Celadon Pharmaceuticals plc

("Celadon" or the "Company" or the

"Group")

Unaudited Interim results for the six

months ended 30 June 2024

London, 30 September 2024 - Celadon Pharmaceuticals Plc (AIM: CEL), a UK-based pharmaceutical company focused on the development, production and sale of breakthrough cannabis-based medicines, today announces its unaudited condensed interim results for the six months ended 30 June 2024 (the "Period").

Strategic and operational highlights

·      Entered into strategic collaboration with Valeos Pharma A/S post Period end to:

o  license Celadon's intellectual property in facility design, cultivation techniques and operating processes;

o  license Celadon's genetics; and,

o  accelerate Celadon's ability to supply pharmaceutical grade EU-GMP cannabis cultivated by Valeos to its existing and prospective European customers.

·      Successfully completed 12 harvests from Phase 1 grow facility.  Now anticipate completing 16 harvests in 2024.

·      Design for Heating, Ventilation and Air Conditioning system for Phase 2 of Celadon's facility now completed.

·      First supply of a small amount of product to customer in the US.

·      Delays in delivery to two UK customers due to delays in onboarding new external testing laboratories, which have now been resolved.  Inventory of £0.3m at 30 June 2024.

·      Cash of £2.65m received (gross of fees) in, and subsequent to, the Period from equity raises.  A further £0.4m remains due from a committed equity subscription in relation to the 10 May equity fundraising.

Financial highlights for the Period

·     Revenue of £63k (30 June 2023: £8k)

·     Operating loss of £2.3 million (30 June 2023: £3.2 million)

·     Loss before tax of £2.4 million (30 June 2023: £4.4 million)

·     Cash balance as at 30 June 2024 of £16k (30 June 2023: £1.6 million).  Cash at 27 September 2024 of £0.5m.

·     As announced on 12 August 2024, there has been a delay in receiving funds due on a £1m draw down request on the Group's £7m committed credit facility, with £0.3m received to date.

·     Ongoing discussions with a small number of potential institutional investors about entering into substantial longer term debt facilities.

James Short, CEO of Celadon, commented:

"The Period has been one of significant operational and strategic progress against the ambitious targets we set out at the beginning of 2022 and ahead of the Company's admission to AIM. Unfortunately, the delays in receiving funding from a committed shareholder and lender have caused the progress of the business to slow. 

"The Group continues to receive a significant number of inbound requests to supply the Group's EU-GMP pharmaceutical products and is confident of being able to make progress on delivering these when the anticipated funding has been received. 

"The strategic collaboration with Valeos has the opportunity to accelerate the Group's ability to supply product to its existing and prospective European customers and to accelerate the point at which the Group becomes profitable.

"I am grateful for the continued support shown by our shareholders as we pursue our primary mission of improving the quality of life for patients most in need."

Investor Presentation: 3:30pm BST, Wednesday 9 October 2024

Management will be hosting a live presentation and Q&A session relating to the interim results at 3:30pm BST on Wednesday 9^th October 2024 via the online platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and attend the presentation via the following link: https://www.investormeetcompany.com/celadon-pharmaceuticals-plc/register-investor

Questions can be submitted pre-event and at any time during the live presentation via the Investor Meet Company platform.

Enquiries:

Celadon Pharmaceuticals Plc

James Short                                                                                                       Via Sodali & Co

Jonathan Turner

Canaccord Genuity Limited (Nominated Adviser and Broker)

Bobbie Hilliam / Andrew Potts                                                                   +44 (0)20 7523 8000

Global Investment Strategy UK Limited (Joint Broker)

James Sheehan                                                                                                                +44 (0)20 7048 9400

Sodali & Co

Elly Williamson / Sam Austrums / Nick Johnson /                               +44 (0)20 7250 1446                                                         

