Half Yearly Report

RNS Number : 0592D

Epistem Holdings plc

25 March 2014

 

RNS Press Release

For release: 25^th March 2014: 7.00 AM

Interim Results to 31 December 2013

Epistem Holdings Plc (LSE: EHP), the biotechnology and personalised medicine company, announces today its unaudited interim results for the six months to 31 December 2013. The first half of the 2013/14 financial year saw Epistem continue to accelerate investment in its core Genedrive® development programme, whilst delivering solid first half financial results.

Financial and Operating Highlights

·    Total revenue and other income of £2.9m (2012: £3.1m) underpinned by a steady performance from the Preclinical Research Services and Personalised Medicine divisions.

·    Increased levels of investment in our Personalised Medicine technology (Genedrive^®) led to a reported loss of £0.6m (2012: £0.2m loss after tax).

·    Cash reserves of £5.2m at 31 December 2013.

·    Genedrive^® MTB clinical testing now underway, following resolution of the software and firmware issues reported in the 2013 Preliminary results.

·    Announcement in September 2013 of 'Hepatitis-C' development collaboration with the Pasteur Institut and INSERM.

·    Announcement in December 2013 of development collaboration with the US Department of Defence for pathogen detection. 

·    Preparations for Indian and FIND/WHO clinical studies in support of regulatory submission are ongoing with launch of Genedrive® expected in calendar H2 2014.

·    Initial TB clinical paper published in December 2013 highlighting the sensitivity and strong performance of Genedrive®.

·    Ongoing development of our patient stratification platform with successful initial clinical trials for Genedrive^® pharmacogenomic applications.

Recent Developments

·    Ongoing discussions with Global Health Investment Fund to enter into a collaboration for the deployment of Genedrive® in low-income countries and for the extension of the Genedrive® test menu.

·    Expanded Genedrive® infrastructure and executive and senior management with recruitment of a COO and Technical Director for Genedrive® Diagnostics.

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 and CEO Statement

In the results for the six months ended 31 December 2013, we report a steady trading position and increasing investment in our Genedrive^® molecular diagnostic technology, giving rise to first half reported losses. Following the termination in September 2013 of the Becton Dickinson supply and distribution agreement, we have made significant progress towards finalising our Genedrive^® unit and assay product development and we have bolstered our management team to transition our initial Tuberculosis (TB) product from the development phase into final manufacture.  Recent positive independent clinical testing has helped increase our confidence, as we finalise the pre-launch stages for our TB assay.  Whilst we continue to remain vigilant, we are confident that the technical and manufacturing issues reported in the Preliminary results have been resolved with final preparations to commence formal independent regulatory clinical trials of our TB assay and Genedrive^® unit now in hand.

In line with the progress achieved, we are in discussions with the Global Health Investment Fund. The Global Health Investment Fund is a new social impact investment fund designed to provide financing to advance the development of drugs, vaccines, diagnostics and other interventions against diseases that disproportionately burden low-income countries.

We are also in discussions with prospective distribution partners in relation to tests from our broader infectious disease and pharmacogenomic portfolios.

We are now finalising preparations for the scale up of our Genedrive^® platform for its first application in TB diagnosis. We expect to complete our in-house clinical testing as a forerunner to entering into the Indian TB regulatory process in April 2014 and we continue to plan for a market launch of our TB test in the second half of 2014.

We believe that the launch of our first Genedrive^®product in TB under the previously reported India supply and distribution agreement with Xcelris, offers very attractive growth opportunities.

This interim report covers the six-month period from the 1July 2013 to 31 December 2013.

Financial Results

Results for the first six months delivered revenues of £2.9m (2013: £3.1m). Based on the increased levels of investment made in our Personalised Medicine (Genedrive^®) programme, the Company reported a loss of £0.6m (2012: £0.2m loss after tax). Reported cash reserves at 31 December 2013 were £5.2m (£6.5m at 30 June 2013.)

Progress across each of the Company's three divisions is outlined below:

·    Preclinical Research Services income for the first six months was £1.6m (2012: £1.3m) with a strengthening performance in the US territory supported by our US government bio-defence contract. We recently announced the opening of a US laboratory in Baltimore to help support our bio-defence work and foster a closer relationship with the US Department of Defence and provide local support for our US clients. We are continuing to develop our range of high margin service offerings, investing in our rheumatoid arthritis (RA) and oncology imaging leukaemia models. The division continues to build its core scientific strengths, especially in the US, to maintain a solid platform for future growth.  

