Proximagen Neuroscience plc
(the "Company")
 

Audited Preliminary Results for the Twelve Months

Ended 30 November 2007

London, UK, 3 April 2008 – Proximagen Neuroscience plc (AIM: PRX), the drug discovery and development company focused on neurodegenerative diseases, today announces its preliminary results for the twelve months ended 30 November 2007. 

Highlights:

• Encouraging pre-clinical studies from PRX1 program revealed enhanced efficacy compared to levodopa (the gold standard of care treatment for patients with Parkinson’s disease)

• Funding award from Michael J. Fox Foundation for PRX4 giving Elan Corporation plc first option to obtain exclusive worldwide commercial license

• PRX2 program expanded to include new indication of neuropathic pain, a global market worth $2.7 billion, which leverages the Company’s growing expertise with selective neuronal nitric oxide synthase (nNOS) inhibitors

• R&D investment increased by 49% to £2.6m (2006: £1.7m)

• Cash of £8.5m at 30 November 2007 (2006: £11.5m)

Post year end highlights:   

• Strategic Partnership Agreement signed with Boehringer Ingelheim.  According to the terms of the agreement, Boehringer Ingelheim and Proximagen will jointly apply their development resource and expertise to a variety of novel central nervous system (CNS) treatments. 

Commenting on the results, Kenneth Mulvany, Chief Executive of Proximagen, said: 

“I am pleased to report that we have made significant progress at Proximagen during the year.  Our internal PRX programs have demonstrated some encouraging findings and our science has been endorsed by the signing of a key partnership agreement and the receipt of external funding.  We move into 2008 with a strong, diverse, and more advanced pipeline, looking forward to the year ahead as a clinical stage biotechnology company.  I am confident that the Proximagen team has a clear strategic and scientific focus and we have confidence in our prospects for the future.” 

AGM Notice:

The Annual General Meeting will be held at 1:00pm on 28 April 2008 at Buchanan Communications Ltd, 45 Moorfields, London EC2Y 9AE. The Notice of AGM, Annual Accounts and proxy materials will be posted to shareholders today.

For further information, please contact: 

Proximagen Neuroscience plc

Tel: 020 7848 6938

Kenneth Mulvany, Chief Executive    

James Hunter, Finance Director

Buchanan Communications

Tel: 020 7466 5000

Mary-Jane Johnson, Tim Anderson, Catherine Breen

Canaccord Adams Limited (NOMAD)

Tel: 020 7050 6500

Mark Williams, Adria Da Breo

Directors’ report 

Chairman’s statement

Neurodegenerative diseases pose a major therapeutic challenge for the 21st century and Proximagen is working hard to meet these challenges. Neurodegenerative diseases affect millions of people around the world each year and represent major health and quality of life issues. With a growing population of elderly people, these diseases are expected to be one of the largest segments of need in the pharmaceutical market. For most, there is no effective treatment - existing symptomatic therapies are limited and largely only of benefit in the earlier stages of illness.  

That is why we choose carefully and focus on a limited number of drug candidates with great potential. Our programs, detailed later in this report, are novel symptomatic therapies and treatments that are designed to be effective over the entire duration of the illnesses and to avoid current problems and side-effects. Equally urgent is the need for agents that will stop or slow the otherwise inevitable progression of disease.  We are addressing this need through collaborative work with our recently announced industry partners, Boehringer Ingelheim and Elan Pharmaceuticals. In the increasingly competitive landscape that characterizes our industry, we expect our collaborations to be transformational for us by reducing discovery and development time and costs, while increasing productivity and thus the likelihood of success.  

I would like to thank all our staff for their continuing outstanding contribution to Proximagen’s success. Our success is built each day on the individual contributions of our employees. We are constantly striving to foster a work environment where talented individuals come together in multi-disciplinary teams to advance much needed potential therapies. It is this teamwork that can make the crucial difference as we advance scientific breakthroughs from the laboratory bench through to the clinic. 

Proximagen has a strong outlook for 2008 with an advancing and diverse pipeline of drug candidates, two collaborations, and with enthusiasm for the opportunities that our drug programs offer in our focused area of neurodegenerative disease. We expect to continue to generate value from our balanced pipeline, while remaining disciplined in our use of capital and resources. The Board is confident that the Company has a clear strategic and scientific focus, and will build on the progress made in 2007.   

Finally, I would like to thank you, our shareholders, for your steadfast support.  You play a central part in our process of innovation, as we all work together in this challenging and rewarding effort. 

