Final Results

RNS Number : 7377O

Epistem Holdings plc

16 October 2012

 



RNS Press Release

For release: 16^th October 2012: 7.00 AM

Preliminary Results to the 30 June 2012

Epistem Holdings Plc (LSE: EHP), the biotechnology and personalised medicine company announces today its preliminary results for the year to the 30 June 2012. The 2011/12 financial year saw Epistem accelerate its investment in a number of its core development programmes, whilst also delivering a solid set of financial results.

Highlights

·    Total sales of £5.6m driven by a solid performance by Contract Research Services and strong growth in our                Personalised Medicine division

·    More than 100% year on year growth in the Personalised Medicine division revenues on back of              collaborations with GSK, Sanofi-Aventis and emerging Genedrive™ sales

·    EU registration and preparations for launch of first major molecular diagnostic product (Genedrive^TM)

·    Recent announcement of major international distribution agreement with Becton Dickinson in        Tuberculosis for ROW territories and initial USD$1.0m milestone payment received post the year end

·    Announcement of Xcelris Laboratories (Indian and Indian Sub Continent) distribution agreement for             Tuberculosis using Genedrive^TM

·    Development and expansion of preclinical service offering in leukemia imaging and rheumatoid arthritis

·    Ongoing investment in Novel Therapies lead programme

·    £2.7m cash placing completed in December 2011 resulting in strengthened cash balance of £4.7m at  30 June 2012  

For further details please contact:

Epistem Plc

Matthew Walls: Chief Executive Officer                                                         ++44 (0)7887 501998

John Rylands: Finance Director      

Peel Hunt LLP

James Steel                                                                                                           ++44 (0)207 418 8900

Vijay Barathan

Cubitt Consulting Limited

Mike Wort                                                                                                             ++44 (0)207 367 5105

Anna Dunphy

Chairman's Statement

I am pleased to report major progress in a number of the Company's core development programmes and the acceleration of investment in our first diagnostic product in the results for the year ended 30 June 2012. I am also pleased to report the recent completion of the first high value commercial contract for our Genedrive^TM platform with Becton Dickinson. This agreement coupled with the earlier reported Xcelris Laboratories agreement signals the beginning of a new and exciting phase of revenue growth for Epistem and its investors.  

Whilst market and trading conditions remain volatile across the healthcare sector, Epistem continues to differentiate itself through its diversified business model and advancing technologies whilst delivering increasing investor returns. 

Results

Further details of the results for the period are covered in the Chief Executive Officer's review, but financially the year to 30 June 2012 saw the Company deliver revenues of £5.6m (2011: £5.8m). Based on this trading performance and the high levels of investment made in our Novel Therapies and Diagnostics (Genedrive^TM) programmes, the Company moved from a prior year profit to reporting an after tax loss of £0.2m (2011: £0.4m profit after tax). Following the successful completion of the £2.7m cash placing in December 2011, cash reserves at the end of the period were £4.7m (2011: £3.6m).

During the year the Company continued to make progress across each of its three divisions as outlined below:

·    Following significant revenue growth over the past few years, Contract Research Services revenues were steady in the year at £2.9m (2011: £3.0m). We continue to develop and extend our high margin service offerings alongside our cornerstone US government bio-defence contract.  With market uncertainties persisting, the division continues to build on and extend its core scientific strengths to provide a solid platform for future growth.  

·    Personalised Medicine revenue growth increased significantly up to £2.7m (2011: £1.1m), more than double last year's revenue, largely driven by the Sanofi-Aventis oncology and GSK fibrosis biomarker collaborations. The Personalised Medicine reported revenues for the year also included initial Genedrive^TM unit sales (development) of £0.4m (2011: £0.0m).         