·    Personalised Medicine first half revenues were £1.3m (2012: £1.8m) primarily reflecting the business generated by our pharmacogenomic (Biomarker) sub division.  Revenues were down partly due to reduced 'revenue recognition' in relation to the Genedrive^®US department of defence pathogen detection contract. Revenues from this contract (£0.4m) are expected to be recognised in the second half of the current financial year. The division continues to make significant investment in Genedrive^® including design and development, software and engineering support, clinical development and broadening the management team.  During the first half, alongside preparing for our India clinical studies, we also entered into an agreement with the Foundation for Innovative New Diagnostics (FIND) for clinical testing of our TB assay with the objective of targeting a World Health Organisation (WHO) recommendation in 2015. The large, (1200 patients) FIND study has been kindly sponsored by the US National Institutes of Allergies and Infectious Diseases (NIAID).

·    In September 2013 we announced the commencement of a three (3) year, FP7 funded €1.5m collaboration with INSERM and the Pasteur Institute for development of a 'Hepatitis C' (HCV) Point-of Care test. Development work on the HCV point-of-care test is progressing with the first public testing successfully completed in Paris, in October 2013 of our initial IL28B (biomarker) assay, intended for patient stratification for HCV therapeutic treatment. The global need for an improved HCV test is a key area of unmet medical need and we will be developing the HCV assay panel (including genotype, viral load, IL28B and protein marker) as part of our expanding menu of infectious disease assays.

·    In addition to the application of Genedrive^® in infectious disease, the Personalised Medicine division continues its pharmacogenomic development of near patient clinical management in cancer treatment and "patient stratification" for drugs covering a broad spectrum of disease indications. Following the successful completion of our first two 'patient stratification' clinical studies, we are now preparing to undertake further "patient stratification" clinical assessments with our pharmaceutical partners GSK and Novartis. We expect this area to emerge as an exciting area of growth for the Company.

·    We have largely completed the in-house phase of development of our Genedrive^® unit and TB assay in readiness for "in country" regulatory (clinical) trials in India over the coming months. In addition, the FIND TB study intended to lead to WHO approval will be undertaken in Brazil and South Africa.

·    We are working closely with GE Healthcare in Cardiff for the manufacturing scale up of our TB assay ready for sales of Genedrive^®expected in the second half of calendar year 2014. This will mark the beginning of Epistem's first Genedrive^® product related revenues which we believe will bring about a breakthrough in rapid, high sensitivity and low cost molecular (DNA) diagnostic testing across a broad range of disease areas.

·    Novel Therapies' drug development programme continues at a reduced investment level whilst we complete the launch of our first Genedrive^® product.  We are carefully investing in a limited number of leads with the division reporting nil revenues for the first half (2012: £0.0m).  Collaborative discussions with potential partners are on hold pending the further development of our leads in the areas of Regenerative Medicine and Oncology.

·       Based on the ongoing investment in our Genedrive^® system and reducing investment in our Novel Therapies programmes, the Company reports a loss for the first half of £0.6m (2012: £0.2m loss for the period) and loss per share of 6.0p (2012: 4.8p loss per share).

Outlook

Alongside the continued revenue growth and development of our Preclinical and Personalised Medicine divisions, the outlook for the second half of the financial year remains firmly focused on clinical regulatory approval of our first TB assay, preparation for launch of Genedrive^® later in the calendar year and broadening our menu of new assays in clinical and non-clinical fields. We are dedicated to delivering the strategic value of Genedrive^®and to driving the shareholder returns from the disruptive market response we expect to create.

The delivery of a new Point-of-Care healthcare diagnostic is technically challenging. However, whilst development timescales and technical obstacles are difficult to predict, we have made major progress over the past few months towards preparations for our first product launch and we are building a management team capable of delivering this vision. With our TB assay and Genedrive^® product development largely complete, we anticipate the following key objectives over the coming months:

·      In April, we expect to enter the Indian regulatory approval process to complete our TB clinical studies, alongside commencing supplementary Nigerian TB studies in readiness for launch of our TB assay later in the year.

·      Also in April, Genedrive^® is expected to enter preliminary TB clinical studies in the US as a forerunner to a WHO recommendation in 2015.

·      Ongoing discussions with the Global Healthcare Investment Fund.

·      Progressing our HCV assay developments and other core development programmes.

·      Discussions with potential pharmaceutical and other distribution partners in relation to the use of Genedrive^® for use as a companion diagnostic in clinical trials re patient stratification.

We expect continued revenue growth in our cornerstone Preclinical Research Services and the Personalised Medicine - Pharmacogenomics business to help offset the increased investment in our emerging Personalised Medicine - Diagnostics business. At this critical time of increased investment and carefully focused delivery, we will limit our investment in our Novel Therapies business programme pending the launch of our Genedrive^® product. 

