Final Results

RNS Number : 4182V

Epistem Holdings plc

28 October 2014

 



RNS Press Release

For release: 28^th October 2014: 7.00 AM

Preliminary Results to 30 June 2014

Epistem Holdings Plc (LSE: EHP), the personalised medicine and biotechnology company, announces today its preliminary results for the year to the 30 June 2014.  The Company has also announced today in a separate announcement the successful completion of the Genedrive^® Indian Tuberculosis clinical evaluation study, and the filing of its Tuberculosis assay regulatory submission.

The 2013/14 financial year saw Epistem commence and successfully complete its Indian clinical evaluation study in advance of the planned launch of Genedrive^® (www.genedrive.com), its revolutionary handheld molecular diagnostic device, whilst accelerating investment in its new product development programmes and delivering a solid set of financial results.

Financial and Operating Highlights

·    Total sales of £5.8m (2013: £5.4m) driven by improving performance from the Personalised Medicine division and solid results from the Preclinical Research Services division.

·    Successful completion of Genedrive^® Indian clinical evaluation study and commencement of 'fast track' independently funded Tuberculosis clinical evaluation studies in Nigeria, South Africa, Uganda and Brazil.

·    Development of 'Hepatitis C' collaboration with INSERM (Institut National de la Santé et de la Recherche Médicale) and Pasteur Institute for development of 'Hepatitis C' (HCV) test.

·    Successful completion of ISO13485 medical device Quality Accreditation with scale up of units and assays underway in preparation for launch of Genedrive®.

·    Ongoing patient stratification assessments in clinical trials for Genedrive^® pharmacogenomic applications and collaborative discussions.

·    Preclinical Research Services sales of £2.9m (2013: £2.9m) with strengthened offering in biodefence, leukemia imaging and rheumatoid arthritis.

·    Following high levels of investment made in our Genedrive^® technology, the Company reports an after tax loss of £1.7m (2013: £1.2m loss after tax).

·    Cash reserves of £4.2m at June 2014, bolstered by recent Global Health Investment Fund investment, with Cash balance at 30 September 2014 of £7.9m. 

Recent Developments

·    Announcement today of market regulatory submission filed with the Indian regulator (Drug Controller General of India) for a license to import and sell Genedrive® for the molecular diagnosis of Tuberculosis; approval anticipated early in 2015.

·    Announcement on 22 July 2014 of $8.0m (£4.7m) collaborative funding agreement with the Global Health Investment Fund I, LLC (GHIF) to support the roll-out of Genedrive® as part of the Global Access Programme.

·    Joined Global Alliance TB Drug Susceptibility Test Consortium in collaboration with Bill and Melinda Gates Foundation, TB Alliance and PATH.

·    Announcement today of Memorandum of Understanding (MOU) signed with Clinton Health Access Initiative (CHAI) to collaborate in bringing Genedrive® and TB diagnostic assay to markets in resource-limited countries.

For further details please contact:

Epistem Plc

Matthew Walls: Chief Executive Officer                                                         ++44 (0)161 606 7258

John Rylands: Finance Director                                                                                                                                                                                                                                                                                                                                                                                                      

Peel Hunt LLP

James Steel                                                                                                           ++44 (0)207 418 8900

Clare Terlouw

Walbrook PR

Mike Wort                                                                                                             ++44 (0)207 933 8780

Anna Dunphy

Chairman's Statement

In the results for the year ended 30 June 2014, I am pleased to report the commencement and successful completion of the Genedrive^® Indian clinical evaluation study, a solid outcome for the year and the delivery of several key milestones in anticipation of the launch of Genedrive^® for the diagnosis of Tuberculosis in India.

The past twelve months have been definitive for the Company with efforts firmly focused on completing the development of Genedrive^® and resolving the technical issues encountered in 2013, whilst also continuing to develop our existing core business.  We have worked closely with our partners and collaborators to resolve the issues we faced with Genedrive® and our efforts have resulted in the completion of the development of our first generation Genedrive^® unit (version 1.0) and finalisation of our Tuberculosis and antibiotic resistance (TB) assay underpinning the successful delivery of our first independent Genedrive^®clinical evaluation study in India. The clinical results have now been incorporated into our TB product regulatory submission and filed with the Indian regulator.  We anticipate feedback from the regulator and launch of the Tuberculosis product early in 2015.