·    The progress of our Genedrive^TM molecular diagnostic device, the recent EU regulatory approval and the announcement of major collaborations with Becton Dickinson (outside India and the Indian Sub Continent) and Xcelris Laboratories (India and Indian Sub Continent) in Tuberculosis marks the beginning of Epistem's first product related revenues and heralds a radical change in 'Point of Care' diagnostics healthcare.  The Board believes Genedrive^TM is poised to bring about a breakthrough in rapid, high sensitivity and low cost molecular (DNA) diagnostic testing 'near to the patient' across a broad range of disease areas. 

·    Novel Therapies's drug development programme continues to advance. Following the completion of the funded research phase of the Novartis collaboration in 2011, we have invested in the development of our emerging leads with the division reporting nil revenues for the year (2011: £1.6m).  Collaborative discussions are being progressed with potential partners in the areas of Regenerative Medicine and Oncology. The timings of license opportunities and future development funding remains difficult to predict accurately.

·       Based on the ongoing investment in our Novel Therapies and Genedrive programmes, the Company now reports a loss for the year of £0.2m (2011: £0.4m profit for the year) and loss per share of 2.9p (2011: 4.9p earnings per share).

Outlook

Epistem continues to build on its scientific and technical heritage as it transforms into a diverse, technology leading personalised medicine group with the near term growth in product revenues which are now underpinned by our first significant and long term commercial contracts with world class partners. Against a backdrop of market uncertainty, Epistem remains vigilant, whilst increasingly positive about its future growth potential.

Despite the challenging market conditions, each division continues to strengthen its technology and expertise.  The Personalised Medicine division has seen a significant improvement in Biomarker growth over the past year, which together with our rapidly advancing molecular diagnostic platform Genedrive^TM is expected to deliver accelerated revenue growth across the division in future years. The Contract Research Services division continues to build an international profile and reputation for its proprietary service models and enhance its relationship with the NIH under our US biodefence contract (3 years remaining of this 5 year contract). We anticipate a return to modest growth from this division in the current financial year. The Novel Therapies funded element of the drug discovery collaboration with Novartis was completed in 2011 and we continue to maintain our investment in the development of our identified hits/leads. Whilst the timing of license and development opportunities remains difficult to judge, we remain optimistic about the strength of our hit/lead programme.  We are in discussions with a number of other collaborative partners in relation to the development of our regenerative medicine and oncology hits/lead portfolio. 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.

Alongside continued strengthening of our divisional units and the commercial advance of our Genedrive^TM    molecular diagnostic product, we expect to see the Company significantly strengthen its financial performance over the coming year.

I would like to thank the CEO for his support and leadership, 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 on-going support has provided a stable platform for our continued growth.

On behalf of the Board, I would also like to offer our thoughts and condolences to the family of Professor Chris Potten who died recently. Chris was a world-renowned scientist who pioneered stem cell research in Manchester and was regarded as the one of the world's most influential figures in his field. In 2000, he co-founded Epistem and we look forward to maintaining and developing the legacy that Chris created.

David Evans

Chairman

16 October 2012

Chief Executive's Review

The financial results for the Group presented in this announcement reflect the Group's trading for the year to 30 June 2012 and for the comparative period to 30 June 2011.

Headline progress over the year and subsequently included:

·    Total sales of £5.6m driven by a solid performance by Contract Research Services and strong growth in our Personalised Medicine division

·    More than 100% year on year growth in the Personalised Medicine division revenues on back of collaborations with GSK, Sanofi-Aventis and emerging Genedrive™ sales

·    EU registration and preparations for launch of first major molecular diagnostic product (Genedrive^TM)

·    Recent announcement of major international distribution agreement with Becton Dickinson in Tuberculosis for ROW territories and initial USD$1.0m milestone payment received post the year end

·    Announcement of Xcelris Laboratories (Indian and Indian Sub Continent) distribution agreement for Tuberculosis using Genedrive^TM

·    Development and expansion of preclinical service offering in leukemia imaging and rheumatoid arthritis

·    Ongoing investment in Novel Therapies lead programme

·    £2.7m cash placing completed in December 2011 resulting in strengthened cash balance of £4.7m at 30 June 2012  

Integrated business model

The establishment of our independent divisions has created a strong portfolio of business units rarely seen in a biotechnology business model. Epistem provides a financially robust business, whilst offering the potential for significant financial upside from the development of our Personalised Medicine, Novel Therapies and Contract Research Services divisions. We continue to enhance and exploit our integrated core competence in epithelial cell biology and molecular (personalised) medicine, whilst retaining a high degree of commercial independence across each division.

