Preliminary Results for year ended 30 June 2015

RNS Number : 6410D

Epistem Holdings plc

28 October 2015

 

RNS Press Release

For release: 28^th October 2015: 7.00 AM

Preliminary Results for the year ended 30 June 2015

Epistem Holdings Plc (LSE: EHP) ("Epistem" or "the Company"), the personalised medicine and biotechnology company, today announces its preliminary results for the year to 30 June 2015. 

The 2014/15 financial year saw excellent progress with Genedrive^®, our novel Point of Care PCR instrument. In May, we announced the landmark Indian regulatory approval, paving the way for placing Genedrive^® units with key opinion leaders (KOLs) and the launch of the Company's tuberculosis (TB) and associated antibiotic resistance test. This represents a step-change for the Company. We have also made very good progress with the development of Genedrive^® tests for Hepatitis C diagnosis and pharmacogenomic applications, whilst also initiating new projects in the fields of human pathogen detection and animal disease testing. The 2014/15 financial year saw the Company experience a difficult year in its established services operations. During the year, Dr Ian Gilham took over the role of Chairman from David Evans and was then appointed Interim CEO in August 2015 when it was announced that Matthew Walls would be leaving that position. Matthew resigned as a Director on 23 October 2015.

Financial and Operating Highlights

·    The award by The Drug Controller General of India (DCGI) to our Indian distribution partner, Xcelris Labs, of an import licence in respect of our TB and associated antibiotic resistance test for use on the Genedrive^® instrument.

·    Invoicing of the first Genedrive^® product sales in advance of the programme of placing units and TB tests with Indian KOL's in preparation for the phased launch of the TB test.

·    The successful conclusion of the US Department of Defence assessment  of Genedrive^® for use in the detection of harmful human pathogens, followed by the announcement in August 2015 of funding of up to $7.8m (c.£5.0m)  over five years, the first $2.4m (£1.5m) stage of which is due for completion during calendar year 2016.

·    Excellent progress with the development of the Genedrive^® 'Hepatitis C' (HCV) blood test. The programme continues to meet internal milestones with clinical trials anticipated to commence in 2015/16.

·    The commencement of clinical trials in collaboration with INSERM (Institute National de la Santé et de la Recherche Médicale) and The Pasteur Institute of the IL28b pharmacogenomic test using the Genedrive^® platform. The simple buccal swab test identifies a DNA marker to highlight a patient's likely response to a drug used for treating Hepatitis C, assisting therapy selection for patients infected with the Hepatitis C virus. The IL28b project represents a significant proof of principle for Genedrive^® in "therapy selection"/"patient stratification" applications.

·    Confirmation of £0.4m funding for the development of the Genedrive^® platform in an aquaculture application, in collaboration with the Centre for Environment, Fisheries and Aquaculture Science (CEFAS).

·    Total income broadly in line with expectations of £4.5m (2014: £5.8m) following a challenging year for the services operations.

·    Preclinical Research Services sales of £2.3m (2014: £2.9m) reflecting weak sales in Europe. As previously announced, the US NIH/NIAID collaborative contract with the University of Baltimore (UMB) will end in September 2015.

·    Following the high levels of investment made in our Genedrive^® technology, the Company reports an Operating loss of £4.0m (2014: £2.3m Operating loss).

·    $8m (c.£4.7m) collaborative funding agreement with The Global Health Investment Fund 1, LLC (GHIF) to support the development and use of Genedrive^® applications as part of the Global Access Programme. 

·    Cash reserves at 30 June 2015 of £4.9m (2014: £4.2m).

An analyst meeting will be held today at 9:30am in the Dome Room at 1 Cornhill, London, EC3V 3ND.

For further details please contact:

Epistem Holdings Plc

Dr Ian Gilham: Chairman                                                                                       [phone]

John Rylands: Finance Director

Peel Hunt LLP

James Steel                                                                                                              [phone]

Tom Burt

Oliver Jackson

Consilium Strategic Communications

Chris Gardner / Laura Thornton                                                                          [phone]

[e-mail] 

Chairman & CEO's Statement

I am pleased to present my first report to the shareholders of Epistem in respect of the year ended 30 June 2015. The year represented a decisive period of transition for Epistem with key steps in the development and launch of Genedrive^®, our novel, versatile and rapid Point of Care molecular testing platform for use in diagnosing infectious diseases, patient stratification and other molecular diagnostic applications. The excellent progress with Genedrive* has, however, been partly tempered by reduced turnover in the established services business divisions of the Company, which to date has represented the majority of our revenues.

