Customer loyalty programmes'; and
IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding
requirements and their interaction',
Principal risks and uncertainties
There are a number of risks and uncertainties which 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 results. The principal risks remain those set out on page 20 of the
Group's Annual Report for 2008, a copy of which is available on the Group's
website www.sinclairpharma.com.
4. Segment information
The Group is organised into two operating segments; development, registration
and commercialisation of products through marketing partners and direct sales
and marketing of pharmaceutical products. These segments are the basis on which
the group reports its primary segment information.
Six months ended 31 December 2008 Six months ended 31
December 2007
Business Segments Marketing Direct Total Marketing Direct Total
partners partners
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 10,205 6,040 16,245 4,679 5,755 10,434
Segmental operating 1,801 (930) 871 (1,323) (1,182) (2,505)
profit/(loss) before
exceptional items
Exceptional items 3,179 1,642
Operating Profit/ 4,050 (863)
(loss)
Revenue analysis - an analysis of revenue by category is set out in the table
below:
Six months Six months
ended Ended
31 December 31 December
2008 2007
£'000 £'000
Product revenue 9,873 8,597
Royalties 560 312
Licence fees and milestones 5,812 1,525
16,245 10,434
5. Exceptional Items
Exceptional items represent significant items of income and expense which due
to their nature, size or the expected infrequency of the events giving rise to
them, are presented separately on the face of the income statement to give a
better understanding to shareholders of the elements of financial performance
in the period, so as to facilitate comparison with prior periods and to better
asses trends in financial performance.
Six months Six months
ended Ended
31 December 31 December
2008 2007
£'000 £'000
Foreign exchange gains 4,413 1,963
Restructuring costs (744) -
Aborted acquisition costs (490) (321)
3,179 1,642
Foreign exchange gains of £4,413,000 (2007: gain of £1,963,000) represent the
gain on the translation of an intra-group loan balance. This is a non cash
item.
Restructuring costs of £744,000 include severance costs and costs related to
the re-structuring of Sinclair Pharma UK Limited (formerly Ashbourne
Pharmaceuticals Limited), and Sinclair srl.
Exceptional acquisition related costs were incurred in relation to a strategic
acquisition opportunity during the summer of 2008. These discussions were put
on hold as a result of the market volatility in the autumn of 2008. Costs of £
490,000 were incurred to that point.
In July 2007, exceptional acquisition related costs were incurred in preparing
for a major acquisition. Sinclair was substantially outbid in this transaction
which resulted in a charge of £321,000 to cover professional fees.
6. Finance income and costs
Six months Six months
ended Ended
31 December 31 December
2008 2007
£'000 £'000
Finance costs
Interest on bank loans and overdrafts (319) (49)
Interest due on finance leases (33) (28)
Net foreign exchange losses on financing (492) -
activities
Other finance charges (116) (2)
Finance costs (960) (79)
Finance income
Bank interest receivable 1 16
Other finance income 78 16
Finance income 79 32
Net finance expense (881) (47)
7. Earnings/(loss) per share
The basic earnings / (loss) per share has been calculated by dividing the
profit/(loss) for the period, by the weighted average number of shares in
existence for the period.
Shares held by the Employee's Share Trust, including shares over which options
have been granted to Directors and staff, have been excluded from the weighted
average number of shares for the purposes of calculation of the basic earnings/
(loss) per share.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. Potential ordinary shares of the Company are share
options, warrants and awards. A calculation has been undertaken to determine
the number of shares that could have been acquired at fair value (determined as
the average annual market price of the company's shares) based on the monetary
value of the subscription rights attached to outstanding options, warrants and
awards.
Six months Six months
ended Ended
31 December 31 December
2008 2007
Basic and diluted EPS
Profit/(loss) attributable to equity 3,564 (932)
shareholders (£000)
Weighted average number of shares 88,978,838 87,047,526
Adjustment for share options, warrants and 3,915,407 n/a
awards
Diluted weighted average number of shares 92,894,245 87,047,526
Basic profit/(loss) per share 4.0p (1.1)p
Diluted profit/(loss) per share 3.8p (1.1)p
8. Goodwill
31 December 31 December 30 June
2008 2007 2008
£'000 £'000 £'000
Cost
At 1 July 50,989 45,929 45,929
Additions 381 - 67
Exchange adjustments 6,903 2,601 4,993
At period end 58,273 48,530 50,989
Accumulated amortisation and impairment
At 1 July 2,879 2,511 2,511
Impairment charge - - 368
At period end 2,879 2,511 2,879
Net book value at period end 55,394 46,019 48,110
Additions in the period relate to the purchase of the minority interest in
Laboratorios Novo Pharma SL for €330,000 plus expenses.
9. Intangible Assets
31 December 31 December 30 June
2008 2007 2008
£'000 £'000 £'000
Cost
At 1 July 17,779 11,511 11,511
Additions 5,704 3,274 4,586
Disposals - (423) (491)
Exchange adjustments 3,666 1,133 2,173
At period end 27,149 15,495 17,779
Amortisation and impairment
At 1 July 2,968 1,469 1,469
Charge for the period/year 1,094 633 1,483
Disposals - (22) (51)
Impairment charge - - 13
Exchange adjustments 358 28 54
At period end 4,420 2,108 2,968
Net book value at period end 22,729 13,387 14,811
Additions in the current period relate to the acquisition of the silver
nanotechnology, the zinc technology, and the buy-out of a future royalty
obligation. Additions of £4.7m were from non-cash transactions.