Bruce Campbell

Chairman

3 April 2008

Chief Executive’s review

 I am pleased to report that 2007 was a year of accomplishment and progress for Proximagen. A key achievement was receiving the Novel Approaches to Drug Discovery for Parkinson’s disease (PD) Award presented by The Michael J. Fox Foundation to pursue development of a novel gene therapy.  Elan Corporation provides funding leadership for the development work on this exciting program, and collaboratively we look forward to success on this innovative program. Overall in 2007, we increased our investment in research and development by 49% and advanced our drug candidate programs to important milestones. We also made good progress in expanding our activities into new therapeutic indications by initiating a new program in the area of neuropathic pain.

The financial year 2008 is off to a great start with the recent announcement of our Strategic Partnership Agreement with Boehringer Ingelheim in December 2007. Under the Agreement, Boehringer Ingelheim and Proximagen will jointly apply their development resource and expertise to a variety of novel central nervous system (CNS) treatments, including those associated with Parkinson's disease (PD). The agreement underlines the value of our pipeline but it also serves as a strong endorsement of the scientific excellence on which our programs and future programs are based.

Pipeline advances

Discovery lies at the very core of Proximagen and we remain committed to maximising returns from our pipeline of promising drug candidates for the treatment of PD and other age-related neurodegenerative diseases. While Proximagen is best known for its expertise in PD and in the last year Proximagen’s development pipeline has increased in size and has grown more diverse, reflecting the Company’s ability to pursue treatments in various indications including cognitive decline and neuropathic pain. Our goal is to be able to pursue CNS therapeutic possibilities wherever the scientific and commercial trail leads.

Such an aspiration must begin with a sound and focused strategic approach. Proximagen’s research and development programs are grounded in the neurological sciences, where advancing technology and rapidly expanding knowledge allows the company to pursue the study of disease and the development of potential new therapies at many levels. Proximagen funds internal discovery research programs focused in the area of the CNS and these programs are enhanced and expanded through external research collaborations and strategic partnership opportunities, such as the industry partnerships mentioned above.

Currently, Proximagen has five programs in preclinical trials. The most advanced program is PRX1, a platform of levodopa (L-DOPA) prodrugs for symptomatic treatment of PD, a market worth over $2bn annually. These compounds have been developed to overcome the poor and unreliable absorption profile and short duration of effect that characterise L-DOPA, the current gold standard treatment for PD. A PRX1 drug candidate has been validated in predictive pharmacokinetic and functional models of PD which demonstrated its enhanced efficacy and consistency of response. Proximagen intends to commence a Phase I proof-of-concept clinical trial study later this year.

The PRX2 program is designed as a novel treatment for the uncontrollable movements (termed dyskinesia) that are frequently seen in PD patients. Once established, these involuntary movements are persistent and may become the factor significantly limiting current PD treatment strategies. Our pre-clinical studies indicate that our drug candidates are effective in significantly reducing dyskinesia, and are safe and well tolerated.

While PRX2 compounds were initially evaluated as a treatment for dyskinesia, some of these compounds are now also under evaluation in the treatment of neuropathic pain, a market worth US$2.7bn. Neuropathic pain is a chronic and often progressive condition that seriously impacts the quality of life of patients who suffer from it. PRX2 compounds have been shown to be as effective as L-NG-nitroarginine methyl ester (L-NAME), a potent pain reliever; however, unlike L-NAME, PRX2 compounds do not cause hypertension in pre-clinical models. Lead optimisation is currently underway to improve the pharmacokinetic profile of these compounds.

Another major area of unmet need in age-related neurodegenerative disease is the absence of any available treatments proven to stop or slow disease progression. The Company has published recent data identifying a specific gene product that may provide a naturalistic approach to neuroprotection. Proximagen’s pre-clinical studies as part of the PRX4 program have already shown that this neuroprotective gene product is implicated in the control of many mechanisms associated with the degeneration of neurons in PD. If successful, the treatment may prevent the disease from causing further damage and may even restore normal brain function to patients, reversing the difficulties in movement that characterise the illness.

The PRX5 program is aimed at the symptomatic treatment of Parkinson’s disease and separately in the control of cognitive decline. Insufficient dopamine in certain parts of the brain, as is the case in PD or with the ageing process, leads to impaired working memory and cognitive awareness which can be alleviated by the administration of D1 receptor agonists. Compounds from this program are novel D1 dopamine agonists and have been shown to be orally active, selective, highly potent and long acting in experimental models of PD and in models of cognition. Currently these compounds are in the discovery phase and we are looking to select a lead series to be developed through to Phase 2 proof-of-concept in human patient studies.

Research at Proximagen has always been a streamlined process with those programs showing more visible commercialization opportunities receiving more resources. Only programs that represent true scientific innovations and unmet need are granted a “PRX” program designation number.  Using this standard as a development benchmark makes things more challenging, but demonstrates our commitment to pursuing only those opportunities that present the best chance of generating significant commercial value.