Financial review

The Company reports a turnover of £5.6m (2011: £5.8m) for the year ended 30 June 2012. Revenues were underpinned by the Contract Research Services division, which delivered sales of £2.9m (2011: £3.0m). The Personalised Medicine division saw sales increase to £2.7m (2011: £1.1m), with the Novel Therapies division reporting no sales over the period, £0.0m (2011: £1.6m).

Consolidated territory revenues were split US 68% (2011: 68%), EU/ROW 19% (2011: 27%) and UK 13% (2011: 5%).  Flat year on year Contract Research Services sales delivered a slightly reduced year-on-year operating profit of £0.8m (2011 £1.0m). Operating profits were further bolstered by growth in Personalised Medicine sales, which saw the division deliver a step up in its operating profit to £0.4m (2011: £0.1m) over the year. With Novel Therapies investment in its lead development reporting an operating loss of £0.8m (2011: operating profit £0.6m) and central administration costs largely unchanged over the year at £1.3m (2011: £1.3m) this gave rise to an overall group operating loss for the year of (£0.8m) (2011: operating profit £0.4m). 

With the benefit of a £0.5m deferred tax credit, the Group reported loss after tax for the year was £0.2m (2011: profit £0.4m) with year end headcount in the Company at 63 (2011: 55).

Cash balances following the completion of the £2.7m cash placing in December 2011 were £4.7m (2011: £3.6m).

Reported loss per share was 2.9p (2011: Earnings per share 4.9p).

Clear investor communication of the Company's strategy and performance remains a key element of our success and we will continue to advance our investor communications as we embark upon the next phase of growth.

The Company's annual audit will be completed in October 2012 by HW Chartered Accountants and their audit report will be included in the annual accounts which are expected to be distributed to shareholders shortly.

Operating review

Contract Research Services

Contract Research Services delivered a marginally reduced year-on-year revenue performance, whilst producing a respectable 27% operating margin (£0.8m operating profit). Although market and industry conditions remain challenging, we continue to deliver a high margin, niche, preclinical service offering across our core disease areas of oncology, mucositis, inflammatory bowel disease and dermatology.  Over the period, we continued to develop and extend our specialist service offering in the area of oncology (new imaging models) and advanced inflammation (rheumatoid arthritis) models.

As part of our ongoing collaboration with the US National Institutes of Health's biodefence programme, we continue to expand our role as 'Subject Matter Experts' (SME) in radiation treatment and have recently taken receipt of a new GLP compliant state of the art irradiation and image analysis system funded by the US biodefence consortium. The US government remains committed to targeting treatment of radiation sickness following a nuclear incident/event.

The new financial year promises to build on last year with the advent of new product developments in oncology (imaging), hair immunohistochemistry and advanced inflammation models from which we anticipate a return to modest growth.

Personalised Medicine

Biomarker

Over the year, the Biomarker division enjoyed a strong uplift in revenue performance to £2.3m (2011: £1.1m) driven by the first full year of the Sanofi-Aventis collaboration and the commencement of the recently announced GSK fibrosis collaboration. Both collaborations utilise Epistem's proprietary RNA amplification technology and oncology bioinformatics to provide biomarker discovery and translational support across the Sanofi-Aventis oncology drug development and GSK fibrosis drug discovery programmes. The Biomarker division works with major pharmaceutical and biotech business groups by providing a suite of preclinical and clinical pharmacodynamic models to measure the effect of a drug on targeted tissue (gene activated pathways).  With the advance of the pharmaceutical industry focus on 'personalised medicine' we have also linked the development of our Genedrive^TM platform to our Biomarker group to help identify key mutational oncology targets such as KRAS, JAK2 and EGFR in cancerous tissue. The identification of these target mutations will enable patients to be 'stratified' for the correct course of 'personalised' therapeutic treatment.  Over the coming year we will also accelerate our developments in circulating (blood) tumour cells by developing Genedrive^TM  for use as a highly sensitive screening tool to identify the presence of mutation targets in blood.