​celadon@sodali.com

About Celadon Pharmaceuticals Plc

Celadon Pharmaceuticals Plc is a UK based pharmaceutical company focused on the research, cultivation, manufacturing, and sale of breakthrough cannabis-based medicines. Its primary focus is on improving quality of life for chronic pain sufferers, as well as exploring the potential of cannabis-based medicines for other conditions such as autism. Its 100,000 sq. ft UK facility is EU-GMP approved and comprises indoor hydroponic cultivation, proprietary GMP extraction and manufacturing and an analytical and R&D laboratory. Celadon's Home Office licence allows for the commercial supply of its GMP pharmaceutical cannabis product. The Group owns an approved clinical trial using cannabis-based medicinal products to treat chronic pain in the UK. Celadon also has a minority interest in early-stage biopharma Kingdom Therapeutics which is developing a licensed cannabinoid medicine to treat children with Autism Spectrum Disorder.

For further information please visit our website www.celadonpharma.co.uk

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

Chief Executive Officer's Report

Introduction & Overview

I am pleased to present Celadon's interim results for the six months ended 30 June 2024. The Period has been one of significant operational and strategic progress against the ambitious targets we set out at the beginning of 2022 and ahead of the Company's admission to AIM.

At Celadon, our mission is to improve quality of life for patients most in need by developing breakthrough cannabis-based medicines. To unlock this opportunity, we are pursuing a strategy to open up the UK market by combining domestic production of pharmaceutical-grade medicinal cannabis with the clinical evidence generation that is required to support prescribing by doctors, and research into future cannabis-based medicines.  Celadon has also entered into contracts to supply two UK based customers and an initial customer in Europe and has shipped a small amount of product to a customer in the US.  Following the recently announced strategic collaboration with Valeos Pharma A/S ("Valeos") is about to establish a medical cannabis distribution entity in Denmark.

Celadon's aim is to become a leader in breakthrough cannabis-based medicines, capitalising on our early-mover advantage in a highly regulated market as one of only three UK companies of our kind with the licences to cultivate and manufacture pharmaceutical-grade cannabis in the UK for commercial sale.

Operational Progress

UK Customers

Following obtaining the full set of regulatory licences in 2023, Celadon has been cultivating high quality medical cannabis plants for supply to pharmaceutical companies and medical cannabis clinics in the UK.  Cultivation continues to progress well with 12 harvests having been completed so far in 2024.  We anticipate being able to complete 16 harvests this year, an increase from the 15 originally planned.  Celadon's Cultivation team continues to improve the yield generated from its crops above and beyond the significant yields being generated.

In the year to 31 December 2023, Celadon won its first contracts to supply medical cannabis to customers in the UK.  Celadon supplied its first product to these customers in December 2023, and has continued to service these customers during the first half of 2024.  Legalisation of medical cannabis only took affect at the end of 2018 and the wider medical cannabis infrastructure in the UK has taken time to develop.  As a result there have been some initial delays in supplying product due to onboarding new external testing laboratories causing revenues in the first half to be lower than anticipated.  Now that these testing facilities are in place, on an annualised basis, these contracts are anticipated to generate approximately £1.5m of revenue.

Overseas Customers

In November 2023, Celadon won a contract with a leading European medicinal cannabis company that has the potential to generate revenue of up to £8.7 million annually.  The Group had originally anticipated supplying this contract from Phase 2 of its 100,000 sq ft Midlands facility.  As noted below, the recently signed strategic collaboration with Valeos will give Celadon access to a substantial amount of EU-based cultivation space, thus allowing Celadon to utilise Phase 2 of its facility, once completed, to supply to the growing UK and international market.

Celadon's reputation for producing high quality, high THC medical cannabis continues to prompt a number of inbound enquiries for product such as the request for a small shipment of two different medical cannabis products to a long established American business.

Phase 2 Facility Fit Out

Having completed the physical build of Phase 2, the most significant remaining part of the fit out of Phase 2 at Celadon's facility in terms of both time and cost, is the installation of Heating, Ventilation and Air Conditioning ("HVAC") system.  Delays in obtaining funding have meant that it has not been possible to progress the fit out as anticipated, but subject to funding being received, the fitting of the HVAC system is expected to commence in Q4 FY2024.

