Final Results
Press Release
For release: 5th October 2010: 7.00 AM
Preliminary Results to the 30 June 2010
Epistem Plc (LSE: EHP), the rapidly growing UK biotechnology and Personalised Medicine company announces today its preliminary results for the year to the 30 June 2010.
The 2009/10 financial year saw Epistem continue to build on last year's strong performance.
The year's results saw an impressive 45% increase in year-on-year turnover and a growth in after tax profit for the Company.
Highlights
· Year-on-year sales up 45%
· All divisional sales increased over the year
· Formation of a new Personalised Medicine division
· Development of GenedriveTM 'Point of Care' mobile molecular diagnostic device
· Growth in Group profit and increased Earnings Per Share
· Strengthened cash balance with continuing strong trading outlook
For further details please contact:
Epistem Plc
Matthew Walls: Chief Executive Officer +44 (0)7887 501998
John Rylands: Finance Director
KBC Peel Hunt Ltd
James Steel +44 (0)207 418 8900
Vijay Barathan
De Facto Communications Ltd
Mike Wort, Anna Dunphy +44 (0)207 861 3838
Chairman's Statement
I am delighted to report significant growth and ongoing improvement in Epistem's results for the year ended 30 June 2010.
Whilst market and trading conditions have remained volatile, the Company continues to invest in and strengthen its foundations and enjoyed a further exceptional year in difficult times.
Results
Further details of the results for the period are covered in the Chief Executive Officer's review, but operationally and financially the year to 30 June 2010 saw the Company increase revenues by 45% to £5.7m (2009: £4.0m) with a Group profit on ordinary activities before taxation of £0.4m (2009: Loss £0.7m). Based on this improved trading performance the Company generated an after tax profit of £0.3m (2009: £0.1m). Cash reserves at the end of the period were £5.4m (2009: £3.7m).
During the year the Company continued to make significant progress across each of its divisions:
· Contract Research Services revenues grew by 10% to £2.5m (2009: £2.3m). The extension of our service offerings and continued expansion of our US government bio-defence contract enabled the division to deliver a solid performance over the year. With market uncertainties still persisting, the division continues to build on its core scientific strengths to provide a firm platform for future growth.
· Biomarker revenue growth was marginally increased over the year at £0.8m (2009: £0.7m), though this masked the significant effort underway to position the division for future growth. As part of our growth strategy to continue to develop this arm of the business whether through the addition of new technologies or through M&A, we are today announcing the creation of our Personalised Medicine division which expands on our Biomarker technology to provide a newly created 'Point Of Care' offering and the unveiling of our 'on the spot' molecular diagnostic platform GenedriveTM.
· The Novel Therapies division research and development collaboration with Swiss based Novartis AG continued to develop over the year with the division reporting its first full year revenue of £2.4m (2009: £1.0m). New drug targets are continuing to emerge, with the Novel Therapies division positioning itself to create a pipeline of early stage development targets. The timings of license opportunities and future development funding though remains difficult to accurately predict.
· Strengthened investor relations continue to advance the visibility of the Company, with the £3.0m placing in November 2009 bringing several new institutional investors to the share register.
· The Company now reports its second year of profits and a growth in its earnings per share to 3.8p (2009: 1.1p).
Outlook
Epistem continues to build on its scientific and technical strengths as it transforms into a diverse, technology leading, and profitable biotechnology and personalised medicine group underpinned by strong revenue growth. Against a backdrop of market uncertainty, Epistem remains vigilant, with the outlook for the expanding group increasingly positive.
Despite the tough market conditions, each divisional business is establishing itself for growth in its chosen segment. The Contract Research Services division buoyed by the expansion and anticipated extension of the US biodefence contract is expected to perform well over the coming year, with the newly formed Personalised Medicine division and its disruptive biomarker and diagnostic technologies providing further support for the Epistem's future growth. The Novel Therapies drug discovery collaboration with Novartis is nearing completion of its first phase, with the emergence of a newly formed group of identified hits/leads. Whilst the timing of license and development opportunities remains difficult to judge, we remain optimistic about the growing strength of our hit/lead programme. Epistem continues to refine its discovery and development technology to position itself as a world leader in therapeutic discovery in the field of epithelial stem cell regulation. With the profile and visibility of each of our business divisions increasing, we expect to see the Company advance quickly over the coming year.