In July 2014 we entered into a strategically important collaboration and $8.0m (£4.7m) funding agreement with the Global Healthcare Investment Fund (GHIF), supported by the Bill and Melinda Gates Foundation to make Genedrive^®available via the 'Global Access Programme' to low-income countries.  The agreement with the GHIF has been hugely important to the Company both in terms of the funding that it has provided to enable the Board to continue and accelerate its investment in Genedrive^®, but also in terms of being able to access the GHIF network which we believe will significantly support the commercial roll-out of Genedrive^®.   

We have also announced today that we have signed a collaboration with the Clinton Healthcare Access Initiative to help support our global regulatory and marketing strategy for Genedrive^®.

We have also entered into 'fast track' TB clinical testing in Nigeria, South Africa, Uganda and Brazil to build our clinical test data in preparation for a World Health Organisation recommendation.

We continue to strengthen and accelerate our investment in the scale up and manufacture of Genedrive^® which has necessarily resulted in increased reported losses. We are also in discussions with prospective collaborative and distribution partners in relation to tests from our pharmacogenomic and infectious disease portfolio.

Our Personalised Medicine team has continued to expand as the opportunities for our new technology become clearer. Dr Allan Brown joined the main Board on 1 February 2014 as Chief Operating Officer, Diagnostics, and we have bolstered the Diagnostics technical development and operation teams considerably over the past 12 months in readiness for our first product launch.

We believe that the launch of our first Genedrive^® product in TB, coupled with the India supply and distribution agreement with Xcelris Labs, provides very attractive growth opportunities and we are continuing to progress a range of channel partner and distributor discussions across multiple territories and potential applications.  

Financial Results

Further details of the results for the period are covered in the Chief Executive's review, but financially the year to 30 June 2014 saw the Company deliver income of £5.8m (2013: £5.4m). Following high levels of investment made in our Personalised Medicine (Genedrive^®) division, the Company reported a loss of £1.7m (2013: £1.2m loss after tax).

Cash reserves at 30 June 2014 were £4.2m (2013: £6.5m.) Following the successful completion of the $8.0m (£4.7m) collaboration and funding agreement with GHIF in July 2014 cash reserves at 30 September 2014 were £7.9m.

The Company continues to make progress as outlined below:

·    Personalised Medicine - Diagnostics

The division saw the successful completion of the Genedrive^® Indian clinical evaluation study and the 'fast track' commencement of further international independently funded Tuberculosis clinical studies in support of a World Health Organisation (WHO) recommendation. The market and regulatory submission has been filed with the Indian regulator for a license to import and sell Genedrive® for the molecular diagnosis of Tuberculosis and antibiotic resistance, with approval anticipated early in 2015. 

We are now finalising development of our 'Hepatitis C' assay under the EU grant received with INSERM and Pasteur Institute in readiness for clinical studies expected to commence in 2015. 

We have successfully completed our ISO13485 in-vitro diagnostic and medical device quality accreditation with scale up of units and assays underway in preparation for launch. Personalised Medicine - Diagnostics revenues over the year remained largely unchanged at £0.5m (2013: £0.4m) driven by US Department of Defense pathogen detection development monies. 

·    Personalised Medicine - Pharmacogenomics

Divisional revenues increased to £2.4m (2013: £2.1m), supported by our ongoing pharmaceutical collaborations with GSK and Novartis. Alongside our traditional service based biomarker business revenues we have increased investment in our Genedrive^® genotyping and patient stratification assay development.  Collaborative discussions with pharma partners are ongoing and are expected to develop further over the coming months.

·     Preclinical Research Services

Preclinical Research Services divisional revenues remained steady over the year at £2.9m (2013: £2.9m). We continue to strengthen our range of service offerings alongside our cornerstone US government bio-defence contract.  The division is building and extending its core scientific strengths, especially in the US, with the set up of our US Baltimore lab, which we expect to maintain as a solid platform for future growth. 

·    Novel Therapies

Our drug development lead programme and investment has been considerably scaled back whilst we complete the launch and initial sales growth of Genedrive^®. The significant investment in Genedrive^® design, development, scale up and preparation for sale, has meant the reduction in investment in our Novel Therapies lead development programme and the reallocation of resource to our other divisional growth programmes. Further details are available in the Chief Executive's review and we will keep our shareholders in touch with our future plans around further investment in this area. 