Diagnostics

Following our first EU product registration for the Genedrive^TM unit (CE mark) and Tuberculosis assay (CE-IVD) and the recent announcements of the Becton Dickinson and Xcelris Laboratories collaborations in Tuberculosis, we now believe we are at the beginning of a new phase of product led revenue growth for Epistem. Both these commercial collaborations (supply and distribution arrangements in Tuberculosis) include escalating annual volume requirements for units and assays with our partners, with each contract capable of delivering revenues to Epistem in excess of US$20-30m per annum over the next 3-5 years. Tuberculosis represents a significant revenue prospect and initial opportunity for our Genedrive^TM platform, lending itself to use both inside and outside the laboratory setting and hence enabling 'near patient' testing or testing in remote field locations. The Genedrive^TM platform is expected to be capable of testing a wide range of infectious diseases with new tests under development including malaria, dengue, HIV, HCV and a range of sexually transmitted diseases. We expect to supply and distribute these high volume tests through a channel partner strategy. We are receiving strong interest and demand for the use and development of Genedrive^TM and we will be working closely with the World Health Organisation and other high profile Healthcare Foundations including both the Gates and Clinton Foundations to ensure that we position our Tuberculosis test to best diagnostic and therapeutic effect in the global market. Over the coming months we will be publishing our first clinical data on our Tuberculosis test and how this compares with other tests in the market and anticipate launching our first regulated product into the US$1bn Tuberculosis diagnostics market early in 2013.

Alongside healthcare applications, we have also seen significant interest in the use of Genedrive^TM for biosurveillance and forensics targets.  We are working closely with the US government on a number of programmes to identify biothreats and infectious diseases in military settings. A good example of this is the recent completion of the US Government contract with the Defence Threat Reduction Agency for next generation 'remote settings' diagnostics. This will provide Epistem with up to USD$2.0m in staged funding over the next 24 months. We anticipate further growth in the US Department of Defence areas over the coming year.   In the UK, we continue to progress the National Police Improvements Agency (NPIA) programme to enable crime scene testing for DNA fingerprinting.

Genedrive^TM is a novel, disruptive and highly sensitive molecular diagnostic tool with the capability of targeting a near patient, low cost and rapid turnaround diagnosis (~30-60mins including sample preparation) across a broad spectrum of bacterial, viral, fungal and somatic mutational disease areas. We expect to see molecular diagnostics begin to dominate the next generation of diagnostic testing and to change the speed, accuracy and workflows in near patient 'Point of Care' diagnostic assessment.  Over the coming year, we intend to accelerate our product developments through increased investment in our manpower resource and expertise, enhance our manufacturing and regulatory control and further develop our channel partner distribution strategy. 

The increased growth in Personalised Medicine revenues enabled the division to lift its operating profit over the year. We anticipate further growth in our portfolio of personalised medicine technologies driven by increasing medical focus for effective patient treatment, tighter regulatory requirements and the growing industry need for rapid, low cost and sensitive molecular diagnostic tools. Our proprietary technologies are well positioned to capitalise on this market growth.

Novel Therapies

The Novel Therapies collaboration with Novartis completed its funding phase in 2011 and we have continued to invest in the development of our prioritised novel hits/leads over the past year. With the Novartis collaboration expected to complete in 2013, we retain intellectual property rights over our collaborative leads and continue to progress discussions with Novartis and other groups around the development of our Novel Therapies lead programme. The timing of a license opportunity and/or funding support remains difficult to judge although we remain confident in our development programme and the prospect of future licenses and funding support.     