I would like to thank the Chief Executive Officer for his leadership and navigation of the Company during these difficult times. I would also like to thank the Board and our employees for their effort and commitment in driving Epistem's progress over the past year, as well as our investors whose valued support has provided a stable platform for our continued growth.
David Evans
Chairman
5th October 2010
Chief Executive's Review
Against the backdrop of changing times and economic uncertainty Epistem continues to make excellent progress in building itself into a globally recognised Drug Discovery and Personalised Medicine company.
The financial results for the Group presented in this announcement reflect the results for the Group's sole trading subsidiary for the year to 30 June 2010 and for the comparative period to 30 June 2009.
Headline progress over the year included;
· Year-on-year net sales up 45%.
· The Company reports its second year of profit growth and an increase in earnings per share.
· Novel Therapies sales increased to £2.4m, £1.4m increase over the previous year.
· Biomarker sales increased 19% year-on-year and now forms part of the newly created Personalised Medicine division.
· Development of our new GenedriveTM 'Point of Care' mobile molecular diagnostic device
· Contract Research sales increased by 10% over the previous year.
· A strengthened cash balance of £5.4m and improved trading outlook.
Integrated business model
The Company continues to progress its integrated business model, with each division targeting revenue growth and profitability. The establishment of independent divisions has created a strong portfolio of growing and profitable business units rarely seen in a biotechnology business model. Epistem provides a financially robust business, whilst offering the potential of significant financial upside from our Novel Therapies, Personalised Medicine and Contract Research Services divisions. We continue to enhance and exploit our integrated core competence in epithelial cell biology, whilst retaining commercial independence across each of our divisions.
Financial review
The Company reports a turnover of £5.7m (2009: £4.0m) for the year ended 30 June 2010. Revenues were underpinned by the Contract Research Services division, which delivered sales of £2.5m (2009: £2.3m) a 10% year-on-year growth. The Biomarker division (now forming part of the Personalised Medicine division) saw sales marginally increased to £0.8m (2009: £0.7m), with the Novel Therapies division reporting increased sales of £2.4m (2009: £1.0m).
Consolidated territory revenues were split US 79% (63%), EU 14% (19%) and UK 7% (18%), the US territory figures continue to be strengthened by our US government and Novartis collaborations and represents a major growth market for the Company.
Sales growth in Contract Research Services delivered a 28% increase in operating profit of that division, with operating profit up to £0.7m (2009: £0.6m). Increased Biomarker sales were partly offset by growing investment in our Biomarker and Diagnostics developments and the set up of our new US Biomarker operations to record a small loss for the year. Novel Therapies reported a significant increase in operating profit of £1.0m (2009: Loss £0.2m) driven by a full year's funding of £1.4m from the Novartis collaboration and £1.2m revenue recognition from the up-front payment which is being spread over the length of the contract. Central administration cost increased by £0.2m to £1.3m (2009: £1.1m) primarily due to increased staff costs and professional fees.
The Group reported profit for the year was £0.3m (2009: £0.1m) with headcount in the company now at 51 (2008: 45).
Cash reserves at the end of the year were £5.4m (2008: £3.7m) benefiting from improved trading and funding from the November 2009 £3.0m placing.
Earnings per share increased to 3.8p per share (2009: 1.1p).
Clear investor communication of the Company's strategy and performance remains a key element of our success and we will continue to strengthen communications as we embark upon our next phase of growth.
The Company's annual audit was completed in October 2010 by HW Chartered Accountants, and their audit report will be included in the annual accounts.