The transition of the Company towards an increasing focus on the Genedrive^® diagnostics system was the driving factor behind my becoming a director of Epistem and in May it became my privilege to have accepted the role as Chairman of the Company. The diagnostics industry has long sought simple, Point of Care, molecular testing capability to enable both qualitative and quantitative testing for infectious diseases which represent key unmet healthcare challenges and which allow more rapid and more accurate targeting of therapies for patients. In meeting this need, Genedrive^® represents a significant breakthrough in low cost molecular testing technology, and design, and offers the prospect of a substantial and disruptive entry to the market for diagnostic devices. As shareholders are aware, the Company has taken time to develop this technology platform and has invested heavily but judiciously in developing its technical expertise, allowing us to address the challenges of delivering molecular testing results from small tissue samples where there is limited access to laboratory equipment.  The first Genedrive^® regulatory approval in India for the TB test, together with an expanding range of tests, particularly in Hepatitis C (and in due course Hepatitis B and HIV) will, in my view, secure for Genedrive^® a key position in low cost Point of Care testing and the creation of substantial returns to shareholders given the opportunities we see in infectious diseases, patient stratification and other molecular diagnostic applications. It is our aim to build a significant global base of installed instruments offering a pipeline of high-value tests.  In order to drive our commercial plans, we have recruited Gordon Powell, as our Global Commercial Director for Genedrive^®. Gordon was formerly Global Commercial Director at Axis-Shield where he implemented the commercial strategy for the highly successful Afinion Point of Care testing instrument.

During the year, the Company entered into a collaboration and $8m (£4.7m) funding agreement with the Global Health Investment Fund (GHIF) which is supported by the Bill and Melinda Gates Foundation. The issue of $8m (£4.7m) Convertible Bonds not only represents a significant financial step for the Company but also offers potential for collaboration with GHIF's significant support network.

Financial Review

As a personalised medicine and biotechnology Company, Epistem retains its mix of services operations supporting drug development organisations. As previously reported, the activities of the Company are detailed within three divisions, Personalised Medicine, Preclinical Research Services and Novel Therapies.

The financial results for the Group presented in this statement reflect the group's trading for the year to 30 June 2015 and the comparative period to 30 June 2014.

The Company reports turnover of £4.5m (2014: £5.8m). Within the divisions, Personalised Medicine delivered income of £2.2m (2014: £2.9m) and Preclinical Research Services income of £2.3m (2014: £2.9m) with Novel Therapies reporting no sales over the period (2014: £nil).

The Income results for the Group reflect a weakness in demand for our Personalised Medicine and Preclinical Research Services, especially, for the latter, in UK/Europe.  Validation of the Genedrive^® platform is anticipated to be the engine generating growth income for Personalised Medicine, in the form of both Genedrive^® product sales and collaborative income. Preclinical Research Services has reorganised its sales activities to address weaknesses experienced in the year in Europe and also, in the US replace the fall off in income which will follow the ending of our collaboration with University of Maryland Baltimore (UMB) in Radiation Biodefence, on the completion of the existing five year contract in September 2015. During the year, the contract with UMB accounted for £0.9m (2014 £1.1m). Novel Therapies, for which we retain the portfolio of drug discovery IP, reported no sales for the period (2014: £nil).

Consolidated geographical revenues were split US 45% (2014: 44%), EU 24% (2014: 20%), UK 20% (2014: 32%) and ROW 11% (2014: 4%). Preclinical Research Services reported a contribution of £0.1m (2014: £0.5m) reflecting the reduced turnover of the division. Personalised Medicine increased its investment in the development of the Genedrive^® platform and reported a loss of £2.4m (2014: £0.7m loss). No development expenditure was incurred by the Novel Therapies division in the period. The headcount of Group at the year end was 71 (2014: 70) Central administration costs increased to £1.7m (2014: £1.5m) giving rise to an overall Operating loss for the year of £4.0m (2014: £2.3m).

