Half Yearly Report

RNS Number : 4948I

Epistem Holdings plc

26 March 2015

 

RNS Press Release

26 March 2015

Interim Results to 31 December 2014

Epistem Holdings Plc (LSE: EHP), the biotechnology and personalised medicine company, announces today its unaudited interim results for the six months to 31 December 2014. The first half of the 2014/15 financial year saw Epistem continue to accelerate investment in its core Genedrive® platform in preparation for launch of its first molecular diagnostic product test for Tuberculosis.

Financial and Operating Highlights

·    Total revenue and other income of £2.2m (2013: £2.9m) underpinned by Preclinical Research Services and Personalised Medicine divisions.

·    Preparations for launch of Genedrive® underpinning increased levels of investment in our Personalised Medicine division giving rise to a reported after tax loss of £1.9m (2013: £0.6m loss after tax).

·    Cash reserves of £6.6m at 31 December 2014.

·    Application for Genedrive® Tuberculosis regulatory approval submitted to Indian regulator. Discussions with the Indian regulator are well advanced.

·    Completion of the GHIF collaboration and bond funding agreement in July 2014.

·    Preliminary Tuberculosis clinical studies in support of planned future WHO regulatory submission.    

·    Successful initial results of US Department of Defence 3-plex pathogen detection test.

·    £0.4m grant funding from the UK Department of Environment/TSB for Genedrive® aquaculture testing.    

·    US Patents granted for Genedrive® mutational analysis and test cartridge RFID (Radio Frequency Identification)  

·    Following successful completion of our Genedrive® patient stratification (genotyping) platform, partnering discussions ongoing.

Recent Developments

·    Commenced clinical studies of IL28B genotype testing for HCV clinical assessment with Pasteur Institut and 'Hepatitis-C' detection test entering clinical studies around mid year.

·    Entered Greater Manchester healthcare accelerator program to help advance Genedrive® to tackle Tuberculosis reduction across NHS England.    

For further details please contact:

Epistem Plc	[phone]
Matthew Walls: Chief Executive Officer
John Rylands: Finance Director
Peel Hunt LLP	[phone]
James Steel
Clare Terlouw
Walbrook PR	[phone]
Mike Wort
Anna Dunphy

Chairman and CEO Statement

In the results for the six months ended 31 December 2014, we report an increased operating loss arising from a weakened first half revenue performance from our Preclinical and Personalised Medicine business, alongside increasing investment in our Genedrive^® molecular diagnostic device as we prepare to launch our Tuberculosis (TB) assay in India. We anticipate improved Preclinical Research Services and Personalised Medicine revenues in the second half. Following the successful completion of Indian TB clinical studies at the end of last year, the process of regulatory approval has taken longer than expected, partly due to the request for additional analytical information in support of the regulatory submission. Despite these delays, we are confident that discussions with the Indian regulator are now well advanced. In preparation for launch, significant progress has been made to scale up and manufacture initial batches of Genedrive^® v1.0 units and TB assays in readiness for regulatory approval to sell. We remain confident that Genedrive^® offers a highly disruptive and strategically important technology targeting low cost disease management at the 'Point of Care', thereby providing a new molecular approach to diagnosis and affordable healthcare.  We believe that the launch of our first Genedrive^® product for TB, under the previously reported India supply and distribution agreement with Xcelris, offers very attractive growth opportunities.

In July 2014 we announced that we had entered into a collaboration and convertible bond funding agreement with the Global Health Investment Fund I, LLC (GHIF) to support the roll-out of Genedrive® as the Company's TB test prepares for launch. Under the terms of the agreement, Epistem has issued to the GHIF a five-year convertible bond totaling $8.0 million (£4.7 million). As detailed in the notes to these interim results, the GHIF agreement contains provisions which allow the bond to be converted into ordinary Epistem shares using a fixed exchange rate and a fixed conversion price of 489p per share. 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 our expanding menu of infectious disease assays under development for low-and middle-income countries.

