Corporate Profile
Chairman’s Statement 20th May 2010
Highlights
- Breakeven point of the Company has substantially reduced due to cost reduction. Administration costs down by 39% and development costs down by 81%.
- Major new licensees appointed.
- Improved balance sheet. Current liabilities reduced by 23% despite credit crunch.
Financials
We can take some significant positives for the future from 2009 despite showing a disappointing drop of 39% in sales. In particular these positives were as we spell out below - a dramatic reduction in costs, bringing the Company’s breakeven point down significantly, an improved balance sheet and further distributors signed up.
The sales drop was primarily the result of the fact that we had received very large orders from our North American licensee in the first half of 2008, which satisfied its demand into 2009. As we then only had Metagenics and Golgi as distributors, clearly our sales pattern was significantly influenced by this. Since then, however, we have signed further contracts with new licensees and this makes us much less dependent on any one single distributor. As sales in the second half of 2009 were £46,000 (the fourth quarter were £26,000), and quarterly sales in the first quarter of 2010 are above that level, we may now have reached a situation where we have sufficient contracts to even out quarterly sales.
Most importantly, however, our loss before tax for the year was almost halved from £1.5m to £758,000. This was achieved by significant reduction in costs and allowed the Company to continue to operate on reduced parameters and also lowered the breakeven point for the Company. I would remind shareholders that the loss in 2007 was £2.6m. This fall in costs reflects the action taken in early 2008 to enable the Company to survive the very difficult funding conditions following the severe economic crisis. This continues although perhaps lessening in severity. In specific terms the items were:
- Administrative costs reduced by 39% from £1,176,224 to £719,569. Included within administrative costs are non-cash items of £238,774 so the cash expenditure on administration was actually £480,795. The largest reduction within this item was staff costs, which in cash terms were reduced from £457,056 to £262,271 in 2009.
- Development costs reduced by 81% from £411,938 to £79,648. This reflected the slowing down of our development programme as we seek to exploit it commercially. As we show under Scientific Development there was actually some further development work taking place which was of no cost to ReGen.
Turning now to the balance sheet our total current liabilities have been reduced by 23% from £541,491 to £416,511. In view of the restricted capital markets during 2009 we regard this as a significant achievement and have plans in hand to reduce this still further. During 2009 we raised £691,185 and this enabled the Company to continue rolling out Colostrinin™ and improving its balance sheet to a limited extent.
Commercial development
Colostrinin™ roll out widens - New Developments:
Cyprus
The agreement with Golgi Pharmaceuticals Ltd of Cyprus under the brand name ‘Cognase’ was extended on 25 March 2009 to allow them to distribute Colostrinin™ in Greece and other Balkan countries. On the same day a further agreement was signed with Golgi to allow them to tablet and package Colostrinin™ in Cyprus. As part of this arrangement Golgi directly invested £28,000 in cash into ReGen in exchange for 700,000 shares priced at 4p per share. This represented at the time 3.4% of the enlarged share capital of the Company and was a 33% premium to the previous placing on 2 March 2009.
Poland
Following the test marketing by Tagerr, a professional services and trading company established in Cologne, Germany, Tagerr has successfully launched Colostrinin™ in Poland and has been slowly increasing its demand.
Turkey
On 29 January 2009 ReGen signed an agreement with Eczacibasi Ilac Pazarlama A.S., a leading Turkish industrials group, as the exclusive distributor of its nutraceutical product Colostrinin™, under the brand name ‘Dyna’ in the Republic of Turkey. Eczacibasi is now launching ‘Dyna’ in Turkey and has paid ReGen a $50,000 milestone payment. Net revenues to ReGen from Eczacibasi pursuant to the minimum annual purchase commitments in the distribution agreement are estimated to be $52,000 in the first year after regulatory approval is obtained and $104,000 in the second year.
India
On 27 April 2010 ReGen signed a Supply Agreement with an Indian Company based in Mumbai, India.
The ReGen Board regards this as a crucial step for two reasons. Firstly, it provides entry into the second most heavily populated market in the world and one where self treatment is an integral part of healthcare. Secondly, India, along with China, is one of the two major growth drivers of the world economy. Thus, for these reasons a consumer launch in this market has significant potential for ReGen’s long term profitability.
UK
PRG Nutraceuticals Limited launched ‘MemoryAid’ in the UK via the internet on the 1st October 2009.
China
China, with India, is a major potential market for ReGen, both because of its size and a tradition of self medication. We are currently engaging ICUK (a UK based British and Chinese Government Consultancy) to introduce us to key players in the Chinese market.
