Half Yearly Report

RNS Number : 8375A

Epistem Holdings plc

26 March 2013

 



Epistem Holdings Plc

("Epistem" or "the Company")

Interim results to the 31^st December 2012  

Epistem (AIM: EHP), the biotechnology and personalised medicine company, today announces its unaudited Interim Statement for the six months ended 31^st December 2012.

Highlights:

During the first half of the current financial year, Epistem continued to strengthen its business and financial position as follows;

·      Year-on-year revenue of £3.1m (£3.1m: 2011/12)

·      Announcement of supply and distribution agreement with Becton Dickinson and increased investment in diagnostics (Genedrive^®)

·      First half growth in the Personalised Medicine division

·      Steady performance from Preclinical Services 

·      Continued advance and investment in our Novel Therapies drug discovery programme   

·      Cash placing raising £4.2m (net) contributed towards strong cash position of £7.3m

Matthew Walls said "We are now bringing on stream our first product which is destined to change the future shape of molecular diagnostics and the Epistem business. We expect to maintain an ongoing firm revenue position across our core business, which alongside our anticipated first Genedrive^® product sales in Tuberculosis and the prospect of further product and milestone payments, should rapidly advance our growth ambitions."

For further information contact:

Epistem Plc

Matthew Walls, Chief Executive Officer                                         ++44 161 606 7258                                                  
John Rylands, Chief Financial Officer

Peel Hunt LLP

Nominated Adviser: James Steel/Vijay Barathan                          ++44 207 418 8900                                                       

Walbrook

Mike Wort/Anna Dunphy                                                                   ++44 207 933 8780

Notes for editors

Epistem is a biotechnology and personalised medicine company commercialising its expertise in epithelial stem cells and molecular amplification in the areas of oncology, gastrointestinal, dermatological and infectious disease. Epistem develops innovative therapeutics, biomarkers and diagnostics alongside providing preclinical services to drug development companies. Epistem's core expertise is focused on the regulation of adult stem cells located in epithelial tissue. Epistem also has a range of proprietary amplification (RNA and DNA) technologies for use in drug discovery, development and diagnostics.

Chairman and Chief Executive Officer Statement

Despite difficult economic trading conditions, Epistem continues to strengthen its core business units and advance its globally leading technologies. First half year-on-year revenues were broadly in line with the previous year at £3.1m (£3.1m: 2011/12), with a reported operating loss of £0.3m (£0.5m loss: 2011/12) reflecting a trading position which continues to largely offset our investment in our Personalised Medicine and Novel Therapies divisions.   

The announcement in August 2012 of our supply and distribution agreement with Becton Dickinson and preparation for the launch of our first commercial product continues to raise the profile of our business alongside our leading biomarker, preclinical research services and drug development programmes. The $1m Becton Dickinson upfront payment is expected to be recognised in the second half of the current financial year.     

This interim report covers the six-month period from the 1 July 2012 to 31 December 2012.

 

Overview

Results for the first six months delivered revenues of £3.1m (£3.1m: 2011/12), driven by a step up in our Personalised Medicine revenues (Biomarker and Diagnostics) and a steady year-on-year Preclinical Services revenue performance which together with the increasing investment in our diagnostics technology (Genedrive^®) and our Novel Therapies drug leads produced a reduced operating loss for the first half of £0.3m (£0.5m loss: 2011/12).

Preclinical Services

First half Preclinical Services revenues remained broadly in line with last year at £1.3m (£1.4m: 2011/12). The pharmaceutical and biotechnology industry continues to see much change and volatility across the sector with resulting caution and delay in contract closures. Despite the general market uncertainty, the division maintains a competitive niche assay offering with strong business relationships, especially in relation to our Biodefence collaboration with the US National Institutes of Health (NIH).

Personalised Medicine

Biomarkers - Following the significant step up in last year's revenues, Biomarkers maintained a solid performance over the first half buoyed by our GSK biomarker collaboration and a non recurring payment of £0.6m from the Sanofi Aventis collaboration. The group also saw a strengthening in demand for its oncology mutations identification assays. First half Biomarker revenues were £1.3m (£1.3m 2011/12). 