In July 2014, we announced an $8.0m (£4.7m) collaborative and funding agreement with the Global Health Investment Fund I, LLC (GHIF) to support the roll-out of Genedrive®. The GHIF and Epistem have made global access commitments to mutually support and facilitate the introduction, distribution and sale of the Genedrive® platform and the expanding menu of infectious disease assays under development for low-and middle-income countries. We look forward to working closely with the GHIF in the roll out of our Genedrive^® product for TB.   

The Board believes that Genedrive^® will bring about a breakthrough in rapid, high sensitivity and low cost molecular diagnostic testing across a broad range of disease areas.

Based on the growing investment in Genedrive^® and reducing investment in our Novel Therapies programme, the Company reports a loss for the year of £1.7m (2013: £1.2m loss for the year) and loss per share of 17.4p (2013: 12.5p loss per share).

Outlook

Our initial priority this financial year is the successful launch and sale of our first Genedrive^® TB products into the Indian clinically regulated marketplace, whilst accelerating the development of our pipeline of products primarily targeting healthcare applications.

Whilst we have made solid progress to resolve the technical issues encountered last year with Genedrive®, we will need to continue to build further strength, resource and infrastructure to support our future growth. We are still at the early stages of scale up and production and whilst we are confident of meeting our short term product requirements for assays and devices through 2015 we will need to further bolster our technical and management expertise and scale up capabilities over the coming year. Over the coming months, we will target the following key objectives in relation to Genedrive^® and within the wider Personalised Medicine group:

·      Scale up and preparation for launch of Genedrive^® and our first TB test

·      Gain Indian regulatory approval to import and sell TB product in India through our distributor Xcelris labs

·      Complete 'fast track' clinical studies for TB as a forerunner to a WHO recommendation

·      Prepare clinical studies for 2^nd TB target market and strategy for CE-IVD roll-out across Europe 

·      Finalise HCV development and commence clinical HCV studies in 2015

·      Accelerate other Infectious disease and Pharmacogenomic assay development programmes

·      Progress collaborative discussions with pharmaceutical partners in relation to the use of Genedrive^® for clinical trials re: genotyping and patient stratification and companion diagnostics.

·      Advance discussions with channel (distribution) partners for roll-out of our infectious disease portfolio

I believe that Genedrive^® offers a strategically important and disruptive industry technology capable of changing the way diagnostics are delivered. I also believe that this technology will deliver significant investor returns to our shareholders.   

Whilst our outlook and investment is naturally dominated by Genedrive^® and our diagnostic and pharmacogenomics applications, we expect our Preclinical Research Services division to face a challenging year due to prevailing market conditions in Europe and the USA. Whilst we have scaled back our investment into Novel Therapies we continue to examine ways in which we can realise the value and heritage of this key area of expertise.

At a personal level I have taken the decision to stand down as Chairman at the point that we launch the Genedrive® product into India. I have been with the Company nearly ten years including nine years as Chairman and I believe the time is now right to hand on the baton to someone who can assist the Company with the critical next stage of the broader commercialization and menu expansion for Genedrive. This has been a considered decision on my part and a worthy successor has been identified and an announcement will be made in due course.  

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 support has provided a stable platform for our continued growth plans.

David Evans

Chairman

28 October 2014

Chief Executive's Review

The way disease is diagnosed and treated must change radically if we are to provide rapid and accurate diagnostic testing at an affordable cost to global populations challenged by disease outbreak and rising healthcare costs. At the same time it is low income developing nations who disproportionately need access to the best healthcare technology to enable accurate diagnosis and effective treatment to properly tackle infectious disease. Epistem's Genedrive^® device offers a strategically important and disruptive technology primed to tackle disease management at the 'Point of Care', at low cost, thereby providing a new approach to diagnosis and healthcare management.  The same technology enables patients to understand their 'gene types' (for the genotyping of DNA and RNA) allowing patients to be correctly aligned with the most appropriate and effective treatment therapies.

The past twelve months has been a vitally important period for the Company with Board and management efforts firmly focused on resolution of the development issues encountered with Genedrive® in 2013, whilst maintaining and growing our existing core business.  We have worked closely with our partners to resolve these issues and our diligent efforts have resulted in the completion of the development of our Genedrive® unit and TB assay and successful delivery of our first independent Genedrive^® clinical evaluation study with the market regulatory submission for our Tuberculosis product now filed with the Indian regulator (Drug Controller General of India).  We anticipate feedback from the regulator and launch of the Tuberculosis product early in 2015.

