Final Results
RNS Press Release
For release: 6th October 2009: 7.30 AM
Preliminary Results to the 30th June 2009
Epistem Plc (LSE: EHP), the rapidly growing UK biotechnology company, announced today its preliminary results for the period to the 30 June 2009.
Exceptional growth
The 2008/09 financial year saw Epistem continue to build on last year's outstanding performance.
The year's results saw an impressive 92% increase in year-on-year turnover and a maiden after tax profit for the Company.
Highlights
-
Year-on-year sales up 92%
-
Contract Research Services 20% sales growth
-
Biomarker sales growth and maiden divisional profit
-
Announcement of Regenerative Medicine collaboration with Novartis AG
-
Maiden Group profit and positive Earnings Per Share
-
Strengthened cash balance with improved trading outlook
For further details please contact:
Epistem Plc
Matthew Walls CEO +44 (0)7887 501998
John Rylands CFO
Piper Jaffray Ltd
Neil Mackison / Rupert Winckler +44 (0)203 142 8700
Corporate Broking: Jamie Adams
De Facto Communications Ltd
Mike Wort / Anna Dunphy +44(0)207 861 3838
Chairman's Statement
'An exceptional year in challenging times'
Dear Shareholder,
I am delighted to report a number of significant achievements and a continuing improvement in the Epistem results for the year ended 30th June 2009.
Despite uncertain market and trading conditions Epistem has enjoyed another exceptional year in challenging times.
Results
Further details of the results for the period are covered in the Chief Executive's Review, but operationally and financially the year to 30 June 2009 saw the Company increase revenues by 92% to £4.0m (2008: £2.1m) with a Group loss on ordinary activities before taxation of £0.7m (2008: Loss £1.3m). Based on future profitability and the benefit of the prior year losses' tax credit, the Company generated its first after tax profit of £0.1m (2008: Loss £1.2m). Cash reserves were £3.7m (2008: £2.1m).
During the year the Company continued to make significant progress across each of its divisions:
-
Contract Research Services revenues grew by 20% to £2.3m (2008: £1.9m). The growth was supported by the continuing expansion of our US government bio-defence contract and the launch of new service offerings. Whilst the financial market uncertainties caused some disruption over the year, the division moved carefully through this period, with firmer trading experienced over the second half.
-
In its first full year of operation following the successful share placing in 2007, Biomarker revenues grew to £0.7m (2008: £0.2m) to record a first operating profit for the division. We anticipate further growth in this division over the forthcoming year.
-
The Novel Therapies division announced its first research and development collaboration with Swiss based Novartis AG. The Regenerative Medicine collaboration is targeted at identifying new drug targets and therapeutics across a variety of epithelial disease areas. Under the terms of the agreement, Novartis has paid Epistem an upfront cash payment and provide research funding. If leads are commercialised, Epistem is eligible to receive tiered royalties on worldwide sales.
-
Strengthened investor relations and communications have further advanced the visibility of the Company and we retain a close relationship with our investors to ensure they are kept informed of progress. This close communication has maintained strong growth in the share price performance over the period. In the light of our anticipated future growth we will continue to build on our investor communications.
-
The Company also reports its first positive earnings per share.
Outlook
Epistem is transforming itself into a diverse, technology leading and profitable biotechnology group underpinned by strong growth. Despite the difficult to judge market and trading conditions, the outlook for Epistem is increasingly positive, although we remain vigilant around our future strategy.
Each of our divisional businesses is establishing itself in a rapidly changing biotechnology/companion biomarker segment. Despite tough market conditions, the profitable Contract Research Services division has performed well with the Biomarker division also profitable and growing, providing further support for our forecast outlook. With the Novel Therapies first drug discovery collaboration now in place with one of the largest pharmaceutical companies in the world, we anticipate rapid advancement of our drug discovery and development programme and acceleration of identified leads. Epistem is positioning itself as a world leader in therapeutic discovery in the field of epithelial stem cell regulation and control. With industry awareness and visibility of our technology still growing we expect to see the Company advance further over the coming year.
Finally, I would 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
6th October 2009
Chief Executive's Review
'Strengthening fundamentals for future growth'
Dear Shareholder,
I am delighted to present the third Annual Report for the Company following its admission to AIM in April 2007.
Whilst economic and trading conditions were difficult throughout the year Epistem continued to make excellent progress in building itself into a globally recognised drug discovery and early stage development company.
The financial results for the Group presented in this report have been prepared using merger accounting, reflecting the results for the Group's sole trading subsidiary for the year to 30 June 2009 and for the comparative period to 30 June 2008. Please note that the previous year comparison figures (shown in brackets) have been restated where appropriate to reflect the introduction of the new Biomarker division.
Headline progress over the year included;
-
Year-on-year net sales growth up 92%.
