TIDMSALV
RNS Number : 0784C
SalvaRx Group plc
27 September 2018
SalvaRx Group plc
("SalvaRx", or the "Company")
Half Yearly Report to 30 June 2018
SalvaRx Group plc (AIM: SALV), the drug development company
focused on immunotherapy for cancer, announces its interim results
for the six months ended 30 June 2018.
Chief Executive Officer's Statement
We continue to make progress on advancing our products.
iOx Therapeutics Limited (56.95% subsidiary undertaking)
iOx Therapeutics Ltd ("iOx") has been advancing its first set of
products through development. During this period, the company was
granted additional patents covering liposomal formulation of its
iNKT agonist. We also worked with our contract manufacturing
partners to scale up the production to enable large scale runs. In
July 2018, however, we announced a delay to the manufacturing
process of our lead candidate IMM60; we now plan to initiate
multiple human clinical studies next year. iOx also made progress
with its second therapy, IMM65, to enable the determination of the
final formulation. To fund its ongoing research and development
activities, in March 2018 the company announced an issue of US$1
million of unsecured convertible loan notes.
Intensity Therapeutics Inc. (8.5% equity investment)
Intensity Therapeutics reported positive safety data of their
lead product INT230-6 in advanced cancer patients. The clinical
trial continues to accrue patients at multiple sites in the United
States and Canada. The findings have been accepted for presentation
at several upcoming international meetings later this year.
Our remaining portfolio companies - Nekonal Oncology and
Saugatuck Therapeutics - continue to characterize, manufacture and
test their products to enable decision making on further
development.
During the six-month period to 30 June 2018 the Company incurred
an operating loss of GBP1.985 million, of which GBP815,000 related
to an impairment of the Company's interest in RIFT Biotherapeutics
Inc. where activities are on hold while that company seeks further
investment.
Funding
In order to finance the Company's various drug development
programmes and its working capital requirements, in June 2018
SalvaRx Group plc raised US$1 million through two unsecured loan
notes of US$500,000 issued to James Mellon and Gregory Bailey, both
directors and substantial shareholders in the Company.
Proposed disposal of interest in SalvaRx Limited
All the Company's investments and business interests are held by
SalvaRx Limited, its 94.2 per cent. owned subsidiary, following a
group restructuring conducted in March 2017.
Subsequent to the period end, on 14 August 2018, the Company
announced the proposed disposal of its interest in SalvaRx Limited
to Portage Biotech Inc ("Portage"), for a consideration of US$67.5
million, to be satisfied by the issue of new Portage shares
("Disposal").
Concurrent with the Disposal, the Company announced that
Shareholders would receive 18 Demerger Shares (i.e. Portage
consideration shares) for every share in SalvaRx Group plc held on
the Demerger Record Date, such date to be notified in due course
(the "Demerger"). This mechanism allows qualifying Shareholders to
retain an interest in the investments and business interests held
by SalvaRx Limited (through their resultant interest in Portage
following completion of the Demerger).
Portage, a company listed on the Canadian Securities Exchange,
has existing interests in four promising biotech companies and, as
at 24 September 2018, cash resources of approximately US$7.1
million which will be used to fund the ongoing development of the
portfolio of oncology assets owned by SalvaRx Limited.
Given the relatively disappointing performance of the Company's
share price on AIM, the Board determined that the Disposal and the
Demerger are the best way to unlock and maximise value for
Shareholders without causing dilution through raising additional
funds at a price which we believe does not reflect the value of the
Company's underlying assets.
The Disposal and the Demerger are still pending approval from
the shareholders of both companies and from various regulatory
bodies.