On 21 July 2015, Epistem entered a Collaboration and Convertible Bond Purchase Agreement with Global Health Investment Fund 1 LLC ("GHIF").

Under the terms of the agreement, Epistem issued to GHIF a five year convertible bond raising $8m (c.£4.7m) for the Company before costs of £0.1m and with a coupon of 5% per annum.  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.

The purpose of the agreement has been to provide funding to support the rollout of Genedrive^® as the Company prepares for the launch of the TB assay whilst also supporting the development of new diagnostic tests aimed at tackling diseases which represent global health challenges such as TB and Hepatitis C.

Financing income for the year which is detailed in the note amounted to £0.6m (2014: £0.1m loss). The surplus arises largely because under International Financial Reporting Standards the Convertible Bond is required to be treated as a derivative to be revalued at each accounts date. After tax credits for the year amounting to £0.4m (2014: £0.7m), the Group reported a loss after tax for the year of £3.0m (2014: £1.7m loss).

The reported loss per share was 30.2p (2014: 17.4p loss per share).

Cash balances at 30 June 2015 were £4.9m (2014: £4.2m).

Following receipt of regulatory approval in India in respect of the Genedrive^® TB test, the Group issued 491,228 ordinary shares of £0.015 each to the vendors of Visible Genomics Limited, in settlement of deferred consideration. The terms relating to the acquisition of Visible Genomics Limited were detailed in the 2014 Annual Report.

The Company's annual audit was completed in October 2015 by HW Chartered Accountants and their audit report will be included with the 2015 Annual Report.

Operating Review

Personalised Medicine

The Personalised Medicine division is harnessing advances in molecular technology to identify and develop new diagnostic tests and biomarkers for use either on Epistem's proprietary Genedrive^® diagnostic platform or in collaboration with drug development partners.

Molecular testing is crucial for diagnosing specific disease mutations including antibiotic resistance as well as identifying patient-specific variations.  This in turn allows for selection of treatment regimens targeting the specific disease characteristics or which take into account a patient's expected response to a drug. This drug orientated companion diagnostic testing and patient stratification is seen as key to the evolution of successful and efficient patient treatment now and in the future.

Genedrive^® represents a substantive breakthrough in molecular diagnostics technology. It allows rapid, low cost testing in near patient locations not presently available in the market.  Within the division, the Diagnostics team is bringing Genedrive^® to market initially for use with its test for the detection of TB and, in the future, across a broad spectrum of viral, bacterial, fungal, genomic genotypes and somatic mutations either independently, in partnerships or within grant funded collaboration, with a view to delivering a flow of instrument and test cartridge sales.

The Pharmacogenomics team deploys its molecular expertise in a serviced based model aiming to collaborate with major pharmaceutical and biotechnology companies to develop biomarker and target discovery projects to deliver collaborative income and milestone payments.

Diagnostics

The announcement in April 2015 of the Indian regulatory approval for the import into India of the Genedrive^® TB test is a key milestone for the Company foreshadowing the launch of the Genedrive^® platform and the commencement of product sales and new income streams.

We are acutely aware that the success of the India launch will impact decisively on the future value of Genedrive^® and its adoption for other applications and in other markets. A careful strategy has been adopted to ensure that the TB test will be brought to market on the basis of substantive endorsement by Key Opinion Leaders, a process which has extended further than anticipated a year ago but which we anticipate will underpin a build-up of sales in 2016.

The first phase of that strategy has been to build on the experience gained from trials undertaken using the Genedrive^® TB test.  The feedback from our Brazil and Africa trials of earlier protocols for Genedrive^® highlighted levels of sensitivity lower than we had experienced in other trials. The variations can be partially accounted for by different levels of co-infection experienced in the different patient population groups. Data further pointed to variations in operator practice in different market conditions. We have paused our Africa trials, part of a programme towards WHO approval, whilst this programme of analysis has been undertaken.

The increasing feedback from our product testing has allowed the steady compilation of data to support our test's claims for the diagnosis of bacterial resistance to the first line antibiotic Rifampicin. Sufficient field data to support this important product claim should be available during 2016.