10. Trade and other receivables
31 December 31 December 30 June
2008 2007 2008
£'000 £'000 £'000
Trade receivables 10,596 5,657 12,154
Less provision for impairment of trade (178) (102) (113)
receivables
Trade receivables-net 10,418 5,555 12,041
Other receivables 2,195 638 1,144
Prepayments and accrued income 605 789 1,284
13,218 6,982 14,469
11. Trade and other payables
31 December 31 December 30 June
2008 2007 2008
£'000 £'000 £'000
Trade payables 7,073 4,703 6,418
Other tax and social security 894 550 426
Other payables 1,556 2,054 2,060
Accruals 4,207 1,655 2,762
13,730 8,962 11,666
12. Borrowings
31 December 31 December 30 June
2008 2007 2008
£'000 £'000 £'000
Bank loans 5,097 1,496 4,022
Obligations under finance leases 90 143 118
Non-current borrowings 5,187 1,639 4,140
Obligations under finance leases 164 230 218
Bank loans 1,555 605 1,350
Bank overdrafts 1,941 846 1,406
Other borrowings 349 - 134
Current borrowings 4,009 1,681 3,108
Total borrowings 9,196 3,320 7,248
Borrowings included above are repayable
as follows:
On demand or within one year 4,009 1,681 3,108
Over one and under two years 2,801 644 1,299
Over two and under five years 2,386 989 2,841
Beyond five years, by installments - 6 -
Total borrowings 9,196 3,320 7,248
13. Cash flow from operating activities
Six months Six months
ended ended
31 December 31 December
2008 2007
£'000 £'000
Profit/(loss) before tax 3,169 (910)
Adjustments for:
Finance income (79) (32)
Finance costs 960 79
Share based payment - value of employee services 347 124
Depreciation 254 261
Amortisation of intangible assets 1,094 633
Non-cash purchase of intangible assets (4,381) -
Profit on disposal of property, plant & - (2)
equipment
Profit on sale of product rights - (40)
Increase/(decrease) in provision for doubtful 65 (709)
debts
Exchange gains (6,014) (2,105)
(4,585) (2,701)
Changes in working capital (excluding effects of
acquisitions)
Increase in inventories (259) (831)
Decrease in receivables 4,041 1,784
Increase in payables 943 71
Decrease in deferred income (126) (536)
Net cash inflow/(outflow) from operations 14 (2,213)
14. Related party transactions
During the period ended 31 December 2008, the Group was charged £157,919 (in
the period to 31 December 2007, £176,738 and in the year ended 30 June 2008 £
500,074) by Axcan Pharma (Ireland) Ltd for the cost of Photofrin® sold in the
period less reimbursable costs. At 31 December 2008 the amount owing to Axcan
was £241,170 (31 December 2007 £182,029 and at 30 June 2008 £269,940).
Dr MJ Flynn, Chief Executive Officer is a remunerated Non Executive Director of
Axcan Pharma (Ireland) Ltd.
On 31 October 2008, the Group received unsecured, interest-bearing short-term
loans from certain directors and connected persons as follows:
Received Owed at
31 December
Mr JAP Randall £100,000 £36,000
Mrs S Flynn (wife of Dr MJ £200,000 £200,000
Flynn)
Mr J-C Tschudin €62,500 €62,500
These loans are repayable on 30 April 2009. On 8 December 2008, £64,000 of Mr
JAP Randall's loan was converted into a subscription for 400,000 new ordinary
shares of 1p each at a price of 16p each, as part of the institutional placing.
On 12 November 2008 Dr MJ Flynn agreed to subscribe in cash for 1,739,130 new
ordinary shares of 1p each at a price of 23p, amounting to £400,000. £200,000
remained due at 31 December 2008 and was received on 12 and 20 January 2009,
the delay in settlement arose from administrative difficulties with Dr Flynn's
SIPP.
Also on 12 November 2008, Mr J-C Tschudin subscribed in cash for 217,391 new
ordinary shares of 1p each at a price of 23p, amounting to £50,000.
On 18 November 2008, Mr G Cook subscribed in cash for 400,000 new ordinary
shares of 1p each at a price of 23p, amounting to £92,000.
Statement of directors' responsibilities
The directors' confirm that this condensed consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted by the
European Union, and that the interim management report herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
* an indication of important events that have occurred during the first six
months and their impact on the condensed consolidated interim financial
information, and a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
* material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The directors of Sinclair Pharma Plc are listed in the Group's Annual Report
for the year ended 30 June 2008, with the exception of Mr R S Harris who did
not stand for re-election at the AGM and therefore stood down on 8 December
2008.
By order of the Board
Dr MJ Flynn
Chief Executive Officer
JAP Randall
Chief Financial Officer
26 February 2009
Independent review report to Sinclair Pharma Plc
Introduction
We have been engaged by the company to review the condensed consolidated
interim financial information in the interim financial report for the six
months ended 31 December 2008, which comprises the income statement, balance
sheet, statement of changes in equity, cash flow statement and related notes.
We have read the other information contained in the interim financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated interim
financial information
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed consolidated interim financial information included in this interim
financial report has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the interim financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated interim financial information in the
interim financial report for the six months ended 31 December 2008 is not
prepared, in all material respects, in accordance with International Accounting
Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.
Emphasis of matter - going concern
In forming our conclusion, we have considered the adequacy of the disclosures
made in note 2 of the condensed consolidated interim financial information
concerning the ability of the company to continue as a going concern due to the
uncertainty associated with the company's ability to obtain further facilities,
or generate additional funds. The matters explained in note 2 indicate the
existence of a material uncertainty which may cast significant doubt about the
company's ability to continue as a going concern. These condensed financial
statements have been prepared on a going concern basis and do not include any
adjustments that would result if the company were unable to continue as a going
concern. In view of this material uncertainty we consider that it should be
drawn to your attention but our conclusion is not qualified in this respect.
PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge
25 February 2009
Notes:
(a) The maintenance and integrity of the Sinclair Pharma Plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