In July 2014 we entered into a strategically important collaboration and $8.0m (£4.7m) funding agreement with the Global Healthcare Investment Fund, supported by the Bill and Melinda Gates Foundation to make Genedrive® available via the 'Global Access Programme' to low income countries. We have also entered into 'fast track' clinical testing in Nigeria, South Africa, Uganda and Brazil to build our clinical test data in preparation for a WHO recommendation anticipated in 2015.

Today we have also announced we have signed a 'memorandum of understanding' with the Clinton Healthcare Access Initiative to help support our global regulatory and marketing of Genedrive^®  (www.genedrive.com)

It has been a busy year in terms of progress and development of Genedrive^® balanced alongside growth of our existing core business.

Financial review

The financial results for the Group presented in this announcement reflect the Group's trading for the year to 30 June 2014 and for the comparative period to 30 June 2013.

The Company reports revenue and other income of £5.8m (2013: £5.4m) for the year ended 30 June 2014. Preclinical Research Services division revenues remained steady at £2.9m (2013: £2.9m). The Personalised Medicine division delivered sales of £2.9m (2013: £2.5m), with the Novel Therapies division reporting no sales over the period.

Consolidated territory revenues were split US 44% (2013: 58%), EU/ROW 23% (2013: 14%) and UK 33% (2013: 28%).  Year on year Preclinical Research Services sales remained steady delivering a reduced year-on-year operating profit of £0.5m (2013 £0.8m) reflecting lower margin mix of business over the year. Personalised Medicine sales increased over the year, which alongside increasing headcount and investment in Genedrive^® saw the division report an operating loss of £0.7m (2013: £0.1m loss) over the year. Novel Therapies, reducing investment in its lead development programme, reported an operating loss of £0.6m (2013: operating loss £0.8m) with central administration costs marginally increased over the year at £1.5m (2013: £1.4m) giving rise to an overall group operating loss for the year of £2.3m (2013: loss £1.5m). 

The benefit of a £0.7m R&D and other tax credits saw the Group report a loss after tax for the year of £1.7m (2013: loss £1.2m) with Year End headcount in the Company at 71 (2013: 67).

Cash balances at the end of June 2014 were £4.2m (2013: £6.5m). Following the completion of the Global Health Investment Fund loan of £4.7m completed in July 2014, reported cash reserves at the 30 September 2014 were £7.9m.  

Reported loss per share was 17.4p (2013: 12.5p loss per share).

The Company's annual audit was completed in October 2014 by HW Chartered Accountants and their audit report will be included with the annual accounts which are expected to be distributed to shareholders shortly.

Operating review 

Personalised Medicine

Genedrive^® represents a novel and globally disruptive molecular diagnostic (identification of disease and patient based DNA and RNA gene based biomarkers) capable of changing the way diagnostics are delivered. As a small handheld diagnostic device, Genedrive^® enables low cost, rapid molecular testing 'near to the patient' across a broad spectrum of bacterial, viral, fungal and somatic mutations. The advance of molecular based technologies is beginning to dominate diagnostic testing by changing the speed and accuracy of patient information and diagnosis, enabling changes to healthcare workflow and the ability to test in remote 'Point of Care' settings away from traditional laboratory settings.

Diagnostics

The past year has seen the finalisation of development of our first generation Genedrive^® device (version 1.0), which recently entered and successfully completed its initial Tuberculosis (TB) and Rifampicin resistance (RIF) clinical evaluation study in India, with the results enabling the completion and submission of our filing with the Drug Controller General of India (DCGI). We are now awaiting approval from the Indian regulator for a licence to import and sell our first major infectious disease assay for TB. This is anticipated early in 2015.  

The clinical studies were completed over a 4-month period ending September 2014 after testing 300 randomly referred and blinded pulmonary 'raw sputa' TB patient samples, with each test taking approximately 1 hour to complete. The test results delivered high levels of sensitivity (93%) and specificity (94%), versus the industry gold standard 'culture test' method for TB. The study also measured those patients showing resistance to the first line antibiotic Rifampicin, a growing concern due to irregular and incomplete treatment with differing regimens giving rise to the growth in Multi Drug Resistance-TB (MDR-TB) cases in India.    