-
The Company reports its maiden profit and positive earnings per share.
-
Contract Research Services sales increased by 20% over the previous year.
-
Strong Biomarker sales giving rise to a maiden divisional profit
-
Novel Therapies division announces its first major collaboration with Novartis AG in the field of Regenerative Medicine.
-
A strengthened cash balance of £3.7m and improved trading outlook.
Integrated business model
The Company has made strong progress over the year, with each division now moving into profitability. The establishment of independent divisional profitability enables the creation a powerful risk-reduced business model seldom seen in the biotechnology sector. Epistem provides a profitable and growing business model whilst offering significant upside potential from our growing Biomarker and Novel Therapies divisions. We will continue to enhance and exploit our integrated core competence in epithelial cell biology whilst retaining commercial autonomy across each of our divisions.
Financial review
The Company reports a turnover of £4.0m (2008: £2.1m) for the year ended 30 June 2009. Revenues were underpinned by the Contract Research Services division, which delivered sales of £2.3m (2008: £1.9m) a 20% year-on-year growth. In its first full year of trading, the Biomarker division saw sales increase significantly to £0.7m (2008: £0.2m). The Novel Therapies division also reported increased sales of £1.0m (2008: £0.0m), resulting from the recently announced collaboration with Novartis AG.
Consolidated territory revenues were split US 63% (41%), EU 19% (31%) and UK 17% (28%), the US territory figures strengthened by our NIH and Novartis collaborations.
The sales growth in Contract Research Services delivered a modest increase in operating profit up to £0.6m (2008: £0.5m). The Biomarker sales growth enabled the division to report a maiden operating profit. Novel Therapies reported a small operating loss of £0.2m (2008: Loss £0.9m). Central administration cost increased by £0.2m to £1.1m (2008: £0.9m) primarily due to increased staff costs and professional fees.
The Group reported profit for the year was £0.1m (2008: Loss £1.2m) with headcount in the company now at 45 (2008: 40).
Cash reserves at the end of the year were £3.7m (2008: £2.1m) benefiting from improved trading and collaboration income.
Earnings per share were 1p per share (2008: Loss 17p).
Against a backdrop of uncertain market conditions, the strengthening Epistem trading position translated into a significant share price increase over the year. 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 on site audit was completed in October 2009 by HW Chartered Accountants, and their Audit report will be included in the Annual Report.
Operating review
Contract Research Services
Over the financial year, Contract Research Services delivered a 20% year-on-year growth in revenue under difficult market conditions. Despite these conditions, our specialist service offerings provided a robust defence against the market weakness with a noticeable increase in revenues from the larger pharmaceutical groups partnering with Epistem for their preclinical and discovery research services.
Revenue growth increased across each of our territories with our oncology and mucositis areas showing greatest gain. Both our new client relationships and aggregate contract values also increased over the year.
Our collaboration with the US National Institutes of Health's biodefence programme continues to expand. Epistem is a main provider of tests for agents which may treat radiation sickness following a nuclear incident. Inflammatory bowel disease and immunohistochemistry models also made good progress over the year.
With the second half of the year returning to a more settled trading position we saw a further uplift in demand for our services. 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.
Biomarker
Reporting separately from the Contract Research Services division for the first time this year, our oncology Biomarker business enjoyed strong growth to report a small maiden operating profit. Under the recently launched brand GenetRxTM, the hair biomarker platform provides a pharmacodynamic (PD) measure of drug-induced gene expression for use in pre-clinical and clinical studies. Continued development of our biomarker platform through partnerships with major pharmaceutical industry players will enable us to create an effective 'companion PD biomarker' to complement drug development from discovery through to market.
With new drug development increasingly targeting specific oncology genes (oncogenes) in molecular pathways, demand for our biomarker is being driven by regulatory authority requirements to show that developmental drugs are effectively targeting these oncogenes and molecular pathways. With 80% of adult cancers derived from the epithelium, our highly sensitive biomarker platform has a significant potential to identify oncology biomarkers over other traditional biomarker methods.
Early technical and development risks around the platform are now much reduced and further validation has been completed with several large pharmaceutical groups including AstraZeneca and Johnson & Johnson. With the global biomarker market forecast to grow considerably over the next few years driven by industry and regulatory needs our biomarker is positioned to capitalise on this market growth.
Increased visibility and roll out of our proprietary platform through presentation and scientific abstracts at the key oncology conferences will further strengthen growth of our biomarker over the coming year.