Diagnostics - The announcement of the supply and distribution agreement with Becton Dickinson marks the beginning of our preparation for the launch of our Genedrive^® TB product. Scale up preparations, testing and market readiness for the Genedrive^® unit and assay have commenced, with the unit and assays to be placed with 'Key Opinion Leaders' over the coming months.

We are completing our clinical studies in India and making final preparations for our regulatory submission to the Indian regulator to enable sale of our Tuberculosis tests in India and the Indian sub-continent. The Indian regulatory submission is expected in May 2013. First half diagnostics revenues were £0.5m primarily relating to development payments from the US department of defence.  

Our Novel Therapies division continues to advance its discovery and development programmes around identified novel regulators of epithelial tissue. Discussions are continuing with prospective parties around licensing and development opportunities for our novel hits/leads in both regenerative medicine and oncology. Collaborative discussions are also continuing with prospective co-development partners.

Revenue growth continues to remain key to de-risking our business model alongside the development of our leading technologies. The diversity of our business portfolio enables flexibility to help manage the differing speeds of growth, investment requirement and development timescales for each of our business divisions. We remain excited by the strength of opportunity our technology presents.

Financial Review

Sales revenues from business operations for the first six months of the current financial year were £3.1m (£3.1m: 2011/12).

Preclinical Services first half revenues remained roughly in line with last year, with the emerging growth in Personalised Medicine (Biomarkers and Diagnostics) delivering the major upside over the first half. We expect our Personalised Medicine revenues to be bolstered further with the launch of our first Genedrive^® product in Tuberculosis, which should further support the revenue outlook for the group.

Year-on-year contract costs were marginally reduced over the first half reflecting the slightly lower operational costs.  We seek to carefully control the investment in our business divisions to accelerate our technology and drug development programmes, whilst balancing this against the strengthening trading performance of the group.  Overall the Company reported an operating loss of £0.3m (£0.5m: 2011/12) for the first half, which continues to reflect the targeted investment we are making across our business. 

The corresponding basic loss per share figure for the first half was (2.6)p (2011/12: (4.8)p)

Following the successful cash placing of £4.2m (net) in December 2012, the first half cash reserves at the 31 December 2012 were £7.3m (£4.7m): 30 June 2012).

 

Operational Review

Preclinical Services continues to develop its core service offering and scientific expertise in preclinical efficacy testing to deliver an improved and extended range of new competitive models in imaging and inflammation. We anticipate a steady level of performance from this division over the second half reflecting the cautious climate and changing industry dynamics affecting our customer base. Both our US and EU territories saw flat first half revenue performance enabling the division to deliver broadly similar year-on-year revenues. Our collaboration as part of the US NIH biodefence programme continues to strengthen. 

Personalised Medicine

The Biomarker division maintained its step up in last years revenue into the first half of this financial year supported by a strengthening in the GSK fibrosis collaboration along with a 'one off' payment related to the completion of biomarker programmes under the Sanofi-Aventis biomarker collaboration. We are continuing to develop collaborations with a number of pharma partners targeting biomarkers of drug effect for key oncology pathways. The first half also saw an increase in demand for pharmacogenomic assays for the identification of oncology mutations and patient stratification markers, greatly enhanced by their prospective use with Genedrive^®. We expect our collaborations to expand further over the coming year providing biomarkers of drug effect and markers of disease progression and anticipate an ongoing strong performance from our biomarker division over the second half.            

Diagnostics. Test preparations for the launch of our first diagnostic product are underway with Becton Dickinson and Xcelris labs. Scale up of the Genedrive^® unit and assays has also commenced with the first production ready units now received alongside our first production assays which are going through their final testing prior to placing in the field. Extensive testing is ongoing to test 'batch to batch' unit and assay consistency/variability and to complete our clinical work in India. The programme of testing is likely to continue over the coming months alongside the introduction of the unit and assays to 'Key Opinion Leaders' for diagnostic use and further field testing.