In addition to scaling up for the launch of our TB test in India, we have been working to prepare our product for the African market. We are in discussions with prospective and strategic distribution partners in relation to our TB test (for markets outside of India) as well as for our second emerging infectious disease test for the diagnosis of Hepatitis C.  The Hepatitis C genotyping test (IL28B) has now commenced clinical studies with the Pasteur Institut and INSERM and the Hepatitis C (HCV) detection assay is expected to start clinical studies in June 2015. We are encouraged by the early clinical data generated for our Hepatitis C test and believe this test will be of significant commercial value to the business going forward and demonstrating the Genedrive^® platform's ability to host an expanding menu of tests.

Further, as part of the increasing focus of medical authorities on the role of personalised medicine in targeting therapeutic treatments, we anticipate significant potential for the genotyping capabilities of Genedrive^®. We continue to engage with pharmaceutical companies to understand and exploit interest in these applications.      

We can also report that work with the US Department of Defence (US DoD) has successfully progressed with the first phase Bio-plex detection assay (3 pathogens) passing through its initial round of performance assessment.  We are now working with the US DoD to expand the programme into the second phase detection of 8 pathogens for military use.     

We will receive £0.4m grant funding for Genedrive^® from the UK Department of Environment/TSB over the next 36 months to develop an assay for aquaculture testing in relation to shrimp farming. This programme will commence in the second half of this financial year.   

Genedrive^® has been also entered into the Greater Manchester - Academic Health Science Network accelerator program with the intention of introducing Genedrive^® via NHS-England to tackle the clinical priority of reducing the prevalence of TB by targeting early detection and treatment leading to improved health outcomes. This provides our first inroad into making our TB test available to the UK (NHS) home market. 

This interim report covers the six-month period from the 01July 2014 to 31 December 2014.

Financial Results

Results for the first six months delivered revenues of £2.2m (2013: £2.9m). Increased levels of investment and headcount in our Personalised Medicine (Genedrive^®) programme gave rise to a Company reported loss of £1.9m (2013: £0.6m loss after tax). Reported cash reserves at 31 December 2014 were £6.6m (£5.2m at 30 June 2014.)

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

Preclinical Research Services income for the first six months was £1.0m (2013: £1.6m). First half weakness in our EU business was the prime reason for the below par performance. We are reorganising our business development team and anticipate a recovery in second half revenues and a breakeven position for this division for the full year. In the US territory, our Preclinical Research Services are supported by the current five year US government bio-defence contract, due for renewal in September 2015, which remains on track as we continue to strengthen our relationship with the US Department of Defence and provide local support and new business opportunities for our US clients. We continue to develop carefully, and extend, our range of higher margin service offerings around our rheumatoid arthritis (RA) and oncology imaging leukaemia models. The division continues to build its core scientific strengths, especially in the US, to maintain and strengthen its platform for future growth.  

Personalised Medicine first half revenues were £1.2m (2013: £1.3m) primarily reflecting the business generated by our pharmacogenomic (Biomarker) sub division.  Whilst year-on-year revenues were flat the division is engaged in a number of collaborations with its pharmaceutical partners which we expect to drive significant future value. Revenues from these contracts are expected to generate increased revenue in the second half of the current financial year and beyond.  

The Personalised Medicine division continues to make significant investment in Genedrive^® including finalising the development of the Genedrive^® v1.0 unit and TB test and scale up manufacture in readiness for our first product launch. The Genedrive^®and TB regulatory submission was delivered to the Indian regulator in October 2014 and following initial review and a subsequent request for additional analytical information, we now believe we are at the final stages with the regulator. Regulatory approval of our first infectious disease TB test will mark a significant milestone for the Company and signal the beginning of a test menu expansion process targeted at positioning Genedrive^® at the forefront of the growing field of molecular 'point of care' diagnostics.

Initial studies targeting a WHO recommendation for TB have commenced, although these studies are expected to extend out into 2016 based on the need to enrol significant patient numbers and to carefully control, support and learn from our initial clinical testing and user feedback.