It is our hope that the Disposal will further facilitate our
efforts to reach proof of concept and advance our products into
clinical testing. Portage has a history of creating value for its
shareholders - one of its portfolio companies, Biohaven
Pharmaceutical Holding Company Ltd ("Biohaven") (NYSE:BHVN), was
the second largest biotech IPO on NASDAQ in 2017. Portage
subsequently announced a distribution in specie of its stock in
Biohaven to its shareholders. Their initial US$7 million investment
was worth in excess of US$100 million at the time of the IPO in
2017, and has almost doubled since then. Biohaven is now worth
approximately US$1.3 billion. Portage has provided seed capital to
four other biotech companies and will seek to evaluate new
opportunities. I am excited at the potential of working with the
Portage team to progress our combined portfolio.
Outlook
Cancer remains a hot area of investment with record amounts of
capital flowing into early stage companies, and being realized
through public offerings. In addition, pharma companies are paying
record amounts for new products. We hope that our exciting pipeline
can offer cancer patients new options for the treatment of their
disease. Thank you for your support as we continue to seek out
creative ways to advance and grow the portfolio and capabilities of
our team.
Dr Ian Walters
Chief Executive Officer
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
Enquiries
SalvaRx Group plc
Ian Walters (Chief Executive) Tel: +1 203 441 5451
Northland Capital Partners Limited Tel: +44 (0)20 3861 6625
Nominated Adviser and Broker
Matthew Johnson / Edward Hutton (Corporate
Finance)
Vadim Alexandre (Corporate Broking)
SalvaRx Group plc
Consolidated income statement
For the six months ended 30 June 2018
Note Unaudited Unaudited Year ended
Six Six 31 December
months months 2017
ended 30 ended 30 GBP'000
June 2018 June 2017
GBP'000 GBP'000
Research and development (557) (570) (1,185)
Exceptional item (Impairment
of investment in associate) 2 (815) - -
Share of losses in associates 2 (16) (96) (309)
Other operating costs (597) (665) (1,422)
Operating loss (1,985) (1,331) (2,916)
Net finance (loss)/income (160) (72) 109
------------ -------------------- --------------------
Loss before tax (2,145) (1,403) (2,807)
Tax 149 15 573
Net loss and comprehensive
loss for the period (1,996) (1,388) (2,234)
------------ -------------------- --------------------
Net loss and comprehensive
loss attributable to
Owners of the company (1,894) (1,091) (1,744)
Non-controlling interest (102) (297) (490)
(1,996) (1,388) (2,234)
------------ -------------------- --------------------
Other comprehensive income
Exchange differences on translating
foreign operations (49) 0 (47)
------------ -------------------- --------------------
Total comprehensive loss for
the period (2,045) (1,388) (2,281)
============ ==================== ====================
Loss per ordinary shares
Basic and diluted 7 (0.05p) (0.03p) (0.05p)
------------ -------------------- --------------------
SalvaRx Group plc
Consolidated statement of financial position
As at 30 June 2018
Note Unaudited Unaudited
30 June 2018 30 June 2017 31 December 2017
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Investments 2 1,453 1,804 1,480
Investment in associates 2 464 1,046 1,297
Intangible assets 3 911 1,093 1,002
Prepayment 259 - 259
3,087 3,943 4,038
-------------- -------------- -------------------
Current assets
Trade and other receivables 604 139 598
Cash and cash equivalents 1,078 909 570
1,682 1,048 1,168
-------------- -------------- -------------------
Total assets 4,768 4,991 5,206
============== ============== ===================
Liabilities
Non-current liabilities
Convertible loan notes 5 757 - -
Unsecured loan notes 4 2,718 2,034 2,603
Other loans 6 758 - -
Equity derivatives 4 329 276 361
Deferred tax liabilities 154 186 170
4,716 2,496 3,134
-------------- -------------- -------------------
Current liabilities
Trade and other payables 1,040 529 1,106
1,040 529 1,106
-------------- -------------- -------------------
Total liabilities 2,756 3,025 4,240
Net (liabilities)/assets (988) 1,966 966
============== ============== ===================
Equity
Share capital 8 911 911 911
Other reserves 3,065 3,065 3,056