These levels of accuracy, speed to result and simplicity of operation compare favourably with other molecular and non-molecular TB test methods, such as culture which has lengthy turn around times to test result (culture testing typically taking up to 42 days to obtain a confirmed TB test result), microscopy which delivers less accurate, (lower sensitivity and specificity of TB test results) and other competitive molecular tests which require lengthy upfront extraction processes, extended timescales to test result and/or increased cost. Genedrive's advantage is its ability to deliver an industry leading speed to result, high levels of molecular accuracy and simplicity of use at low cost in remote/non laboratory based settings, making it suitable for tackling disease in low-income countries and developing nations.

Genedrive® has now commenced clinical evaluation studies in Nigeria, South Africa, Uganda and Brazil underpinned by funding from the Foundation for Innovative New Diagnostics (FIND), National Institute of Allergy and Infectious Disease (NIAID) and the Bill and Melinda Gates Foundation (BMGF). These studies will build on our Indian results to date to provide a dossier of support targeting a World Health Organisation (WHO) recommendation for our Genedrive^® device and TB assay anticipated in 2015.

Our Genedrive^® assay design, development and manufacturing processes continued to improve over the year with the Company receiving ISO13485 in-vitro diagnostic and medical device accreditation. This globally recognised accreditation provides increasing confidence in our operational processes and quality assurance as well as supporting our regulatory submissions. We are working closely with our ISO13485 approved Genedrive^® unit manufacturers in Asia and GE Healthcare in Cardiff for the scale up of our TB assay product in preparedness for launch early in 2015.

In July 2014, we entered into a collaborative funding agreement with the Global Health Investment Fund I, LLC (GHIF) to support the roll-out of Genedrive®. Under the terms of the agreement, Epistem has issued to the GHIF a five-year convertible bond totaling $8.0 million (GBP4.7 million). As part of the collaborative funding agreement, the GHIF and Epistem have made global access commitments to mutually support and facilitate the introduction, distribution and sale of the Genedrive® platform and the expanding menu of infectious disease assays under development for low and middle-income countries. This marks a step change for Epistem and helps chart a course which, by working closely with international aid organisations we seek to establish Genedrive® as a world class 'Point of Care' molecular platform for low and middle income countries.

More recently Epistem was invited to join the select Global Alliance TB Drug Susceptibility Consortium supported by Bill and Melinda Gates Foundation, PATH ('driving transformative Innovation to change lives'), FIND,Cepheid, J&J/Janssen, Sanofi, Sequella, Abbott Molecular, Alere and Hain Lifescience GmbH.

We are also pleased to announce today the signing of a 'Memorandum of Understanding' with the Clinton Healthcare Access Initiative (CHAI). CHAI will assist Epistem in determining target market segments in focus countries, assist in determining the optimal global regulatory strategyand building a strategy for appropriate local product management, with a focus in the medium term on the TB Indian public market. Based on CHAI's learning in relation to data reporting and communications they will also advise on incorporation of remote connectivity into Genedrive® device.

Our Indian distributor partner Xcelris Lab is preparing for the launch of our TB/RIF test including first line antibiotic resistance (Rifampicin) detection. The Xcelris collaboration (supply and distribution arrangement) includes escalating annual volume requirements for units and assays capable of delivering significant revenues to Epistem over the next 3-5 years. TB represents our first significant revenue prospect and the initial opportunity to see the application of our Genedrive^® platform used both inside and outside laboratory settings enabling 'near patient' testing or testing in remote, low resource, field locations to address the US$1bn TB diagnostics market.

The 3 year collaboration with INSERM, the French National Institute of Health and Medical Research, completed its first year of development. HCV Point-of-Care testing for both genotyping patients for targeted treatment (IL28B test) and improving the health and quality of life for chronic hepatitis C patient (HCV test) are both expected to complete their assay development phase over the coming months. Clinical testing will then commence over the coming year with an expected launch in late 2015. Between 150 and 180 million people live with HCV infection globally and together with HBV infection - these infections cause around 1 million deaths each year.

The year also saw the strengthening of the management team with the creation of a new Chief Operating Officer, Diagnostics role and the appointment of Dr.Allan Brown, along with senior management to lead our assay and operational development, electrical and software engineering groups.

We are also advancing our assay development across a range of other infectious diseases, with tests under early stage design in HIV and Sepsis. We expect to supply and distribute these high volume tests through a channel partner strategy.