Operating review
Contract Research Services
Over the financial year, Contract Research Services delivered a 10% year-on-year growth in revenue. Whilst market conditions remained challenging, our specialist preclinical services continued to expand and develop its business mainly with the larger pharmaceutical / Biotechnology groups.
Revenue increases were seen in our major US and EU markets, with the UK territory now representing the smallest territory in terms of revenue generation. Interestingly, only 4 years ago, the UK had been our major market. Our mucositis and inflammatory bowel disease models showed the greatest gain over the year supported by our new assays and technical developments. Our new client relationships and aggregate contract values also continued their trend of year-on-year increase over the year.
The US National Institutes of Health's biodefence programme continues to make good progress and continues to expand marking a significant milestone in our tests for agents which may treat radiation sickness following a nuclear incident. We enjoy a business relationship with the US biodefence group which is based on many years of close working and we expect this to continue over the forthcoming years.
A solid start to the new financial year and our focus on specialist testing of preclinical drug compounds in our core disease areas continues to provide an attractive business model from which we anticipate further growth over the coming year.
Personalised Medicine
Following last year's formation of the Biomarker division, we have now expanded our Diagnostic assay developments alongside our Biomarker technology to create a new 'Personalised Medicine' division. The oncology Biomarker business saw continued revenue growth over the year and the set up of the new US Biomarker office. We anticipate that US business expansion will continue to underpin our business development with the division poised to accelerate its revenue generation over the coming year. Our hair biomarker continues to engage with a growing customer base and provides a powerful measure of drug-induced gene expression for use in pre-clinical and clinical studies. Use of our technology to identify drug induced oncology genes (oncogenes) in molecular pathways is driven by the regulatory authority requirements to show that developmental drugs are effectively targeting these oncogenes. Our highly sensitive amplification technology, RNA-AmpTM which underpins our Biomarker technology has also recently been launched in a simple to use kit form.
We are also unveiling our new GenedriveTM 'Point Of Care' (POC) molecular diagnostic device for 'on the spot' patient diagnosis. GenedriveTM is a unique, mobile and proprietary electronic device which targets a rapid molecular diagnostic assessment (sub 30 mins) for use in clinics, hospitals, surgeries as well as lending itself to OTC opportunities. The device is expected to have other marketing opportunities in veterinary, food and industrial use. We expect the device to bring a new 'standard of care' to the rapid diagnosis of pathogens and other molecular diseases.
Whilst technical and development risks may still arise around each of our platforms, over time these continue to reduce. Validation of the new GenedriveTM system is now underway, with beta site clinical testing expected to start towards the end of this year with the launch of the device anticipated in the first half of next year.
The Personalised Medicine market is forecast to grow considerably over the next few years driven by effective patient treatment, increasing regulatory requirements and patient specific drug development and our platform technologies are well positioned to capitalise on this market growth.
Novel Therapies
The Novel Therapies collaboration with Novartis is now in its second year and we are seeing the emergence of the first hits/leads from the Regenerative Medicine programme. Whilst these hits/leads are still at the discovery stage, the core cell biology and signalling pathways which regulate the cell/stem cell are becoming clearer and better understood as we identify which genes and pathways regulate specific characteristics of the cell. Our relationship with Novartis remains strong and we will be advancing each of our hit/leads under the collaboration over the coming year as we move into the next phase of development. Despite our confidence in the collaboration programme, the timing of potential licenses and future funding remains difficult to judge with accuracy. With the first phase of the discovery collaboration now nearing completion, discussions around the second phase of hit/lead development and future licensing/ funding will continue into next year.
Aside from the Novartis collaboration, we have also commenced a focused small molecule programme to establish our own proprietary agents which regulate the signalling pathways and biology of the cell. This will allow us to develop our own drug leads and reinforce our lead position in the regulation of epithelial cells and stem cells, focused in the disease areas of regenerative medicine and oncology.
We will continue to evaluate our other drug discovery and development opportunities with the major industry players over the forthcoming year to identify new lead developments and to expand our discovery and early stage development platform.