Equity, purchase of own shares (215) (215) (215)
Share-based payment reserves 666 500 573
Accumulated deficit (5,695) (3,455) (3,752)
-------------- -------------- -------------------
Equity attributable to equity holders of the parent (1,268) 806 582
Non-controlling interest 280 1,160 384
Total equity (988) 1,966 966
============== ============== ===================
SalvaRx Group
Consolidated statement of cash flows
For the six months ended 30 June 2018
Note Unaudited Unaudited Year ended 31 December
six months ended 30 June six months ended 30 June 2017
2018 2017
GBP'000
GBP'000 GBP'000
Loss for the period (1,996) (1,388) (2,281)
Adjustments for:
Deferred taxation (149) (15) (573)
Impairment of investment 815 - -
in associate
Amortisation 91 91 182
Share of losses in associates 16 96 309
Share-based payments 93 118 191
Finance cost 160 29 118
Foreign exchange (212) - (249)
Operating cash flows before
movements in working capital (1,182) (1,069) (2,303)
(Increase)/decrease in
receivables 4 (105) (76)
(Decrease)/increase in payables (66) 234 434
-------------------------- -------------------------- --------------------------
Cash used in operations (1,244) (940) (1,945)
Taxation received 188 - 54
Net cash outflow from operating
activities (1,056) (940) (1,891)
-------------------------- -------------------------- --------------------------
Investing activities
Investment in associates - - (1,413)
Purchase of investments - (1,419) -
Prepaid equity option - (259)
Net cash used in investing
activities - (1,419) (1,672)
-------------------------- -------------------------- --------------------------
Financing activities
Proceeds from the issue 758 - -
of other short term loans
Proceeds from the issue - 2,295 -
of unsecured loan notes
Proceeds from the issue of
convertible loan notes 757 - 3,119
Net cash from financing
activities 1,515 2,295 3,119
-------------------------- -------------------------- --------------------------
Net increase in cash and cash
equivalents 459 (64) (444)
Cash and cash equivalents at
beginning of period 570 967 967
Effect of exchange rate on
cashflow 49 6 47
Cash and cash equivalents at end
of period 1,078 909 570
========================== ========================== ==========================
SalvaRx Group plc
Consolidated statement of changes in equity
As at 30 June 2018
Attributable to the owners of the company
Share Other Purchase Share-based Accumulated Equity Non-controlling Total
Capital reserves of own payments deficit attributable interest equity
shares reserves to owners
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
GBP'000
At 31 December
2016 911 3,065 (215) 382 (2,364) 1,779 647 2,426
Shares issued by
subsidiary - - - - - - 810 810
Share based payments - - - 118 - 118 - 118
Net loss for the
period - - - - (1,091) (1,091) (297) (1,388)
---------- ---------- -------------- --------------- ------------------ -------------- ----------------- ----------------
At 30 June 2017 911 3,065 (215) 500 (3,455) 806 1,160 1,966
Conversion of 2016
loan notes - - - - 482 482 (662) (180)
Equity contribution
to non-controlling
shareholders - - - - (79) (79) 79 -
Foreign exchange
gain on
retranslation
of foreign
subsidiaries - - - - (47) (47) - (47)
Share based payments - - - 73 - 73 - 73
Net loss for the
period - - - - (653) (653) (193) (846)
---------- ---------- -------------- --------------- ------------------ -------------- ----------------- ----------------
At 31 December
2017 911 3,065 (215) 573 (3,752) 582 384 966
Share based payments - - - 93 - 93 - 93
Foreign exchange
gain on
retranslation
of foreign
subsidiaries - - - - (49) (49) (2) (51)
Net loss for the
period - - - - (1,894) (1,894) (102) (1,996)
At 30 June 2018 911 3,065 (215) 666 (5,695) (1,268) 280 (988)
========== ========== ============== =============== ================== ============== ================= ================
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2018
1 General information
SalvaRx Group plc (the 'Company' and, together with its
subsidiaries, the 'Group') is incorporated in the Isle of Man,
British Isles under the Isle of Man Companies Act 2006. The address
of the registered office is Commerce House, 1 Bowring Road, Ramsey,
Isle of Man, British Isles, IM8 2LQ.