Alongside healthcare applications, we continue to see opportunities for the use of Genedrive^®for biosurveillance and forensic targets.  We are working closely with the US government on a number of programmes to identify biothreats and infectious diseases in military settings. We are currently completing the first phase of our US Government contract for pathogen detection anticipated by early 2015. If successful, this is likely to extend into broader US Department of Defense development. Diagnostic revenues for the year were £0.5m (2013: £0.4m) reflecting the US DoD biothreat development monies.

Pharmacogenomics

The Pharmacogenomics division works with major pharmaceutical and biotech business groups to provide a suite of preclinical and clinical pharmacodynamic biomarkers to measure the effect of a drug on targeted tissue (gene activated pathways).  Our expertise in defining the consequences of gene target modulation in epithelial tissue continues to advance and provide biomarker discovery and translational support for oncology drug development and fibrosis drug discovery programmes.

Revenues increased to £2.4m (2013: £2.1m) primarily supported by GlaxoSmithKline, Novartis and grant revenues.

Our collaboration with GlaxoSmithKline continues to build, supported by our RNA amplification technology and bioinformatics expertise to provide biomarker discovery (using hair and other tissues) for drug development. We are also collaborating with GlaxoSmithKline for the rapid assessment of genotypes for 'patient stratification' for therapeutic treatment.

We continue to work closely with Novartis on the clinical expansion of our oncogene identification from whole blood for myeloproliferative disorders. Novartis oncology revenues increased over the year buoyed by the application of our oncology biomarkers for Phase II clinical testing. We anticipate this collaboration expanding further in myloproliferative disorders as well as via the use of Genedrive^® for patient stratification and genotyping.

We are also developing Genedrive^® for use as a highly sensitive screening tool for identification and monitoring of the presence of mutation targets in blood.  The broadening adoption of Genedrive^® for use in pharmacogenomics applications is anticipated to present additional revenue generating opportunities over the coming year.   

Preclinical Research Services

Preclinical Research Services delivered a steady year-on-year revenue performance and 20% operating margin (£0.6m operating profit). The division provides a high margin, niche, preclinical service offering across our core disease areas of oncology, mucositis, inflammatory bowel disease and dermatology. 

Our collaboration with the US National Institutes of Health's biodefence programme continues to expand and accounts for roughly a third of the division's revenues.  We have collaborated as part of this programme for over 8 years and provide a role as 'Subject Matter Experts' (SME) in radiation treatment.

During the year we extended our service capability to set up small laboratory facility in Baltimore, Maryland to engage more closely with the US government departments and our local US East Coast clients. The US government remains committed to targeting treatment of radiation sickness following a nuclear incident/event.

The year saw continued interest in our rheumatoid arthritis (RA) and oncology imaging leukaemia models, together with strong demand for our inflammatory bowel disease models.  

Over the coming year, we expect to strengthen and build on our new oncology (imaging) services, RA and inflammation models from which we expect to see future growth. However, during this period of considerable investment in the launch of Genedrive®, we are limiting investment in our other divisions. We expect our Preclinical Research Services division to continue to face a challenging year, exacerbated in part due to tougher market conditions in the Europe and the US and as a result do not expect near term growth in this division to match that of recent years.

Novel Therapies

Over the year our Novel Therapies's drug development programme operated at a much reduced investment and resource level which we expect to maintain whilst we complete the launch and development of Genedrive^®. The significant investment in Genedrive^® design, development and preparation for sale, has necessarily meant the reduction in resource support and investment in our Novel Therapies programme with the small NT team being repositioned into our Personalised Medicine and Preclinical Services divisional teams. Commensurate with this, the accounts include an impairment charge of £385k (2013: nil) to cover the carrying value of the Novel Therapies assets. We do not anticipate investment in our Novel Therapies lead programme over the short to medium term, but will continue to review our position in light of growth and progress in our core business.   

Collaborative discussions with potential partners remain on hold pending the further development of our leads in the areas of Regenerative Medicine and Oncology.

Integrated business model

Epistem has established a balance of independent, revenue driven business units with the objective of building each autonomously as part of a financially robust integrated business model, whilst offering the potential of significant financial upside from technology growth emerging from our Personalised Medicine, Novel Therapies and Preclinical Research Services divisions. Quality of science has been a central theme and we have leveraged successes in one division to develop and secure the growth and development of another.  Whilst this remains our ongoing objective, we will continue to review this model to ensure it is optimal for each division and offers our investors the best return on their investment.       