Following protein synthesis of our prioritised hits/leads, we are now beginning to enter the early stages of preclinical efficacy testing.  Over the coming months we will better establish our leads' effect on the cell biology and signalling pathways which regulate the cell/stem cells in the areas of regenerative medicine and oncology.  We are also considering small molecule partnerships to establish a portfolio of agents which regulate signalling pathways and cell biology.

We will evaluate our other drug discovery and development opportunities with major industry players to identify new lead developments and to expand our discovery and early stage development platform.

Current trading and outlook

We continue to develop a rich portfolio of technology and business opportunities to enable us to grow and invest in our future growth. We are continuing to build and strengthen our internal expertise across our core divisional programmes and this careful preparation is expected to deliver growth over the coming year. Our traditional business model of services and technology licensing continues to evolve with the advent of our new product revenues. We believe that the new product launches will continue to de-risk our business model and allow us to strengthen our trading position and increase the confidence of our future revenue forecasts.

We continue to staff our management team with world class, innovative individuals who fit with the culture and dynamism of the Company. We also expect to build on our corporate and board strength and supplement our scientific advisory board and advisory committees as appropriate to reflect the changing nature of our business.

Our shareholder interest and support remains strong and we will ensure that our ongoing investor communications continue to nurture this relationship.

We anticipate a strengthening operational and financial position for the year ahead based on our expectation of revenue growth and our overall growth plans. We remain selective in considering complementary technology, acquisitions and in-licensing, with few opportunities thus far meeting our high expectations.

We remain 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 help and support over the past year. I would also like to thank our investors for their continued support and interest in our technology and the Company as a whole.

On behalf of the all the Board, management and staff at Epistem, I would also like to send our condolences to the family of Professor Chris Potten who died in August. Chris was a world-renowned scientist who pioneered stem cell research in Manchester, UK.  Chris led a team of researchers at the Paterson Institute at The Christie Hospital Manchester for more than 30 years. He was regarded as one of the world's most influential figures in his field and developed research which is now central to many areas of cancer therapy. He published around 400 scientific papers and 11 books - ensuring a reference legacy that will be used for many years to come. In 2000, he co-founded Epistem with Cath Booth and his team. Chris will be sadly missed, but we look forward to maintaining and developing the legacy that Chris created.

Matthew H Walls

Chief Executive Officer

16 October 2012

CONSOLIDATED INCOME STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2012

		2012	2011
		£000	£000
Revenue		5,560	5,752
Contract costs		(4,112)	(3,072)
Discovery and development costs		(996)	(979)
General administrative costs		(1,287)	(1,316)
Operating (loss)/profit		(835)	385
Finance income		109	18
Finance costs		-	(46)
(Loss)/profit on ordinary activities before taxation		(726)	357
Taxation on ordinary activities		482	28
Total comprehensive Income for the financial year		(244)	385
(Loss)/Earnings per share (pence)
Basic		(2.9)p	4.9p
Diluted		(2.9)p	4.3p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2012

	Share Capital	Share Premium Account	Employee Share incentive plan reserve	Share options reserve	Reverse acquisitions reserve	Retained earning	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 July 2010	119	11,206	(43)	633	(2,484)	(3,647)	5,784
Purchase of own shares (SIP)	-	-	(45)	-	-	-	(45)
Recognition of equity- settled share-based payments	-	-	-	58	-	-	58
Total comprehensive income for the year	-	-	-	-	-	385	385
At 30 June 2011	119	11,206	(88)	691	(2,484)	(3,262)	6,182
Allotment of ordinary shares	12	2,765	-	-	-	-	2,777
Share issue costs	-	(60)	-	-	-	-	(60)
Exercise of options	2	96	-	(14)	-	-	84
Lapse of options	-	-	-	(1)	-	1	-
Purchase of own shares (SIP)	-	-	(48)	-	-	-	(48)
Recognition of equity-settled share-based payments	-	-	-	171	-	-	171
Total comprehensive income for the year	-	-	-	-	-	(244)	(244)
At 30 June 2012	133	14,007	(136)	847	(2,484)	(3,505)	8,862