The principal activity of the Group is drug development,
pre-clinical development with particular focus on developing series
of compounds for cancer immunotherapy.
Basis of preparation
The consolidated interim financial information has been prepared
using policies based on International Financial Reporting Standards
('IFRSs') as issued by the International Accounting Standards Board
(the 'IASB') and as adopted by the European Union (the 'EU'). These
policies and practices are consistent with those adopted in the
Group's financial statements for the year ended 31 December
2017.
The consolidated interim financial statements have not been
audited, and have not been prepared in compliance with
International Accounting Standard ('IAS') 34, 'Interim Financial
Reporting'. In the opinion of the Directors, the consolidated
interim financial information for the period represents fairly the
financial position, results from operation and cash flows for the
period in conformity with generally accepted accounting principles
consistently applied.
These consolidated interim financial statements include the
accounts of the Company and:
i) SalvaRx Limited, ("SalvaRx") incorporated on 6 May 2015 in
the British Virgin Islands. SalvaRx Group plc owns 94.15% of the
company.
ii) IOX Therapeutics Limited ("iOx") incorporated in the U.K. as
a private company (Company Number 9430782) under the Companies Act
2006 on 10 February 2015. SalvaRx Group plc holds 56.95% equity in
iOx.
iii) Saugatuck Therapeutics Limited incorporated in the British
Virgin Islands. SalvaRx Limited holds 70% equity in the
company.
The Group's interim financial statements are presented in pounds
sterling, which is the Group's functional and presentational
currency, and all values are rounded to the nearest thousands
(GBP000) except loss per ordinary share and figures and numbers in
the Notes.
Going concern
As part of their going concern assessment, the Directors have
followed the guidelines published by the Financial Reporting
Council entitled "Guidance on Risk Management and Internal Control
and Related Financial and Business Reporting".
At 30 June 2018, the Group had cash and cash equivalent of
approximately GBP1.1 million. On 8 March 2018, iOx Therapeutics
raised $1m through the issue of a convertible loan and on 26 June
2018 a $1m loan was secured by the Company.
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2018
1 General information (continued)
Going concern (continued)
The Board has prepared cash flow forecasts for the period
through to June 2019. The forecasts indicate that further funding
may not be required over and above existing resources and this
includes repayment of the $1m loan issued on 26 June 2018 which is
repayable within one year. As explained in Note 9, a major post
balance sheet event which involves disposal of all the Company's
operating assets and liabilities for shares of Portage will
significantly reduce cash flow requirements of the Company post
this transaction and will also make more cash resources available
through sale of the Portage shares received in consideration of
the
proposed disposal.
The Directors have prepared this interim statement on the basis
that the proposed disposal will complete given that shareholders
holding over 70% of the equity have already indicated their
approval and that it will therefore provide financial support
necessary for the group to meet its liabilities as they fall
due.
The Group continues to incur losses and transition to
profitability is dependent upon achieving a level of revenues
adequate to support the Group's cost structure and, until doing so,
intends to fund future operations through additional debt or equity
offerings. Should the Group be unable to obtain further finance
such that the going concern basis of preparation were no longer
appropriate, adjustments would be required including to reduce
balance sheet values of assets to their recoverable amounts, to
provide for further liabilities that might arise and to reclassify
non-current assets as current assets.
2. Investments
Unaudited Unaudited 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'001 GBP'002
Available-for-sale investments
Investment in Intensity i 1,453 1,540 1,480
Loan receivable at amortised
cost - -
Nekonal S.A.R.L. - 264 -
1,453 1,804 1,480
-------------- --------------------- ------------------------
Investment in Associates
Nekonal Oncology Ltd iii 464 276 482
RIFT Biotherapeutics ii - 770 815
464 1,046 1,297
-------------- --------------------- ------------------------
i. On 22 April, 2016, the Company acquired 1m Series A preferred
stock in Intensity Therapeutics Inc., a Delaware corporation
("Intensity") for US$2m (GBP1.5m as at 30 June 2017) in cash. All
Series A Preferred stock is convertible into equal number of common
shares in Intensity. On 2 March 2017, the Company transferred this
investment at cost to SalvaRx Limited. The Company's investment
represents less than 10% of the equity of Intensity.