Our Genedrive^® collaboration with INSERM and the Pasteur Institute for development of a 'Hepatitis C' (HCV) 'Point of Care' test is now well progressed. Commencement of clinical testing for the IL28B (patient genotyping marker) started in March 2015 with the intention of stratifying patients for HCV therapeutic treatment. We anticipate clinical testing of our HCV detection test to commence around the middle of this year. Hepatitis C diagnosis and effective therapeutic treatment remains a key area of unmet medical need. The same technology enables doctors at the 'Point of Care' to identify patient 'gene types' (for genotyping of DNA and RNA) allowing patients to be genotypically aligned with the most appropriate and effective therapeutic course of treatment. We believe the Hepatitis C test will offer significant commercial value to the business going forward.

We have been awarded a £0.4m grant to develop Genedrive^® as a 'Point of Need Diagnostic' (POND) for shrimp aquaculture. Current estimates predict that up to 40% of tropical shrimp production (>$3bn) is lost annually to disease, the majority due to White Spot Syndrome Virus (WSSV) and Early Mortality Syndrome (EMS).

The consortium led by Epistem will establish a mobile testing model in which WSSV/EMS POND are linked with data transmission to central facilities for regional disease management.

Genedrive^® has also been entered into the Greater Manchester - Academic Health Science Network accelerator program with the intention of introducing Genedrive^® via NHS-England to tackle the clinical priority of reducing the prevalence of TB. Rapid simple to use diagnostics at the Point of Care (clinic or GP surgery) will empower GP's to take informed healthcare decisions based on timely and accurate patient test results. This will enable patients to be rapidly tested and more effectively treated in local (primary care) settings rather than at the centralised (acute) hospital level. Genedrives^® rapid and simplified 'gold standard' diagnosis also enables efficient and cost-effective changes to patient workflows and improved healthcare.        

In addition to the application of Genedrive^® in infectious disease, the Personalised Medicine division continues its pharmacogenomic development of near patient clinical management in genotype testing for patient alignment with the appropriate course of treatment. Various clinical collaborations are currently being negotiated with our pharmaceutical partners. We anticipate further news flow on these developments over the coming months.

Our Novel Therapies' drug development programme remains on hold, whilst we complete the launch and delivery of our first revenues from our Genedrive^® product.

Based on the ongoing investment in our Genedrive^® technology and reducing investment in our Novel Therapies programme, the Company reports a loss for the first half of £1.9m (2013: £0.6m loss for the period) and loss per share of 19.0p (2013: 6.0p loss per share).

Outlook

The outlook for the second half of the financial year remains firmly focused on obtaining Indian regulatory approval of our first TB assay and preparing for launch of Genedrive^®. This will mark the beginning of Epistem's first product related revenues and will bring about a breakthrough in rapid, high sensitivity and low cost molecular (DNA and RNA) diagnostic testing across a broad range of disease areas. We are dedicated to delivering the strategic value of Genedrive^® and to generating shareholder returns from the disruptive market response which we expect to create. We are also intent on driving an improved second half revenue delivery in our preclinical and personalised medicine divisions, with both divisions anticipating increased revenues in the second half. With the delays in the key Indian TB regulatory approval process, we have restricted our initial product revenue expectations for the second half resulting in the Board's current full year revenue expectations being in the region of £5.0m. It should be noted that this revenue guidance excludes any product or new Genedrive^® collaborative revenues, the timing of which remain difficult to accurately forecast, however any such revenues being recognised in the remaining months of the current financial year would represent an attractive upside to this guidance.  

We have made significant progress over the past few months in preparing for our first product launch, which we are poised to deliver upon receipt of regulatory approval. With our Genedrive^® v1.0 product and first TB test development now complete, we anticipate the following key objectives over the coming months:

·      Completion of our Indian regulatory process and licence to sell Genedrive^® and TB test in India

·      Selectively place Genedrive^® with Indian Key Opinion Leaders (KOL's) as a forerunner to roll-out of the TB test in India

·      Acceleration of our collaboration with GHIF and engagement of the Global Access Commitment

·      Completion of our IL28B genotype testing for HCV clinical assessment and commence HCV clinical detection studies

·      Discussions with pharmaceutical and other distribution partners in relation to the use of Genedrive^® for genotype testing and patient stratification for alignment with appropriate therapy

Whilst we have been disappointed by the first half revenue development in our core businesses, we are encouraged by the progress of our flagship Genedrive^® platform, especially the Genedrive^® TB and Hepatitis C programmes, and the commercial value they can provide to the business going forward.