We would like to thank our investors for their patience and commitment over the reporting period. The past six months have been an extremely busy and challenging period for the Company and we are grateful for our investors' support which has provided a stable platform for our continued growth.

Our recent clinical and commercial progress has provided much confidence and excitement within the business at the prospect of our next steps. The Board of Epistem remains confident that we are developing a strategically valuable asset in the field of molecular diagnostics.

David Evans              Matthew Walls

Chairman                  Chief Executive Officer

25 March 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2013

		Six months ended	Six months ended	Year Ended
		31 December 2013	31 December 2012	30 June 2013
		Unaudited	Unaudited	Audited
	Notes	£000	£000	£000
Revenue		2,544	2,751	5,356
Other Income - Development Grant Funding		344	300	324
Revenue & Other Income	(1)	2,888	3,051	5,356
Contract costs		(2,022)	(2,290)	(3,800)
Discovery and development costs		(716)	(400)	(1,679)
General administrative costs		(853)	(705)	(1,396)
Operating (loss)	(2)	(703)	(344)	(1,519)
Finance income		8	15	60
Finance costs		(35)	-	-
(Loss) on ordinary activities before taxation		(730)	(329)	(1,459)
Taxation on ordinary activities		146	80	296
Total Comprehensive Income for
the financial period		(584)	(249)	(1,163)
(Loss) per share (pence)
Basic -               Basic	(3)	(6.0)p	(4.8)p	(12.5)p
Diluted -               Basic	(3)	(6.0)p	(4.8)p	(12.5)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2013

			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 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 period	-	-	-	-	-	(249)	(249)
At 31 December 2012	145	18,198	(151)	927	(2,484)	(3,747)	12,888
Allotment of ordinary shares	1	(1)	-	-	-	-	-
Share issue costs adjustment	-	-	-	-	-	-	-
Exercise of options	-	33	-	(6)	-	(7)	20
Purchase of own shares (SIP)	-	-	(31)	-	-	-	(31)
Lapse of options	-	-	-	(8)	-	-	(8)
Recognition of equity- settled share-based payments	-	-	-	100	-	-	100
Total comprehensive income for the period	-	-	-	-	-	(914)	(914)
At 30 June 2013	146	18,230	(182)	1,013	(2,484)	(4,668)	12,055
Allotment of ordinary shares	-	-	-	-	-	-	-
Share issue costs	-	-	-	-	-	-
Exercise of options	-	69		(25)	-	25	69
Purchase of own shares (SIP)	-	-	(23)	-	-	-	(23)
Recognition of equity-settled share-based payments	-	-		87	-	-	87
Total comprehensive income for the year	-	-	-	-	-	(584)	(584)
At 31 December 2013	146	18,299	(205)	1,075	(2,484)	(5,227)	11,604

CONSOLIDATED BALANCE SHEET

As at 31 December 2013

	31 December	31 December	30 June
	2013	2012	2013
	(unaudited)	(unaudited)	(audited)
	£000	£000	£000
Non-current assets
Intangible assets	4,044	2,611	3,495
Plant and equipment	706	534	710
Deferred taxation	1,123	1,082	977
	5,873	4,227	5,182
Current assets
Trade and other receivables	1,657	2,956	2,006
Tax receivables	362	46	362
Cash and cash equivalents	5,190	7,332	6,522
	7,209	10,334	8,890
Liabilities
Current liabilities
Deferred income	466	677	210
Trade and other payables	1,012	996	1,807
	1,478	1,673	2,017
Net current assets	5,731	8,661	6,873
Total assets less current liabilities	11,579	12,888	12,055
Non-current liabilities
Liabilities payable 1 - 5 years		-	-
Net Assets	11,604	12,888	12,055
Capital and reserves
Called-up equity share capital	146	145	146
Share premium account	18,299	18,198	18,230
Employee share incentive plan reserve	(205)	(151)	(182)
Share options reserve	1,075	927	1,013
Reverse acquisition reserve	(2,484)	(2,484)	(2,484)
Retained earnings	(5,227)	(3,747)	(4,668)
Total shareholders' equity	11,604	12,888	12,055

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2013

 