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2017
2 Investments (continued)
ii. The total investment by SalvaRx Limited of US$1,090,000 in
RIFT Biotherapeutics ("RIFT") was converted into a 33% equity
holding. On 6 December 2017, SalvaRx Limited acquired a further
251,798 of Series A preferred stock for a total consideration of
US$349,999. This increased the Group's interest to 34.99%.
Subject to RIFT achieving certain development milestones,
SalvaRx Limited has an obligation to acquire a further 467,626 of
Series A preferred stock for a total consideration of
US$650,000.
In addition, SalvaRx Limited also has the option to invest up to
an additional US$500,000 at the same value of its original
investment. SalvaRx Limited also hold an option to acquire all
outstanding shares of RIFT in exchange for new shares in SalvaRx
Limited on the same basis within 90 days of the milestone
investment referred to above being achieved.
In the six months period to 30 June 2018 RIFT has not achieved
any of the development milestones and so no further investment has
been made. The entity has run out of funding and is currently
seeking additional funding from its other shareholders and
investors to enable it to resume its development activities.
Meanwhile, however, the Directors have taken the decision to impair
the investment to nil resulting in a GBP815,000 exceptional write
off in the period.
Iii. SalvaRx Limited has made a nominal equity investment and a
capital contribution of EUR300,000 in Nekonal Oncology. Nekonal
Oncology has been treated as an associate company by the Group as
the equity interest is 33%.
SalvaRx Limited has an obligation to make a further capital
contribution of EUR300,000 once certain development milstones have
been achieved. As the milestones were expected to be achieved when
the investment was made, this obligation of GBP266,000 has been
included in Trade and other payables.
SalvaRx Limited also has acquired an option from Nekonal SARL
for a one-time fee of EUR300,000 that gives SalvaRx the right to
acquire option shares in any qualifying subsidiary of Nekonal.
As at 30 June 2018, the Board has determined that there was no
evidence of any impairment in the value of the equity investment in
Nekonal and as a result no adjustment was considered necessary in
their carrying value.
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2018
3. Intangible assets
In process research
Unaudited 30 Unaudited 30 31 December
June 2018 June 2017 2017
GBP'000 GBP'000 GBP'000
Cost
Beginning of period 1,457 1,457 1,457
Additions - - -
end of period 1,457 1,457 1,457
--------------- ------------------ ---------------------
Amortisation
Beginning of period (455) (273) (273)
Charge for the period (91) (91) (182)
end of period (546) (364) (455)
--------------- ------------------ ---------------------
Balance at end of period 911 1,093 1,002
-------------------------- --------------- ------------------ ---------------------
The intangible asset arising from the acquisition of the
investment in iOx on 1 July 2015 is being amortised over 8 years,
being the Directors assessment of the period over which the
technologies are likely to be developed and at the end of which
commercial products will hopefully be available for sale. The
remaining life of the intangible asset is 5 years. In the Directors
opinion, the progress of iOx is satisfactory and, there is no
indication of impairment.
4. Unsecured Loan Notes
On 2 March 2017, the liability on the 2016 convertible loan
notes was transferred to SalvaRx Limited and the note holders
immediately converted their loan notes into shares in SalvaRx
Limited at a price of US $250 per share. This gave rise to a 5.85%
equity non-controlling interest in SalvaRx Limited and a credit of
GBP630,000 has been recorded in equity.
On 2 March 2017, the Company announced an offering by its
subsidiary SalvRx Limited of unsecured loan notes of up to US $5
million, carrying a coupon of 7% and repayable in four years. The
loan notes were subscribed in tranches during the year. The holders
of the loan notes were issued US $7,500 of warrant in respect of
each US $10,000 loan note. The warrants vest in the event of a
qualifying transaction and are exercisable at a price of the higher
of US $250 per share and a price reflecting discount to the implied
valuation of SalvaRx Limited. SalvaRx Limited raised US $3,960,000
in unsecured loan notes from the offering reflecting a sterling
value of GBP3,136,000 on issue.