David Evans              Matthew Walls

Chairman                  Chief Executive Officer

26 March 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2014

 

		Six months ended	Six months ended	Year Ended
		31 December 2014	31 December 2013	30 June 2014
		(unaudited)	(unaudited)	(audited)
	Notes	£000	£000	£000
Revenue		1,668	2,544	4,497
Other Income - development grant funding		547	344	1,264
Revenue & Other Income	(1)	2,215	2,888	5,761
Contract costs		(1,916)	(2,022)	(4,489)
Discovery and development costs		(1,281)	(716)	(2,037)
General administrative costs		(895)	(853)	(1,530)
Operating (loss)	(2)	(1,877)	(703)	(2,295)
Finance income		7	8	15-
Financing costs	(3)	(376)	(35)	(69)
(Loss) on ordinary activities before taxation		(2,246)	(730)	(2,349)
Taxation on ordinary activities		389	146	656
Total Comprehensive Income for
the financial period		(1,857)	(584)	(1,693)
(Loss) per share (pence)
Basic	(4)	(18.6)p	(6.0)p	(17.5)p
Diluted	(4)	(18.6)p	(6.0)p	(17.5)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 December 2014

			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 2013	146	18,230	(182)	1,013	(2,484)	(4,668)	12,055
Exercise of options	-	69	-	(25)		25	69
Purchase of own shares (SIP)	-	-	(23)	-	-	-	(23)
Forfeit of options	-	-	-	-	-	-	-
Recognition of equity- settled share-based payments	-	-	-	87	-	-	87
Total comprehensive income for the period	-	-	-	-	-	(584)	(584)
At 31 December 2013	146	18,299	(205)	1,075	(2,484)	(5,227)	11,604
Exercise of options	4	317	-	(114)	-	114	321
Purchase of own shares (SIP)	-	-	(23)	-	-	-	(23)
Forfeit of options	-	-	-	(58)	-	-	(58)
Recognition of equity- settled share-based payments	-	-	-	129	-	-	129
Total comprehensive income for the period	-	-	-	-	-	(1,109)	(1,109)
At 30 June 2014	150	18,616	(228)	1,032	(2,484)	(6,222)	10,864
Exercise of options	-	5		(2)	-	2	5
Purchase of own shares (SIP)	-	-	(35)	-	-	-	(35)
Recognition of equity-settled share-based payments	-	-		86	-	-	86
Total comprehensive income for the year	-	-	-	-	-	(1,857)	(1,857)
At 31 December 2014	150	18,621	(263)	1,116	(2,484)	(8,077)	9,063

CONSOLIDATED BALANCE SHEET

As at 31 December 2014

	31 December	31 December	30 June
	2014	2013	2014
	(unaudited)	(unaudited)	(audited)
Note	£000	£000	£000
Non-current assets
Intangible assets	7,328	4,044	6,785
Plant and equipment	759	706	840
Deferred taxation	154	1,123	154
	8,241	5,873	7,779
Current assets
Trade and other receivables	2,214	1,657	1,125
Tax receivables	1,246	362	1,474
Cash and cash equivalents	6,609	5,190	4,238
	10,069	7,209	6,837
Liabilities
Current liabilities
Deferred income	68	466	86
Trade and other payables	1,394	1,012	1,016
Deferred consideration payable in shares     (5)	2,650	-	2,650
	4,112	1,478	3,752
Net current assets	5,957	5,731	3,085
Total assets less current liabilities	14,198	11,604	10,864
Non-current liabilities
Liabilities payable 1 - 5 years                           (6)	5,135	-	-
Net Assets	9,063	11,604	10,864
Capital and reserves
Called-up equity share capital	150	146	150
Share premium account	18,621	18,299	18,616
Employee share incentive plan reserve	(263)	(205)	(228)
Share options reserve	1,116	1,075	1,032
Reverse acquisition reserve	(2,484)	(2,484)	(2,484)
Retained earnings	(8,077)	(5,227)	(6,222)
Total shareholders' equity	9,063	11,604	10,864