We will continue to enhance and exploit our competence in molecular (personalised) medicine and infectious disease, gene pathways and epithelial cell biology whilst retaining a high degree of commercial independence across each division.

Outlook

The past few years have seen a careful investment in the design, development and manufacture of Genedrive^® to complete the first generation (version 1.0) unit build. We have now created a strategically important asset and technology with significant global potential.  The coming months will signal the first Genedrive^® product sales for Epistem and the acceleration of our assay development programmes to expand our test menu offering. Whilst our first generation infectious disease products including TB/RIF, IL28b and HCV target low resource, decentralized, 'Point-of-Care' settings, future Genedrive^® developments will also target patient specific genotype tests as companion diagnostics for therapeutic treatment.             

We anticipate Indian regulatory approval over the coming months and the final preparations for launch into India of Genedrive^® and our first TB and antibiotic resistance test.  We will initially work with selected Key Opinion Leader (KOL) sites in India to technically support the roll-out of Genedrive^® and we expect our first product revenues from early 2015.  

We will also prepare our next target markets for roll-out taking advantage of our DCGI and CE-IVD status and Global Access Commitment and collaboration through GHIF and a growing network of support from the Bill and Melinda Gates foundation, Clinton Healthcare Access Initiative, FIND and WHO alongside the completion of our ongoing TB evaluation studies as a forerunner to a WHO recommendation anticipated later in 2015.

We will appoint distribution channel partners to help us exploit Genedrive^® into the market for our developing menu of products. Over the coming year we anticipate collaborating with leading pharmaceutical companies to introduce Genedrive^® as a companion diagnostic for patient genotyping and stratification for drug treatment 

Alongside anticipated revenue growth from our service-based Pharmacogenomic division, we expect to complement this with increasing product revenues initially led by our first diagnostic test products.

We will continue to accelerate and expand our product developments through increased investment in our manpower resource and industry competence, enhance our software and electrical engineering expertise, manufacturing scale up capabilities, quality and regulatory and further develop our channel partner distribution strategy to take advantage of the substantial growth opportunities open to us.

On behalf of the Board and in response to David Evans announcement to step down from as Chairman, I would like to thank David for his tireless support and absolute commitment to Epistem over the past decade. It has been a great privilege and pleasure to work closely with David during this time and the Board and employees of Epistem are extremely grateful for his wise and considered leadership. 

I would like to thank our investors, Board, management and employees for their help and solid support over the past year and I look forward to updating our investors on our progress over the coming weeks and months.

Matthew H Walls

Chief Executive Officer

28 October 2014

CONSOLIDATED INCOME STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2014

		2014	2013
		£000	£000
Revenue		4,497	4,957
Other Income - development grant funding		1,264	399
Revenue & Other Income		5,761	5,356
Contract costs		(4,489)	(3,800)
Discovery and development costs		(2,037)	(1,679)
General administrative costs		(1,530)	(1,396)
Operating (loss)		(2,295)	(1,519)
Finance (costs)/income		(54)	60
(Loss) on ordinary activities before taxation		(2,349)	(1,459)
Taxation on ordinary activities		656	296
Total comprehensive Income for the financial year		(1,693)	(1,163)
(Loss) per share (pence)
Basic -           Basic		(17.4)p	(12.5)p
Diluted		(17.4)p	(12.5)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2014

	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
At 1 July 2012	133	14,007	(136)	847	(2,484)	(3,505)	8,862
Allotment of ordinary shares	12	4,312	-	-	-	-	4,324
Share issue costs	-	(140)	-	-	-	-	(140)
Exercise of options	1	51	-	(13)	-	-	39
Lapse of options	-	-	-	(8)	-	-	(8)
Purchase of own shares (SIP)	-	-	(46)	-	-	-	(46)
Recognition of equity-settled share-based payments	-	-	-	187	-	-	187
Total comprehensive income for the year	-	-	-	-	-	(1,163)	(1,163)
At 30 June 2013	146	18,230	(182)	1,013	(2,484)	(4,668)	12,055
Exercise of options	4	386	-	(139)	-	139	390
Lapse of options	-	-	-	(58)	-	-	(58)
Purchase of own shares (SIP)	-	-	(46)	-	-	-	(46)
Recognition of equity-settled
share-based payments  share-based payments	-	-	-	216	-	-	216
Total comprehensive income for the year	-	-	-	-	-	(1,693)	(1,693)
At 30 June 2014	150	18,616	(228)	1,032	(2,484)	(6,222)	10,864