The coupon interest of 7% arising on the 2017 loan notes is
included within accruals as it is payable within one year.
5. Convertible Loan Notes
On 8 March 2018 iOx Therapeutics Limited issued US$1m of
unsecured convertible loan notes. The notes entitle the holder to
interest of 7% per annum and are convertible into ordinary shares
in iOx on the earlier of the first anniversary of the date of issue
of the instrument or the date in which iOx conducts a sale or
listing or it undertakes an eligible third-party fundraising of not
less than $2m.
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2018
6. Other loans
On 26 June 2018, J Mellon and G Bailey made additional loans to
the company of US$500,000 each. Interest is payable on the loans at
7% per annum and the loans are repayable on 20 June 2019.
7. Loss per Ordinary Share
Basic loss per Ordinary Share is calculated by dividing the net
loss for the year attributable to Ordinary equity holders of the
parent by the weighted average number of Ordinary Shares
outstanding during the period. The calculation of the basic and
diluted loss per Ordinary Share is based on the following data:
The calculation of the basic and diluted loss per share is based
on the following data:
Unaudited Unaudited Audited
six months six months Year ended
ended ended 31 December
30 June 30 June 2017
2018 2017
GBP'000 GBP'000
GBP'000
Loss
Loss for the purposes of basic loss
per share from continuing operations
being net loss attributable to equity
holders of the parent (1,894) (1,091) (1,744)
Number of shares
Weighted average number of Ordinary
Shares for the purposes of basic
profit/(loss) per share 36,467,123 36,466,619 36,467,123
Loss per Ordinary Share GBP GBP GBP
From continuing operations
Basic and diluted (0.05p) (0.03p) (0.05p)
The weighted average number of shares for the purpose of
calculating the basic and diluted measures is the same. This is
because the outstanding share options would have the effect of
reducing the loss per ordinary share and therefore would be
anti-dilutive under IAS 33 Earnings per Share.
8. Share capital
Unaudited Unaudited
30 June 2018 30 June 2017 31 December
2017
Number GBP'000 Number GBP'000 Number GBP'000
in 000 in 000 in 000
Authorised
Ordinary
Shares of
2.5p each 80,000 2,000 80,000 2,000 80,000 2,000
============ ================ ============ ================== =============== ==================
Issued and
fully paid
Ordinary
Shares of
2.5p each 36,467 911 36,467 911 36,467 911
============ ================ ============ ================== =============== ==================
The Company has one class of Ordinary Shares, which carry no
right to fixed income.
SalvaRx Group plc
Notes to the interim financial statements for the six months
ended 30 June 2018
8. Share capital (continued)
The Company has 3,182,828 options issued and outstanding as at
30 June 2018 of which 836,264 options have not yet vested. These
options expire between February 2018 and March 2021 and are
convertible into equal number of Ordinary shares of the Company at
an exercise prices ranging from 23.2p to 71p per share.
iOx has 2,599 options issued and outstanding as at 30 June 2018
of which 1,035 options have not yet vested. These options expire
between 2020 and 2022 and are convertible into equal number of
Common shares of iOx at an exercise price of GBP120 per share.
9. Post balance sheet events
On 14 August 2018, the Company announced that it had entered
into a conditional sale agreement for the
disposal of its interest in Salvarx Limited to Portage Biotech
Inc. for a consideration of US$67.5 million to be
satisfied by the issue of approximately 758 million shares in
Portage.
Concurrent with the Disposal, it is proposed that not less than
656 million Portage shares will be transferred to the shareholders
of the Company on a pro-rata basis.
The Company will be seeking shareholders' approval to undertake
the Disposal and Demerger at the 2018
AGM.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SEEFWMFASELU
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