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 December 2014

 

			31 December	31 December	30 June
			2014	2013	2014
			(unaudited)	(unaudited)	(audited)
			£000	£000	£000
Cash flows from operating activities
		Operating (loss) for the year	(1,877)	(703)	(2,295)
		Depreciation, amortisation and impairment	156	161	712
		Research Tax Credits	(117)	-	(211)
		Share based payment expense	86	87	158
Operating (loss) before changes in working capital and provisions
			(1,752)	(455)	(1,636)
	(Increase)/decrease in trade and other receivables		(1,089)	349	(881)
	Increase/(decrease) in deferred income		(18)	256	(124)
	(Decrease)/(increase) in trade and other payables		270	(795)	(791)
Net cash (outflow) from operations			(2,589)	(645)	(1,670)
	Finance income		7	8	15
	Financing costs		(376)	(35)	(69)
	Add: unrealised exchange differences  accrued interest		543	-	-
	Tax received		734	-	578
			908	(27)	524
Net cash (outflow) from operating activities
			(1,681)	(672)	(1,146)
Cash flows from investing activities
	Acquisition of fixed assets		(618)	(706)	(1,482)
Net cash outflow from investing activities			(618)	(706)	(1,482)
Cash flows from financing activities
	Exercise of share options		5	69	390
	Purchase of own shares		(35)	(23)	(46)
	Issue of Convertible bond		4,700	-	-
Net cash inflow from financing activities			4,670	46	344
Net decrease in cash equivalents			(2,371)	(1,332)	(2,284)
Cash and cash equivalents at beginning of year			4,238	6,522	6,522
Cash and cash equivalents at end of year			6,609	5,190	4,238
Analysis of net funds
	Cash at bank and in hand		6,609	5,190	4,238
Net funds			6,609	5,190	4,238

 

 

NOTES TO THE PRELIMINARY RESULTS TO 31 DECEMBER 2014

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
	2014	2013	2014
	£000	£000	£000
Revenue	1,668	2,544	4,497
Other  Income - development grant funding	547	344	1,264
Revenue & Other Income	2,215	2,888	5,761

2. Business Segments

	Preclinical	Personalised	Novel
	Research Services	Medicine	Therapies	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31 December 2014
Revenue and Other Income	1,003	1,212	-	-	2,215
Segment trading result	(78)	(779)	-	(895)	(1,752)
Add Research Credits	53	64	-	-	117
less depreciation and amortization	(88)	(51)	-	(17)	(156)
less equity-settled share-based payments	(8)	(66)	-	(12)	(86)
Operating (loss)	(121)	(832)	-	(924)	(1,877)
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)
Twelve months ended 30 June 2014
Revenue and Other 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)

 

3. Finance Costs

Financing costs are detailed below.

	31 December cember	31 December	30 June
	2014	2013	2014
	£000	£000	£000
Realised exchange differences	342	(35)	(69)
Unrealised exchange differences	(435)	-	-
Loan interest accrued	(108)	-	-
Other financing professional charges	(175)	-	-
Financing costs	(376)	(35)	(69)

4. 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 10,010,544 (2013: 9,701,568.)

5. Deferred consideration payable in shares

The Deferred consideration payable in shares represents the balance of the consideration which remains payable following the acquisition of Visible Genomics Limited. As detailed more fully in the Annual Report and Accounts for the Company, the Group acquired Visible Genomics Limited on 28^th July 2010. The Deferred consideration payable to the vendors of Visible Genomics Limited is detailed below:

·      Consideration Shares to a value of £1.4m upon receipt of regulatory approval of Genedrive^® from DCGI;

·      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.

Consideration Shares refer to ordinary shares in the Company of £0.015 which are to rank pari passu with other existing issued ordinary shares except as outlined below. The value at which Consideration shares are to be issued is to be calculated by reference to the 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.