CONSOLIDATED BALANCE SHEET

As at 30 June 2014

			2014		2013
			£000		£000
Non-current assets
Intangible assets			6,785		3,495
Plant and equipment			840		710
Deferred taxation			154		977
			7,779		5,182
Current assets
Trade and other receivables			1,125		2,006
Tax receivables			1,474		362
Cash and cash equivalents			4,238		6,522
			6,837		8,890
Liabilities
Current liabilities
Deferred income			86		210
Trade and other payables			1,016		1,807
Deferred consideration payable in shares			2,650		-
			3,752		2,017
Net current assets			3,085		6,873
Total assets less current liabilities			10,864		12,055
Net Assets			10,864		12,055
Capital and reserves
Called-up equity share capital			150		146
Share premium account			18,616		18,230
Employee share incentive plan reserve			(228)		(182)
Share options reserve			1,032		1,013
Reverse acquisition reserve			(2,484)		(2,484)
Retained earnings			(6,222)		(4,668)
Total shareholders' equity			10,864		12,055

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2014

 

			2014	2014	2013	2013
			£000	£000	£000	£000
Cash flows from operating activities
		Operating (loss) for the year		(2,295)		(1,519)
		Depreciation, amortisation and impairment		711		284
		Research Credits		(211)		-
		Share based payment expense		158		179
Operating (loss) before changes in working capital and provisions
				(1,637)		(1,056)
	Decrease/(Increase) in trade & other receivables			881		(28)
	(Decrease)/increase in deferred income			(124)		12
	(Decrease)/increase in trade & other payables			(791)		400
Net cash (outflow) from operations				(1,671)		(672)
	Finance Costs		(69)		-
	Finance income		15		60
	Tax received		578		-
				524		60
Net cash (outflow) from operating activities
				(1,147)		(612)
Cash flows from investing activities
	Acquisition of non-current assets		(1,481)		(1,727)
Net cash outflow from investing activities
				(1,481)		(1,727)
Cash flows from financing activities
	Proceeds from issue of share capital		390		4,363
	Expenses of share issue		-		(140)
	Purchase of own shares		(46)		(46)
Net cash inflow from financing activities				344		4,177
Net (decrease)/increase in cash equivalents				(2,284)		1,838
Cash and cash equivalents at beginning of year				6,522		4,684
Cash and cash equivalents at end of year				4,238		6,522
Analysis of net funds
	Cash at bank and in hand			4,238		6,522
Net funds				4,238		6,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2014

Business segments

	Preclinical
	Research Research Research	Personalised	Novel
	Services	medicine	Therapies	Unallocated	Total
	£000	£000	£000	£000	£000
Twelve months ended 30 June 2014
Income	2,899	2,862	-	-	5,761
Segment trading result	568	(640)	(216)	(1,349)	(1,637)
Add Research Credits	115	96	-	-	211
less depreciation and amortization	(133)	(109)	(24)	(60)	(326)
Less fixed asset impairment	-	-	(385)	-	(385)
less equity-settled share-based payments	(8)	(29)	-	(121)	(158)
Operating profit/(loss)	542	(682)	(625)	(1,530)	(2,295)
Twelve months ended 30 June 2013
Income	2,851	2,505	-	-	5,356
Segment trading result	878	15	(718)	(1,231)	(1,056)
less depreciation and amortization	(108)	(79)	(62)	(35)	(284)
less equity-settled share-based payments	(13)	(33)	(3)	(130)	(179)
Operating profit/(loss)	757	(97)	(783)	(1,396)	(1,519)
Geographical segments
				2014	2013
				£'000	£'000
United Kingdom				1,879	1,491
Europe				1,157	563
United States of America				2,555	3,144
Asia				170	158
				5,761	5,356

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 and also the weighted average Matching Shares held by the Epistem SIP which are not yet vested. 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 9,724,524 (2013: 9,266,047)

The dilutive weighted average number of shares in issue during the year was 10,776,434  (2013: 10,439,012)

 

END

 

 

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