CANPAIN Trial

Given the limited amount of funds available to the Group, progress on formally re-launching the CANPAIN Trial has been slow.

Strategic Progress

In September 2024, the Group entered into a strategic collaboration (the "Collaboration") with Valeos to, inter alia, accelerate the Group's ability to supply product to its existing European customer.  Valeos is a successful Danish company that specialises in EU-GMP production of medical cannabis., with manufacturing facilities in Holeby, Denmark.  Valeos' existing manufacturing facilities are capable of producing an estimated 1.5 tonnes of pharmaceutical grade medical cannabis Active Pharmaceutical Ingredients finished to EU-GMP standards per year.

The Collaboration will see Celadon license the intellectual property ("IP") it has developed in facility design, cultivation techniques and operating processes to Valeos.  The aim of licensing this IP to increase the product quality and yield from Valeos' growing rooms by up to 100% - ie to increase cultivation capacity to c.3 tonnes per annum. 

Celadon will also licence some of its genetics to Valeos, and Valeos will grow these on behalf of Celadon, allowing Celadon to eliminate a number of supply chain inefficiencies in supplying its existing and potential European customers.

Valeos is expected to commence cultivation for Celadon's European customer in Q1 2025.

Strategic Developments

Celadon is working with a number of healthcare providers and medical cannabis clinics to assist them in evaluating the potential to improve treatment for existing conditions by using cannabis-based medicinal products ("CBMPs").

Funding

As announced on 10 May 2024, the Group raised £2.1 million via a Placing and Subscription in May 2024, with £0.75 million of the proceeds being payable over a three-month period until August 2024.  Receipt of £0.4 million of these funds has been delayed.  The Group has also experienced delays in receiving amounts due under a draw down from its £7 million Committed Credit Facility provider following an initial draw down request of £1 million, of which £0.3 million has been received to date. 

The Company has not received any further cash from the £0.4 million owed from the Placing and Subscription and £0.7 million due from the Committed Credit Facility provider (the "Delayed Funding"), since the last update on its financial position made on 11 September 2024.  Based on the current forecasts of the Company, the cash resources available to the Company are expected to finance the working capital requirements of the Company through to December 2024, with the Company continuing to manage its cash position and assuming careful creditor management.  While the Directors remain confident of receiving the funds from the Delayed Funding, and there is a legal requirement on both parties to make payment, the Board notes the significant delayed timeframe of payment which raises uncertainty that the funds will be received.

Given the Group's reliance on the receipt of the Delayed Funding and its Committed Credit Facility to ensure it has the ability to continue as a going concern, the Group is in discussion with both its existing lender about receiving further amounts on the Committed Credit Facility, but also a small number of other potential lenders about entering into longer term debt facilities that would allow refinancing of the Committed Credit Facility to ensure that the Group continues to have access to sufficient funds.  In the event that it is not possible to borrow further amounts on the Committed Credit Facility, or to refinance it, there is a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern.

Outlook
While the UK market for CBMPs is early in its development, the growing demand for CBMPs internationally indicates the potential path for the UK market.  As such, we are increasingly optimistic around the medium to long-term sector outlook and the prospects for Celadon and the wider medicinal cannabis market.  We need to resolve the short term funding challenges for Celadon, and then we can look forward to finishing the fit out of our Phase 2 grow facility and building on the Collaboration with Valeos so that we can both be producing CBMPs that so many patients will be able to benefit from. 

James Short

CEO

Financial overview

Revenues - in the six months ended 30 June 2024, the Group recorded revenues of £63k (six months ended 30 June 2023: £8k, year ended 31 December 2023: £75k).  Revenue from the sale of medical cannabis products is recognised at the time that the customer has the risks and rewards of ownership. 

Cost of sales - includes all costs of cultivation and production for the medical cannabis products sold in the Period. 

Fair value adjustment - in accordance with IAS41 (Biological Assets), the Group is required to estimate the fair value of the medical cannabis in cultivation (referred to as "Biological Assets").  This fair value is based on the anticipated sales revenue less the anticipated costs to sell the product. 