			31 December	31 December	30 June
			2013	2012	2013
			(unaudited)	(unaudited)	(audited)
			£000	£000	£000
Cash flows from operating activities
		Operating (loss) for the year	(703)	(344)	(1,519)
		Depreciation, amortisation and impairment	161	243	284
		Share based payment expense	87	87	179
Operating (loss)/profit before changes in working capital and provisions
			(455)	(14)	(1,056)
	(Increase) in trade and other receivables		349	(978)	(28)
	Increase/(Decrease) in deferred income		256	479	12
	(Decrease) in trade and other payables		(795)	(411)	400
Net cash (outflow) from operations			(645)	(924)	(672)
	Finance income		8	15	60
	Finance costs		(35)	-	-
	Tax received			(5)	-
			(27)	10	60
Net cash (outflow)/inflow from operating activities
			(672)	(914)	(612)
Cash flows from investing activities
	Acquisition of fixed assets		(706)	(626)	(1,727)
Net cash outflow from investing activities			(706)	(626)	(1,727)
Cash flows from financing activities
	Proceeds from issue of share capital		-	4,324	4,363
	Expenses of share issue		-	(140)	(140)
	Exercise of share options		69	19	-
	Purchase of own shares		(23)	(15)	(46)
	Increase/(decrease) in borrowings		-	-	-
Net cash inflow from financing activities			46	4,188	4,177
Net increase in cash equivalents			(1,332)	2,648	1,838
Cash and cash equivalents at beginning of year			6,522	4,684	4,684
Cash and cash equivalents at end of year			5,190	7,332	6,522
Analysis of net funds
	Cash at bank and in hand		5,190	7,332	6,522
Net funds			5,190	7,332	6,522

 

 

 

 

 

NOTES TO THE PRELIMINARY RESULTS TO 31 DECEMBER 2013

1. Revenue and Other Income

Income receivable in the form of Government grants to fund product development is recognised as Development Grant Funding when the related eligible costs are incurred and recognised,  as detailed below.

	31 December cember	31 December	30 June
	2013	2012	2013
	£000	£000	£000
Revenue	2,544	2,751	5,032
Other  Income - Development Grant Funding	344	300	324
Revenue & Other Income	2,888	3,051	5,356

2. Business Segments

	Preclinical	Personalised	Novel
	Research Services	Medicine	Therapies	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31 December 2013
Revenue and Other Income	1,603	1,285	-	-	2,888
Segment trading result	492	129	(299)	(777)	(455)
less depreciation and amortization	(59)	(55)	(31)	(16)	(161)
less equity-settled share-based payments	(11)	(14)	(2)	(60)	(87)
Operating profit/(loss)	422	60	(332)	(853)	(703)
Six months ended 31 December 2012
Revenue and Other Income	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)
Twelve months ended 30 June 2013
Revenue and Other 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)

 

3. Earnings per share

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 9,701,568 (2012: 9,565,772.)

4. Post Balance Sheet event

The Company's Financial Statements for the year ended 30^th June 2013 and prior years noted the acquisition of Visible Genomics Limited by Epistem Holdings Plc, which included provision for payment of an earnout. On 5^th March, 2014, agreement was reached with the vendor of Visible Genomics Limited ("Vendor") to vary the terms of the earnout as follows:

(a) Cash payments

·      £50,000 upon Epistem products entering a clinical trial registered with the Directorate of Health Services Office of Drugs Controller General (India) "DCG(I)";

·      £50,000 upon Epistem making a DCG(I) regulatory submission;

(b) Issue of Consideration shares In Epistem Holdings Plc

·      Consideration Shares to a value of £1.4m upon receipt of regulatory approval from DCG(I);

·      Consideration Shares to a value of £1.25m upon the achievement of commercial milestones related to the recognition of £5m of Genedrive related income or contractual commitments from any of a list of 16 IVD companies which provide a minimum combined value of £5m.

The value at which Consideration shares are to be issued is to be calculated by reference to LSE daily share price over a 5 day period commencing 30 days after the date that the achievement of the milestone(s) is announced.

The Consideration shares are subject to a "Lock-In" provision, under which the Vendor covenants not to sell Consideration shares for a period of up to 24 months without the consent of the Company, except in the event that an offer for the whole of the issued share capital of the Company is received and which is either recommended by the Board or becomes unconditional as to acceptances.

In the event that an offer for the whole of the issued share capital of the Company or for the Genedrive business is received and which is either recommended by the Board or is declared unconditional as to acceptances, then, the Vendor will become entitled to be allotted shares in the Company up to a maximum value of £2.65m, save to the extent that Consideration shares, as detailed above, have already been issued. The value at which these shares are issued will be the relevant offer price.

The effect on the financial statements of this transaction will be to increase Intangible Fixed Assets and Current Liabilities by £2.75m

 

END

 

 

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