Our service business

During the year we signed four service contracts all of which made an important contribution to the Group’s operations. Revenues for the period were down on 2006 levels - in line with our projections and reflecting the increasing demands of our internal R&D programs on our service resources. We are committed to continue providing services to our valued customers and recognise the value of further strengthening our relationships with these important pharmaceutical companies. Our internal programs must take priority over external service work, and thus we undertake service contracts when resources permit.

Operational review

We continue to be located in offices and laboratories on Guy’s Campus, part of King’s College London, one of the largest biomedical campuses in the United Kingdom.  During the year we took in hand additional laboratory and office space adjacent to our existing facilities in order to accommodate our increased bioanalytical facility and our additional staff.  Whilst we are still a small and nimble Company, we grew our staff numbers by 18% with strategic hires that broadened our capabilities and deepened our expertise. And as our growth continues, we remain committed to building a Company that can attract and cultivate the best possible talents.

We are pleased to report that in 2007, the National Parkinson Foundation again designated our academic facility as a Parkinson’s disease Center of Excellence.

During the period, Proximagen continued to pursue its aggressive intellectual property strategy and four new patent applications were filed based upon the Company’s growing pipeline of in-house discovery initiatives.

To date, the Group has rights to patent applications pending in ten distinct patent families that encompass all aspects of our discovery programs, ranging from specific composition of matter patents to use patents claiming novel mechanisms of actions associated with those programs.
 

Summary

The period under review has been significant for Proximagen and we move into 2008 with a stronger, more advanced and more diverse pipeline of drug candidates than in 2007. We look forward to building on the progress made over the past year as we move towards becoming a clinical stage biotechnology company with the expectations to report further significant events, which will reinforce our ability to generate value from our balanced and focused pipeline.

As always, I would like to thank our employees, who are crucial to the success of Proximagen, for their continued commitment, hard work and enthusiasm. Also, I would especially like to thank our shareholders for their continued support.  We will certainly be working hard over the next year to enhance shareholder value.

Kenneth Mulvany

Chief Executive Officer

3 April 2008

Financial review

Profit and loss account

R&D investment in the Group’s programs rose by 49% over the year with £2.6 million being spent in 2007 compared with £1.7 million in 2006.  The increased investment in our science is accounted for by an increase in scientific staff numbers, our PRX1 program moving to lead candidate status and a full year of discovery chemistry on our PRX5 program.

Our revenues for the year at £0.28 million were down on 2006 levels where we reported revenues of £0.74 million.  As detailed above, this decrease reflects the reduction in capacity we have available for external contracts owing to the progress of our own R&D programs.  Gross margin improved slightly, however, from 55% in 2006 to 58% this year owing primarily to the specific nature of the contracts we undertook in the year.

Overheads for the year were £1.09 million, with the increase over 2006 levels due in part to an increase in non-cash charges of depreciation and expensing for share-based payments under FRS20, the standard adopted by the Group on 1 December 2006.  FRS20 requires companies to adopt fair value accounting for share options in issue and for comparative purposes the 2006 accounts have been restated accordingly.  For the period up to November 30 2006 the charge for share-based payments was £0.064 million and for the year to 30 November 2007 the charge was £0.062 million. 

Interest receivable was £0.55 million in 2007 compared with £0.56 million in 2006, despite operating with significantly lower average cash balances through the year.  These lower balances were offset by higher interest rates in 2007 where we averaged a return of 5.47% on fixed rate deposits compared with return of 4.69% in 2006.

The retained loss for the year was £2.96 million, equating to a loss per share of 14.8p compared with a retained loss in 2006 of £1.65 million and a loss per share of 8.3p.

Balance sheet and cash flow

Net assets at the year end totalled £8.7 million (2006: £11.6 million) with cash and deposits of £8.5 million (2006: £11.5 million).

The decrease in the cash balance of £3.0 million from the previous year is principally accounted for by:

·          Cash outflow from operations of £3.36 million (2006: outflow of £1.9 million)

·          Interest received of £0.49 million (2006: inflow of £0.58 million)

·          Tax credit received of £0.07 million (2006: nil)

·          Capital expenditure of £0.19 million (2006: outflow of £0.18 million)

International Financial Reporting Standards (IFRS)

The Company has adopted IFRS for its financial year beginning 1 December 2007 and therefore these results to 30 November 2007 will be the last produced under UK GAAP.  The first financial results to be reported under IFRS will be the Group’s unaudited interim results for the six months to 31 May 2008.  The Group has assessed the likely impact of the transition to IFRS on the Group’s operations and its financial reporting and this has been reported to the Audit Committee and the Board.

James Hunter

Finance Director

3 April 2008

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 30 November 2007

All Group activities relate to continuing operations.

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the year ended 30 November 2007

CONSOLIDATED BALANCE SHEET AT 30 NOVEMBER 2007

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 November 2007