Current trading and outlook
Epistem continues to diversify its portfolio of business opportunities and strengthen its technology whilst maintaining profitable and sustainable growth. The past year has seen further strong operational and financial development across each of our divisions with each division developing its own independent strategy for growth.
Trading in the first three months of the new financial year continues strong with revenues 15% ahead of the comparative period last year.
The next phase of Epistem growth will continue to strengthen and build on each of our divisional operations. We continue to supplement our management team with world class, innovative individuals who fit with the culture and dynamism of the Company. We will also build on our corporate and board strength and supplement our scientific advisory board and advisory committees as appropriate.
Our shareholder interest and support remains strong and we will ensure that our ongoing investor communications continue to grow this relationship.
A strengthening operational and financial position confirms our belief that the year ahead will continue to generate substantial increases in our forecast revenues and growth ambitions. We remain selective in considering complementary technology, acquisitions and in-licensing, with few opportunities thus far meeting our high expectations. We continue to remain vigilant in our outlook in these uncertain times.
Our ambition remains firmly fixed on building shareholder value by providing a high margin, diverse and rapidly growing portfolio of world class technologies.
I would like to thank the Board, management and employees for their outstanding performance over the past year. I would also like to thank our investors for their continued close support and interest in our exciting and rapidly growing Company.
Matthew H Walls
Chief Executive Officer
5 October 2010
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2010
2010 2009
£000 £000
|
Revenue |
5,740 |
3,968 |
|
|
|
|
|
Contract costs |
(2,697) |
(2,424) |
|
Discovery and development costs |
(1,433) |
(1,131) |
|
General administrative costs |
(1,298) |
(1,114) |
|
-------------------- |
-------------------- |
|
|
Operating Profit/Loss |
312 |
(701) |
|
Finance income |
40 |
41 |
|
|
Finance costs |
(2) |
(9) |
|
|
|
------------------------------- |
----------------------------- |
|
|
Profit/Loss on ordinary activities before taxation |
350 |
(669) |
|
|
Taxation on ordinary activities |
(60) |
752 |
|
|
|
|
-------------------------------- |
------------------------------ |
|
Total Comprehensive Income for the financial year |
|
290 |
83 |
|
|
|
================================= |
============================== |
|
Earnings / (Loss) per share (pence) |
|
|
|
- Basic |
3.8p |
1.1p |
|
- Diluted |
3.3p |
1.0p |
CONSOLIDATED BALANCE SHEET
As at 30 June 2010
2010 2010 2009 2009
£000 £000 £000 £000
Non-current assets
|
Intangible assets |
|
|
135 |
|
139 |
|
Plant and equipment |
|
|
608 |
|
465 |
|
Deferred taxation |
|
|
536 |
|
594 |
|
|
|
-------------------- |
|
-------------------- |
|
|
|
|
1,279 |
|
1,198 |
|
Current assets
|
Trade and other receivables |
|
1,011 |
|
820 |
|
|
Tax receivables |
150 |
|
150 |
|
|
|
Cash and cash equivalents |
5,371 |
|
3,748 |
|
|
|
|
-------------------------- |
|
--------------------------- |
|
|
|
|
6,532 |
|
4,718 |
|
|
|
|
--------------------------- |
|
--------------------------- |
|
|
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Deferred income |
|
974 |
|
1,380 |
|
|
Trade and other payables |
|
1,014 |
|
721 |
|
|
Obligations under finance leases |
|
37 |
|
46 |
|
|
Corporation taxation |
|
2 |
|
- |
|
|
Bank overdrafts and loans |
|
- |
|
52 |
|
|
|
--------------------------- |
|
--------------------------- |
|
|
|
|
|
2,027 |
|
2,199 |
|
|
|
|
|
|
|
|
|
Net current assets |
|
4,505 |
|
2,519 |
|
|
|
---------------------------- |
|
----------------------------- |
||
|
Total assets less current liabilities |
5,784 |
|
3,717 |
||
|
Non-current liabilities |
|
|
|
|
|
|
Deferred income |