Novel Therapies
The announcement in March 2009 of the research and development collaboration with Novartis signalled Epistem's first collaboration in drug discovery. Under the terms of the agreement, Novartis have paid Epistem an upfront cash payment of $4.0m and will provide research funding for 2 years. Novartis has an option to exclusively license targets for development of biotherapeutic products in exchange for license fees, milestone payments and royalties. For each product developed from targets licensed under the agreement, Epistem is eligible to receive up to $45.0 million in milestones. Furthermore, if leads are commercialized Epistem is eligible to receive tiered royalties on worldwide sales. Our collaboration with Novartis is progressing well with several programmes engaged in identifying and developing therapeutic leads across a variety of disease areas.
Outside of the Novartis collaboration, there is a growing interest in our drug discovery platform and the role epithelial stem cells play in the mechanisms of tissue renewal and cell generation. Increased awareness of the body's own key soluble regulators of epithelial cells and the 'normal versus abnormal' role which epithelial cells play in disease management is also strengthening collaborative interest with the Company.
We will continue to evaluate our other drug discovery opportunities with the major industry players over the coming year to identify new lead developments and to expand our lead discovery and early stage development platform.
Current trading and outlook
Epistem is transforming itself into a diversified, technology leading and profitable group with sustainable growth. The past year has seen strong operational and financial development across each of our divisions and the establishment of each division as an independent and maturing business model in its own right.
Trading in the first three months of the new financial year continues to build with revenues 20% ahead of the comparative period last year.
The next phase of Epistem growth will continue to build on and firmly establish each of our divisional operations. We will 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.
Shareholder interest and support has been exceptional over the year and we will ensure that our ongoing investor communications continue to grow this relationship.
Our recognised and experienced management team and strengthening operational and financial position confirms our belief that the year ahead will continue to generate substantial increases in our forecast revenues and growth ambition. In addition we will selectively consider complementary technology acquisitions and in-licensing where appropriate. We are not complacent about the task ahead and we remain vigilant in our outlook.
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
6 October 2009
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2009
2009 2008
£000 £000
|
Revenue |
|
3,968 |
2,065 |
|
|
|
|
|
|
|
|
Contract costs |
|
(2,424) |
(1,509) |
|
|
Discovery and development costs |
|
(1,131) |
(1,071) |
|
|
General administrative costs |
|
|
(1,114) |
(933) |
|
|
|
--------------------------- |
--------------------------- |
|
|
Operating loss |
|
(701) |
(1,448) |
|
|
Interest receivable |
|
41 |
128 |
|
|
Interest payable and similar charges |
|
|
(9) |
(13) |
|
|
|
-------------------------- |
------------------------ |
|
|
Loss on ordinary activities before taxation |
|
(669) |
(1,333) |
|
|
Tax credit on loss on ordinary activities |
|
|
752 |
179 |
|
|
|
|
---------------------------- |
-------------------------- |
|
Profit / (loss) for the financial year |
|
|
83 |
(1,154) |
|
|
|
|
=============== |
============ |
|
Earnings / (loss) per share (pence) |
|
|
|
|
|
|
|
1p |
(17)p |
|
|
|
1p |
- |
CONSOLIDATED BALANCE SHEET
As at 30 June 2009
2009 2009 2008 2008
£000 £000 £000 £000
Non-current assets
|
Intangible assets |
|
|
139 |
|
55 |
|
Plant and equipment |
|
|
465 |
|
352 |
|
Deferred taxation |
|
|
594 |
|
- |
|
|
|
-------------------- |
|
-------------------- |
|
|
|
|
1,198 |
|
407 |
|
Current assets
|
Trade and other receivables |
|
820 |
|
437 |
|
|
Tax receivables |
150 |
|
175 |
|
|
|
Cash and cash equivalents |
3,748 |
|
2,143 |
|
|
|
|
-------------------------- |
|
--------------------------- |
|
|
|
|
4,718 |
|
2,755 |
|
|
|
|
--------------------------- |
|
--------------------------- |
|
|
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Deferred income |
|
1,380 |
|
- |
|
|
Trade and other payables |
|
721 |
|
428 |
|
|
Obligations under finance leases |
|
46 |
|
41 |
|
|
Bank overdrafts and loans |
|
52 |
|
25 |
|
|
|
--------------------------- |
|
--------------------------- |
|
|
|
|
|
2,199 |
|
494 |
|
|
|
|
|
|
|
|
|
Net current assets |
|
2,519 |
|
2,261 |
|
|
|
--------------------------- |
|
--------------------------- |
||
|
Total assets less current liabilities |
3,717 |
|
2,668 |
||
|
Non-current liabilities |
|
|
|
|
|
|
Deferred income |
|
|
(920) |
|
- |
|
Obligations under finance leases |
|
|
(37) |
|
(86) |
|
|
|
---------------------------- |
|
--------------------------- |
|
|
Net Assets |
|
2,760 |
|
2,582 |
|
|
|
|
================ |
|
================ |
|
Capital and reserves
|
Called-up equity share capital |
|
|
108 |
|
108 |
|
Share premium account |
|
|
8,467 |
|
8,437 |
|
Share options reserve |
|
|
606 |
|
547 |
|
Reverse acquisition reserve |
|
|
(2,484) |
|
(2,484) |
|
Retained earnings |
|
|
(3,937) |
|
(4,026) |
|
|
|
|
--------------------------- |
|
--------------------------- |
|
Total shareholders' equity |
|
|
2,760 |
|
2,582 |
|
|
|
|
============== |
|
=============== |
CONSOLIDATED STATMENT OF CASH FLOWS
For the year ended 30 June 2009
2009 2009 2008 2008
NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2009
1) A Summary of Accounting Policies
Basis of Accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, International Financial Reporting Interpretations Committee ('IFRIC') interpretations and with those parts of the Companies Act 1985 and 2006 applicable to companies reporting under IFRS.