CONSOLIDATED BALANCE SHEET

As at 30 June 2012

			2012		2011
			£000		£000
Non-current assets
Intangible assets			2,189		1,075
Plant and equipment			573		567
Deferred taxation			1,002		520
			3,764		2,162
Current assets
Trade and other receivables			1,978		1,910
Tax receivables			41		117
Cash and cash equivalents			4,684		3,620
			6,703		5,647
Liabilities
Current liabilities
Deferred income			198		75
Trade and other payables			1,407		1,447
			1,605		1,522
Net current assets			5,098		4,125
Total assets less current liabilities			8,862		6,287
Non-current liabilities
Liabilities payable 1 - 5 years			-		(105)
Net Assets			8,862		6,182
Capital and reserves
Called-up equity share capital			133		119
Share premium account			14,007		11,206
Employee share incentive plan reserve			(136)		(88)
Share options reserve			847		691
Reverse acquisition reserve			(2,484)		(2,484)
Retained earnings			(3,505)		(3,262)
Total shareholders' equity			8,862		6,182

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2012

 

			2012	2012	2011	2011
			£000	£000	£000	£000
Cash flows from operating activities
		Operating (loss)/profit for the year		(835)		385
		Depreciation, amortisation and impairment		193		194
		Share based payment expense		171		58
Operating (loss)/profit before changes in working capital and provisions
				(471)		637
	(Increase) in trade and other receivables			(68)		(899)
	Increase/(decrease) in deferred income			123		(899)
	Increase in trade and other payables			(40)		433
Net cash (outflow) from operations				(456)		(728)
	Finance costs		-		(46)
	Finance income		109		18
	Tax received		76		75
				185		47
Net cash (outflow) from operating activities
				(271)		(681)
Cash flows from investing activities
	Acquisition of fixed assets		(1,313)		(1,093)
Net cash outflow from investing activities
				(1,313)		(1,093)
Cash flows from financing activities
	Proceeds from issue of share capital		2,861		-
	Expenses of share issue		(60)		-
	Purchase of own shares		(48)		(45)
	(Decrease)/Increase in borrowings		(105)		68
				2,648		23
Net cash inflow from financing activities
Net increase/(decrease) in cash equivalents				1,064		(1,751)
Cash and cash equivalents at beginning of year				3,620		5,371
Cash and cash equivalents at end of year				4,684		3,620
Analysis of net funds
	Cash at bank and in hand			4,684		3,620
Net funds				4,684		3,620

 

 

 

 

NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2012

Business segments

	Contract
	Research Research Research	Personalised	Novel
	Services	medicine	Therapies	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Twelve months ended 30 June 2012
Revenue	2,895	2,665	-	-	5,560
Segment trading result	856	503	(700)	(1,130)	(471)
less depreciation and amortization	(68)	(48)	(52)	(25)	(193)
less equity-settled share-based payments)	(6)	(31)	(2)	(132)	(171)
Operating profit/(loss)	782	424	(754)	(1,287)	(835)
Twelve months ended 30 June 2011
Revenue	3,002	1,130	1,620	-	5,752
Segment trading result	1,029	148	716	(1,256)	637
less depreciation and amortisation	(55)	(38)	(74)	(27)	(194)
less equity-settled share-based payments	(7)	(17)	(1)	(33)	(58)
Operating profit/(loss)	967	93	641	(1,316)	385
Geographical segments
				2012	2011
				£'000	£'000
United Kingdom				720	273
Europe				977	1,452
United States of America				3,778	3,901
Asia				85	126
				5,560	5,752

 

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 8,471,693 (2011: 7,933,983)

The dilutive weighted average number of shares in issue during the year was 9,468,074 (2011: 8,972,757)

 

END

 

 

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