Whilst the launch of our TB assay remains our prime focus, other Genedrive^® infectious disease assay developments are continuing around malaria, dengue and HCV, HIV (viral panels). Biosurveillance and pathogen identification work is also ongoing with the US department of defence.  

The Novel Therapies division continues to develop and characterise its novel hits/leads and is currently in discussions with a number of groups around the next phase of development for its leads. These discussions range from funding opportunities through to co-development of our lead candidates in regenerative medicine and oncology.

Strategy

Epistem remains focused on strengthening its revenues and advancing our globally leading technologies and scientific expertise to continue to deliver increased shareholder value. Where appropriate, we will consider the acquisition of new technology and businesses to complement our growth strategy. 

The Board believes that Epistem's growing business model differentiates us within the sector as a lower risk investment proposition with significant upside potential.    

Outlook

Over the second half of the current financial year we expect to see Preclinical Services maintain its steady revenue position, which alongside our anticipated first Genedrive^® product sales in Tuberculosis and the prospect of further product and milestone payments should rapidly advance our Personalised Medicine division. Novel Therapies discussions will continue across a group of partners, but the timing, duration and outcome of these discussions remains uncertain.

We remain committed to developing our technology and expertise and heritage in stem cells and to extending our international profile in scientific excellence across the pharmaceutical, diagnostic and regenerative medicine industries.   

The Board remains confident that the Group is well placed to deliver increasing shareholder value based on its current performance and on the opportunities now emerging.

David Evans                                          Matthew Walls

Non Executive Chairman                    Chief Executive Officer

26 March 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2012

	Six months ended	Six months ended	Year Ended
	31 December 2012	31 December 2011	30 June 2012
	Unaudited	Unaudited	Audited
	£000	£000	£000
Revenue	3,051	3,055	5,560
Contract costs	(2,290)	(2,515)	(4,112)
Discovery and development costs	(400)	(395)	(996)
General administrative costs	(705)	(688)	(1,287)
Operating (loss)	(344)	(543)	(835)
Finance income	15	7	109
Finance costs	-	-	-
(Loss) on ordinary activities before taxation	(329)	(536)	(726)
Taxation on ordinary activities	80	145	482
Total Comprehensive Income for
the financial period	(249)	(391)	(244)
(Loss) per share (pence)
Basic	(2.6)p	(4.8)p	(2.9)p
Diluted	(2.6)p	(4.8)p	(2.9)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2012

			Employee
			share
		Share	incentive	Share	Reverse
	Share	premium	plan	options	acquisitions	Retained
	Capital	account	reserve	reserve	reserve	Earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 July 2011	119	11,206	(88)	691	(2,484)	(3,262)	6,182
Allotment of ordinary shares	12	2,765	-	-	-	-	2,777
Share issue costs	-	(56)	-	-	-	-	(56)
Exercise of options	2	77	-	(12)	-	12	79
Purchase of own shares (SIP)	-	-	(25)	-	-	-	(25)
Recognition of equity- settled share-based payments	-	-	-	84	-	-	84
Total comprehensive income for the period	-	-	-	-	-	(391)	(391)
At 31 December 2011	133	13,992	(113)	763	(2,484)	(3,641)	8,650
Purchase of own shares (SIP)	-	-	(23)	-	-	-	(23)
Share issue costs adjustment	-	(4)	-	-	-	-	(4)
Exercise of options	-	19	-	(2)	-	(12)	133
Lapse of options	-	-	-	(1)	-	1	-
Recognition of equity- settled share-based payments	-	-	-	87	-	-	87
Total comprehensive income for the period	-	-	-	-	-	147	147
At 30 June 2012	133	14,007	(136)	847	(2,484)	(3,505)	8,862
Allotment of ordinary shares	11	4,313					4,324
Share issue costs		(140)					(140)
Exercise of options	1	18		(7)		7	19
Purchase of own shares (SIP)			(15)				(15)
Recognition of equity-settled share-based payments				87			87
Total comprehensive income for the year						(249)	(249)
At 31 December 2012	145	18,198	(151)	927	(2,484)	(3,747)	12,888