The consolidated financial statements consolidate those of the Company and its subsidiary, Epistem Limited, (together referred to as the 'Group'). They are presented in pounds sterling and all values are rounded to the nearest one thousand (£k) except where otherwise indicated.
Basis of Consolidation
On 16 March 2007, Epistem Holdings Plc merged with Epistem Limited, and on that date the shareholders of Epistem Limited exchanged their shares for equivalent shares in Epistem Holdings Plc. As Epistem Holdings Plc was newly incorporated at the time of the transaction under the terms of IFRS 3 'Business Combinations', this transaction has been accounted for as a reverse acquisition, on the basis that the shareholders of Epistem Limited gained a controlling interest in the Group. The financial statements therefore represent a continuation of the financial statements of Epistem Limited.
Share Based Payments
The Group issues equity-settled and cash-settled share-based payments to certain employees (including Directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest.
Revenue Recognition
a.Contract revenue
In respect of preclinical contract income, the Company generally invoices and reports as revenue 50% of the value of a new contract on signature. This policy is designed to recognise that, in negotiating contracts for new studies, the Company performs specific pre-contract work to establish the parameters of the study work. When the final report is issued to the client, the remainder of the contract is invoiced and recognised as revenue, at that date. In other cases where the contract does not provide for income recognition on signature, revenue is recognised as the work is undertaken and invoiced.
In respect of clinical contract income, revenue is recognised as work is undertaken and invoiced.
b.Collaboration & Licensing revenue
Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence agreements which are not directly related to on-going research activity are recorded as deferred income and recognised as revenue over the anticipated duration of the agreement. Where the anticipated duration of the agreement is modified, the period over which revenue is recognised is also modified.
Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological or regulatory hurdles in the research and development process are recognised as revenue upon the achievement of the specified milestone.
Income which is related to on-going research activity is recognised as the research activity is undertaken, in accordance with the contract.
Research & Development
Research and development expenditure is written off in the year in which it is incurred.
Intangible Assets
Intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated so as to write off the cost of an intangible asset, less its estimated residual value, over the useful economic life of that asset, as follows:
Intellectual property - 5% straight line basis
Patents - over their estimated useful lives on a straight-line basis
No amortisation is charged on those assets which are not yet available for commercial use.
Depreciation of plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
Plant & machinery - 25% reducing balance basis
Fixtures & fittings - 25% reducing balance basis
Equipment - 25% reducing balance basis
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted, or substantially enacted, by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except to the extent that the deferred tax arises from the initial recognition of goodwill (if amortisation of goodwill is not deductible for tax purposes) or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit and loss. Temporary differences are differences between the carrying amount of the Group's assets and liabilities and their tax base.
2) Tax credit
2009 2008
£000 £000
|
Current tax Research and development tax credits |
|
150 |
175 |
|
|
Adjustment relating to a previous period |
|
8 |
4 |
|
|
Total current tax |
|
158 |
179 |
|
|
|
|
|
|
|
|
Deferred tax: |
|
|
|
|
|
Prior year tax losses now recognized |
|
423 |
- |
|
|
Current year tax losses |
|
74 |
- |
|
|
Prior year capital allowances in excess of depreciation now recognized |
|
(26) |
- |
|
|
Current capital allowances in excess of depreciation |
|
|
(49) |
- |
|
Prior year options now recognised |
|
|
153 |
- |
|
Current year options charge |
|
|
19 |
- |
|
|
|
--------------- |
--------------------- |
|
|
Total deferred tax |
|
594 |
- |
|
|
|
|
|
------------- |
--------------- |
|
Tax credit on loss on ordinary activities |
|
|
752 |
179 |
|
|
|
|
============ |
============= |
3) Loss per share
Basis of Calculation
The basic loss 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.
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. 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 7,201,928 (2008: 6,945,363.)
The dilutive weighted average number of shares in issue during the year was 7,941,300 (2008 6,945,363)
This information is provided by RNS
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