After the medical cannabis has been harvested, but before it can be sold it is necessary for the harvested plants to be dried, trimmed and further processed.  Whilst in this post-cultivation state, the cannabis plants are referred to as Agricultural Products.  The fair value of the Biological Assets is treated as the carrying value of the Agricultural Products.  As such, the fair value adjustment represents the anticipated profit from the cultivation activities in the Period.  The fair value adjustment for the six months ended 30 June 2024 was £338k (six months ended 30 June 2023: £nil, year ended 31 December 2023: £74k).

Gross profit - for the six months ended 30 June 2024 the Group reported a gross profit of £350k (six months ended 30 June 2023: loss of £26k, year ended 31 December 2023: £75k). The gross profit represents the realised and unrealised profit from the cultivation and sale of the Group's medical cannabis products.

Operating costs - include all people costs, property costs (including utilities, repairs and maintenance), marketing, and legal and professional costs. These totalled £2.3 million in the six months ended 30 June 2024, and were lower than the operating costs for the six months to 30 June 2023 of £2.9 million (year ended 31 December 2023: £5.5 million) as a result of a lower salary base and reduced spend on consultants.

Operating loss - is gross margin less operating costs, depreciation and amortisation. The operating loss for the six months ended 30 June 2024 was £2.3 million (six months ended 30 June 2023: £3.2 million, year ended 31 December 2023: £5.9 million). 

One off and non-cash items - in this reporting Period, and the comparator period there were a number of non-recurring and non-cash items below Operating Profit, which are detailed as follows:

Transaction related costs in the six months ended 30 June 2024, six months ended 30 June 2023 and year ended 31 December 2023:

Transaction related costs - a £0.2 million charge arose in the Period to 30 June 2024 in respect of an internal reorganisation of the Group's intellectual property ownership and entry into the strategic collaboration with Valeos Pharma A/S.  The £0.6 million charge in the Period to 30 June 2023 in respect of due diligence costs for a potential transaction, and on certain internal reorganisations.  Similar transaction related costs for the year to 31 December 2023 totalled £0.7 million. 

Profit on Disposal of Harley Street (CPC) Limited

On 8 March 2024, the Group disposed of its investment in Harley Street (CPC) Limited for a consideration of £0.5 million payable over three years.  At the time of the disposal, the only activity conducted by Harley Street (CPC) Limited was the operation of a CQC registered clinic.  The assets relating to the CANPAIN Trial had been transferred to Celadon Property Co Limited during 2023.  The Group had impaired the value associated with the goodwill on its investment in Harley Street (CPC) Limited in the year to 31 December 2022. 

Long term incentive plans - the Group has two share based long term incentive plans for certain directors, advisors and employees; the Subsidiary Incentive Scheme and a separate Long Term Incentive Plan. 

In the six months to 30 June 2024, the total charge in respect of the long term incentive plans was £54k (six months ended 30 June 2023: £420k, year ended 31 December 2023 £285k).

Finance charges on leased assets - Celadon has a Right of Use lease on its production facility with over 20 years remaining. There is also a 3 year Right of Use lease on one item of production equipment, with 1 year left to run. The finance charge on these leased assets of £296k is a fair valuation charge to unwind the respective balance sheet lease liabilities (six months ended 30 June 2023: £289k, year ended 31 December 2023: £581k).

Loan interest charges - In the period to 30 June 2024, Celadon's had drawn on two different external funding lines: a) a UK Government backed COVID related Bounce Back loan; and b) a Committed Credit Facility from a High Net Worth individual. 

The external loan interest charged on the Bounce Back loan in the Period was £0.2k (six months ended 30 June 2023: £0.4k, year ended 31 December 2023: £1k). 

The interest charged on the Committed Credit Facility in the period to 30 June 2024 was £0.5k (six months to 30 June 2023: £nil, year ended 31 December 2023: £0.3k).