|
|
- |
|
(920) |
|
Obligations under finance leases |
|
|
- |
|
(37) |
|
|
|
---------------------------- |
|
--------------------------- |
|
|
Net Assets |
|
5,784 |
|
2,760 |
|
|
|
|
============================= |
|
=========================== |
|
Capital and reserves
|
Called-up equity share capital |
|
|
119 |
|
108 |
|
Share premium account |
|
|
11,206 |
|
8,467 |
|
Employee share incentive plan reserve |
|
|
(43) |
|
- |
|
Share options reserve |
|
|
633 |
|
606 |
|
Reverse acquisition reserve |
|
|
(2,484) |
|
(2,484) |
|
Retained earnings |
|
|
(3,647) |
|
(3,937) |
|
|
|
|
------------------------------- |
|
-------------------------------- |
|
Total shareholders' equity |
|
|
5,784 |
|
2,760 |
|
|
|
|
=============================== |
|
=============================== |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2010
2010 2010 2009 2009
£000 £000 £000 £000
Cash flows from operating activities
Operating profit/(loss) for the year 312 (701)
Depreciation, amortisation and impairment 169 131
Share based payment expense 28 71
__________ __________
Operating profit/(loss) before changes in
working capital and provisions 509 (499)
(Increase) in trade and other receivables (191) (383)
(Decrease)/increase in deferred income (1,326) 2,300
Increase in trade and other payables 293 293
__________ __________
Net cash (outflow)/inflow from operations (715) 1,711
Interest received 40 41
Tax received - 183
________ _______
40 224
__________ __________
Net cash (outflow)/inflow from
operating activities (675) 1,935
Cash flows from investing activities
Acquisition of fixed assets (308) (328)
________ ________
Net cash outflow
from investing activities (308) (328)
Cash flows from financing activities
Proceeds from issue of share capital 2,884 24
Expenses of share issue (135) -
Purchase of own shares (43) -
Repayment of borrowings (48) (53)
_________ _________
Net cash inflow/(outflow) from financing activities 2,658 (29)
__________ _______________
Net increase in cash equivalents 1,675 1,578
Cash and cash equivalents at beginning of year 3,696 2,118
__________ _________
Cash and cash equivalents at end of year 5,371 3,696
========== =========
Analysis of net funds
Cash at bank and in hand 5,371 3,748
Bank overdrafts - (52)
___________ _________
Net funds 5,371 3,696
========== =========
NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2010
Business segments
Contract Person-
Research alised Novel Un-
Services medicine Therapies allocated Total
£'000 £'000 £'000 £'000 £'000
Twelve months ended 30 June 2010
Revenue 2,519 800 2,421 - 5,740
Segment trading result 759 (51) 1,067 (1,265) 510
less depreciation and amortisation (31) (36) (80) (22) (169)
less equity-settled share-based payments) (6) (12) - (11) (29)
Operating profit/(loss) 722 (99) 987 (1,298) 312
Twelve months ended 30 June 2009
Revenue 2,295 670 1,003 - 3,968
Segment trading result 607 51 (103) (1,054) (499)
less depreciation and amortisation (37) (24) (53) (17) (131)
less equity-settled share-based payments (7) (19) (2) (43) (71)
Operating profit/(loss) 563 8 (158) (1,114) (701)
Geographical segments
2010 2009
£'000 £'000
United Kingdom 412 687
Europe 782 762
United States of America 4,524 2,508
Asia 22 11
5,740 3,968
Earnings per share
Basis of Calculation
The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the weighted average number of ordinary shares in issue during the year less the weighted average number of Matching Shares held by the Epistem Share Investment Plan which are not yet vested.
The 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 in relation to share options and share warrants. The number of share options has been adjusted to take into account the issue price and the fair value, consistent with IAS 33, "Earnings per share".
The weighted average number of shares in issue during the year was 7,649,732 (2009: 7,201,928.)
The dilutive weighted average number of shares in issue during the year was 8,725,670 (2009 7,941,300)
This information is provided by RNS
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