6. Liabilities payable in 1 - 5 years.

The liabilities payable in 1 - 5 years are in respect of the Collaboration and Convertible Bond Purchase Agreement entered into on 22 July 2014 with the Global Health Investment Fund 1 LLC ("GHIF" or the "bond holder"). Under the terms of the Agreement, the Company has issued to GHIF a five-year Convertible Bond totalling $8.0m (£4.7m on conversion to GBP.)Further, as part of the Agreement, GHIF and the Company entered into a Global Access Commitment. The purpose of the Agreement is to fund the Company's development, production and commercialization of Genedrive^®to address Global Health Challenges and achieve Global Health Objectives. An outline (only) of the terms of the Agreement is detailed below:

Convertible Bond Agreement

Unless previously converted or redeemed, the Convertible Bond will mature on 21 July 2019 and interest will be payable half yearly at the rate of 5% per annum.

During a Purchaser Optional Conversion Period which runs from 15 January 2015 to 15 May 2019 (or earlier in the event of a change of control of the Company) the bond holder has the option to convert all (but not part only) of the Convertible Bond at the Conversion Price, initially £4.89 per Epistem Ordinary Share at the Fixed Rate of Exchange of $1.6913:£1.  ("The Fixed Rate of Exchange") (The Conversion Price may be adjusted to take account of changes by the Company of its capital structure or payment of dividends etc.)

The Company has an option conversion period running from 22 January 2015 to 08 July 2019, during which the Company may convert all (but not part only) of the Convertible Bond into Epistem Ordinary Shares at the Conversion Price of 489p per Epistem Ordinary Share at the Fixed Rate of Exchange of $1.6913:£1 if the current market prices equals or exceeds 1.2 times the Conversion Price. The Conversion Price may be adjusted to take account of changes by the Company of its capital structure or payment of dividends etc.)

The Company may redeem the whole of the Convertible Bond on any interest payment date from 22 July 2016. In this event, the bond holder may elect to receive full payment in Epistem Ordinary Shares based on a conversion ratio calculated around the market price at the time of notice of Redemption. Without such an election, the bond will be redeemed at par in US dollars.

Global Access Commitment

Under the Global Access Agreement, the Company will undertake appropriate regulatory strategy and registrations to secure access for Genedrive^®in Developing Countries in tuberculosis, malaria or other infectious diseases agreed between the parties.

The Company agrees to establish a tiered pricing framework that is commercially reasonable and reflects the needs of poor patients in Developing Countries. The Company agrees, taking into account its profitability and other commercial interests, to allocate sufficient capacity and product distribution to make Genedrive^®and its assays accessible to people most in need in Developing Countries.

GHIF will use commercially reasonable efforts through its global access network to support the Company in placing Genedrive^®and its assays in global territories to reflect the needs and price sensitivity of poor patients in the Developing World.

Notwithstanding any early Conversion, Redemption or Termination of the agreement, the Global Access Commitment shall endure for 5 years from 22 July 2014.

General Undertakings

During the period of the Agreement, the Company has entered into undertakings commensurate with a Convertible Bond Agreement. These include:

·      Undertakings relating to incurring financial indebtedness & financial default;

·      Undertakings relating to maintenance of appropriate records;

·      Undertakings relating to standards of social responsibility and ethical behaviour.

Impact on the financial accounts

The Agreement resulted in an injection of cash at bank of $8m (£4.7m) at 22 July 2014.

Interest charges accrue at the rate of 5% (of $8m) per annum from 22 July 2014 and will be booked to the Income Statement.

Unless or until the Convertible Bond is converted or redeemed, the Company will retain a liability of $8m. The liability will be converted to GBP at the dollar/sterling rate of exchange prevailing at each balance sheet date. Differences from previously reported liability arising because of exchange rate differences will be booked to the income statement. At 31 December 2014, the applicable rate was £1: $1.55 giving rise to an unrealised difference of £435k resulting from fluctuations in the exchange rates and this has been reflected in the Income Statement for the period.

 

END

 

 

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