Non Current Assets at 30 June 2024 were £6.8 million, a reduction of £0.1 million from the position at 30 June 2023 of £6.9 million (31 December 2023:  £6.7 million).  This reduction was due to the depreciation of the Group's plant and machinery and amortisation of the Group's intangible asset totalling £0.2 million and a reduction in the Right of Use asset of £0.2 million, offset by the recognition of deferred consideration due on the sale of Harley Street (CPC) Limited of £0.3m.

Current Assets at 30 June 2024 were £1.7 million, a reduction of £0.9 million from the position at 30 June 2023 of £2.6 million (31 December 2023: £2.5 million).  The decrease since June 2023 reflects the utilisation of the cash to fund the operating expenses for the business and facility expansion by £1.0 million, offset by an increase in trade receivables and the fair value of the Biological Assets and Agricultural Products. 

Current Liabilities at 30 June 2024 were £0.9 million, a reduction of £0.5 million from the position at 30 June 2023 of £1.4 million (31 December 2023: £1.0 million).  The decrease is due to the reduction in Trade and Other Payables.

Non-current liabilities at 30 June 2024 were £5.1 million, an increase of increase by £0.1 million from the position at 30 June 2023 of £5.0 million (31 December 2023: £5.1 million).  The increase compared is as a result of an increase in the lease liability and the provision in respect of the property decommissioning costs of £0.1 million.

Net assets - at 30 June 2024 were £2.5 million (30 June 2023: £3.0 million, 31 December 2022: £3.2 million).

Shareholders' Equity - Share Capital including Share Premium and the Merger Relief Reserve total £92.8 million at 30 June 2024 (30 June 2023: £88.3 million and 31 December 2023: £91.2 million), the increases have been due to share allotments in October and December 2023, and in May 2024; the Reverse Acquisition Reserve of £59.2 million (which is the consolidation reserve created on the reverse acquisition of combining Summerway Capital Plc and Celadon) remained constant; the Retained losses increased to £32.7 million (30 June 2023: £27.9 million, 31 December 2023: £30.7 million).  The Non-controlling Interest of £23k at 30 June 2024, 30 June 2023 and 31 December 2023 relates to the Subsidiary Incentive Scheme.

Cash outflows from operating activities - for the six months ended 30 June 2023 were £2.6 million (six months to 30 June 2023: £3.0 million, year ended 31 December 2023: £6.0 million). The main items of expenditure include staff, advisers and utility costs.

Investing activities - in the period ended 30 June 2024 capital expenditure totalled £59k (30 June 2023: £208k, year ended 31 December 2023: £341k). In the period to 30 June 2024, the Group received the first instalments of the disposal proceeds due on the sale of Harley Street (CPC) Limited of £33k.  The remaining £467k is due in instalments until March 2027.

Financing activities - in the six months ended 30 June 2024, the Group raised £1.6 million of new equity financing (net of allocated issue costs, which were specifically related to the fundraise process), with a further £0.4 million of subscription proceeds still anticipated at the date of this report. 

Cash balance - at 30 June 2024 the Group had £16k in cash (30 June 2023: £1.6 million, 31 December 2023: £1.3 million).

Post balance sheet events - on 11 September 2024, the Group announced that it had raised a further £1.0 million of equity funding by a placing of 2,625,000 ordinary shares at a placing price of £0.40 per share.

Going Concern - the Group has received £2.65m (gross of fees) of funding via equity raises since May 2024, with a further £0.4m due. 

The Group is selling products to customers and the strategic collaboration recently entered into with Valeos will allow the Group to be able to supply products to its European customer worth up to £8.7m per annum - which should significantly reduce the Group's cash outflow.  Sensitised cashflow forecasts for the next 12 months indicate that by utilising its £7m Committed Credit Facility, the Group should have sufficient funds to be able to continue as a going concern for the next 12 months.

As previously announced the Group has experienced some delays in receiving amounts requested on its loan draw downs, although the lender has continued to express their intention to support the business.  The Group is in discussion, both with the existing lender, but also new potential lenders about refinancing the Committed Credit Facility to put in place a longer term funding solution.  In the event that it is not possible to borrow further amounts on the Committed Credit Facility, or to refinance it, there is a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern.

Jonathan Turner

CFO