Existing Licensees
Our major partner is still Metagenics Inc., who were taken over by Alticor during 2009. This takeover would have contributed to the fact that they did not reorder active material from us for almost one year. An additional problem was that for a period of time Colostrinin™ fell foul of a review of the Australian regulations relating to colostrum products which meant it could not be sold in Australia, by Metagenics’s subsidiary company who order through the US. This problem has now been resolved. We now are led to believe there will be a relaunch of Colostrinin™ in the US in the latter half of 2010.
Scientific development
Although ReGen has cut back its research spending, as it now believes it is time to capitalise on its research output, some research carried out in prior periods was reported in 2009. Also some of our former paid collaborators have continued to produce research out of their own funding.
Colostrinin™:
In the autumn of 2007 we announced that a micro array analysis of peptides derived from Colostrinin™ at the University of Texas Medical Branch (UTMB) had shown that certain peptides had a capacity to change gene expression in areas involved in obesity and Alzheimer’s disease. It was therefore decided to explore certain peptides further with a view to developing them to the status of pre-clinical pharmaceutical candidates. On 12 March 2009 we announced the successful completion of the first stage of this exercise.
Alzheimer’s disease:
In an in-vitro study using neuronal cells two synthetic peptides (RG-01 and RG-018) have shown significant impact on expression of genes involved in beta-amyloid generation and degradation pathways. Controlling beta-amyloid generation could have important implications in Alzheimer’s disease.
Anti-obesity:
In an in-vivo study on obesity Colostrinin™, as well as three peptides in combination, have been shown to significantly reduce the body weight gain of mice when fed a high fat diet (HFD).
The obesity data could be used to create another nutraceutical product and indeed a large European food company is considering doing further work on this.
Backing up the work in Alzheimer’s disease Professor Michael Stewart of the Open University has co-authored a paper showing further evidence of Colostrinin™ activity in reducing cytotoxicity related to Alzheimer’s disease. Professor Stewart said:
“Alzheimer’s disease is the most common form of dementia affecting 18 million people worldwide. It is characterised by extra cellular senile plaques consisting mainly of aggregated amyloid-beta and intracellular neurofibrillary tangles containing the cytoskeletal protein tau. A recent study by Froud et al. in Journal of Alzheimer’s Disease1 has demonstrated that Colostrinin™ significantly relieves amyloid-beta induced cytoxicity”.
1 J Alzheimers Dis. 2010 Feb 17. (Epub ahead of print) Colostrinin Alleviates Amyloid-beta Induced Toxicity in Rat Primary Hippocampal Cultures. Froud KE, Wardhaugh T, Banks D, Saffrey MJ, Stewart MG Department of Life Sciences, Open University, Walton Hall, Milton Keynes, UK.
Zolpidem:
A study confirming the zolpidem effect in brain damage was presented at the 4th International Congress on Brain and Behaviour on 3 – 6 December 2009 in Thessaloniki, Greece by Dr Ralf Clauss. 23 of 41 consecutive adult patients, at least 6 months after brain damage, were selected as neurologically disabled patients after scoring less than 100/100 on the Barthel Index. Causes of brain damage included stroke (12 subjects), traumatic brain injury (7 subjects), anaphylaxis (2 subjects), drug overdose (1 subject) and birth injury (1 subject). The selected 23 patients had a baseline SPECT scan before starting daily zolpidem therapy and a second within two weeks of therapy, performed 1 hour after receiving 10 mg oral zolpidem. Scans were designated as improved when at least two of three independent assessors detected improvement after zolpidem. The rest were designated non-improved.
After four months of daily zolpidem therapy, the clinical condition of subjects was rated on the Tinetti Falls Efficacy Scale (TFES) before and after zolpidem. The TFES ratings of all subjects and scan improvers and non-improvers were compared statistically.
Mean overall improvement after zolpidem on TFES was 11.3% from 73.4/100 (SD 25.4) to 62.1/100 (SD 28.8) (p=0.0006). 10/23 (43%) improved on SPECT scan after zolpidem. Their mean TFES improvement was 19.4% (SD 16.75) compared with 5.17% (SD 5.167) in 13/23 non improvers (p=0.0081).
Summary
The Company has survived the credit crunch by implementing a severe cost reduction programme, but as my review of the year shows the business side has been expanded despite this. We still continue to believe that during 2010 the Company will move to sustainable profitability.
I would like to thank the shareholders and in particular our funders during 2009 for their very significant support at a time when money was very difficult to raise.
Percy W Lomax
Executive Chairman