CONSOLIDATED BALANCE SHEET

As at 31 December 2012

	31 December	31 December	30 June
	2012	2011	2012
	(unaudited)	(unaudited)	(audited)
	£000	£000	£000
Non-current assets
Intangible assets	2,611	1,256	2,189
Plant and equipment	534	547	573
Deferred taxation	1,082	665	1,002
	4,227	2,468	3,764
Current assets
Trade and other receivables	2,956	2,321	1,978
Tax receivables	46	117	41
Cash and cash equivalents	7,332	5,255	4,684
	10,334	7,693	6,703
Liabilities
Current liabilities
Deferred income	677	17	198
Trade and other payables	996	1,414	1,407
	1,673	1,431	1,605
Net current assets	8,661	6,232	5,098
Total assets less current liabilities	12,888	8,730	8,862
Non-current liabilities
Liabilities payable 1 - 5 years	-	(80)	-
Net Assets	12,888	8,650	8,862
Capital and reserves
Called-up equity share capital	145	133	133
Share premium account	18,198	13,992	14,007
Employee share incentive plan reserve	(151)	(113)	(136)
Share options reserve	927	763	847
Reverse acquisition reserve	(2,484)	(2,484)	(2,484)
Retained earnings	(3,747)	(3,641)	(3,505)
Total shareholders' equity	12,888	8,650	8,862

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2012

 

			31 December	31 December	30 June
			2012	2011	2012
			(unaudited)	(unaudited)	(audited)
			£000	£000	£000
Cash flows from operating activities
		Operating (loss) for the year	(344)	(543)	(835)
		Depreciation, amortisation and impairment	243	96	193
		Share based payment expense	87	84	171
Operating loss before changes in working capital and provisions
			(14)	(363)	(471)
	(Increase) in trade and other receivables		(978)	(411)	(68)
	Increase/(Decrease) in deferred income		479	(58)	123
	(Decrease) in trade and other payables		(411)	(33)	(40)
Net cash (outflow) from operations			(924)	(865)	(456)
	Finance costs			-	-
	Interest received		15	7	109
	Tax received		(5)	-	76
			10	7	185
Net cash (outflow)/inflow from operating activities
			(914)	(858)	(271)
Cash flows from investing activities
	Acquisition of fixed assets		(626)	(257)	(1,313)
Net cash outflow from investing activities			(626)	(257)	(1,313)
Cash flows from financing activities
	Proceeds from issue of share capital		4,324	2,777	2,861
	Expenses of share issue		(140)	(56)	(60)
	Exercise of share options		19	79
	Purchase of own shares		(15)	(25)	(48)
	Increase/(decrease) in borrowings		-	(25)	(105)
Net cash inflow from financing activities			4,188	2,750	2,648
Net increase in cash equivalents			2,648	1,635	1,064
Cash and cash equivalents at beginning of year			4,684	3,620	3,620
Cash and cash equivalents at end of year			7,332	5,255	4,684
Analysis of net funds
	Cash at bank and in hand		7,332	5,255	4,684
Net funds			7,332	5,255	4,684

 

NOTES TO THE INTERIM RESULTS TO 31 DECEMBER 2012

A. Business segments

	Preclinical Research	Personalised	Novel
	Services	medicine	Therapies	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31 December 2012
Revenue	1,252	1,799	-	-	3,051
Segment trading result	348	619	(356)	(625)	(14)
less depreciation and amortization	(57)	(128)	(43)	(15)	(243)
less equity-settled share-based payments)	(5)	(16)	(1)	(65)	(87)
Operating profit/(loss)	286	475	(400)	(705)	(344)
Six months ended 31 December 2011
Revenue	1,403	1,652	-	-	3,055
Segment trading result	395	222	(370)	(610)	(363
less depreciation and amortization	(36)	(24)	(24)	(12)	(96)
less equity-settled share-based payments	(2)	(15)	(1)	(66)	(84)
Operating profit/(loss)	357	183	(395)	(688)	(543)
Twelve months ended 30 June 2011
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)

 

B. 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.

The weighted average number of shares in issue during the period was 9,565,772 (2011: 8,095,560)

 

END

 

 

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