We have developed further sputum sample collection protocols to allow for different testing environments. The final stage of the development process undertaken during this financial year has allowed us to position Genedrive^® towards the decentralised testing environment which capitalises on the platform's low cost, ease of use and speed to result. This development also allows Genedrive^® to be positioned in laboratory settings offering users access to high quality but low cost molecular TB testing. 

Genedrive^® units and assays are now to be deployed in India as part of a rollout programme with KOL's which we expect to facilitate KOL endorsement and deliver growing demand for Genedrive^® units and TB tests and underscore the value of the Genedrive^® platform.

In all of this planning, we have worked closely with our India distribution partner, Xcelris Labs. Xcelris Labs placed their first order for Genedrive^® units during the period, enabling us to book our first product sales before the year end. Whilst this does not at present signify a level of customer demand, it has initiated the start of our product sales and is encouraging.

We continue to test the robustness of the Genedrive^® supply chain and prepare for the scale up of manufacture as demand permits.

The collaboration with INSERM, the French National Institute of Health and Medical Research, to develop a Hepatitis C diagnostic for use on Genedrive^® is progressing well. The collaboration involved the development of our genotyping IL28b oral (buccal) swab test to confirm patients' responsiveness to the drugs targeting Hepatitis C. The collaboration further involves the development of a blood based test for Hepatitis C infection.

We can report that the IL28b test has entered clinical trials with The Pasteur Institute. Whilst the results will be unblinded in 2016, the test appears robust to date. Importantly, the IL28b test represents proof of principle in our ability to rapidly develop genotyping tests for operation on Genedrive^® using buccal swab samples.  We believe that this platform offers excellent scope for collaboration with drug development partners seeking to identify certain characteristics within patient populations (patient stratification) in planned clinical trials and possibly into full clinical use in some instances.

We will report more fully on the background to our Hepatitis C test in the Annual Report but progress with the development of the test has been positive with internal testing indicating conformity with WHO guidelines. We expect to commence independent validation of the Hepatitis C test in collaboration with the Pasteur Institute in 2015/16.

Crucially, the Hepatitis C test, which measures viral load, has been developed on a blood based platform. This platform may reasonably be expected to be adapted to the development of a test for Hepatitis B virus and HIV.

Important validation of Genedrive^® has been secured during our work with the US Department of Defence which has assessed the use of Genedrive^® in the detection of human pathogens in a variety of non-clinical sample types. During the financial year, the first phase bioplex detection assay (3 pathogens) successfully passed through its initial performance assessment. In our Pre-Close Trading update, we announced agreement with the US Department of Defence for the programme to be extended with work to a value of $2.4m (c.£1.5m) scheduled for completion in calendar 2016. The progress is difficult to position in terms of future product sales but we are pleased with the independent validation of Genedrive® versus other potential suppliers for this programme, as well as the profile given to Genedrive^® within the US Government procurement infrastructure.

During the year, approval was granted for £0.4m funding for a collaboration with the Centre for Environment, Fisheries and Aquaculture Science (CEFAS) to develop a Point of Need aquaculture test for the diagnosis of pathogens (White Spot Syndrome Virus, in particular) found to be harmful to shrimps and causing great damage to fish farms. As with the US Department of Defence collaboration, whilst it is difficult to assess the potential for future product sales, we do welcome the exposure which this programme gives to Genedrive^®.

In our view, both the US Department of Defence programme and the CEFAS project demonstrate the versatility of Genedrive^® as a broadly applicable rapid point of care molecular testing system. We are encouraged that in both cases Genedrive^® was selected from a range of possible competitive suppliers for these programmes and we remain confident of the very broad applicability of Genedrive^® in a wide range of testing environments going forward.

Diagnostics revenues for the year were £0.4m (2014: £0.5m) including £0.1m of maiden Genedrive^® sales.

Pharmacogenomics

The Pharmacogenomics team engage the application of molecular expertise towards collaborative projects for pharmaceutical and biotechnology organisations engaged in drug development and the discovery of new biomarker targets. Our business model seeks to engage the client in a level of FTE based service commitment, supplemented with the potential for milestone income or the opportunity to deliver tests to patient populations in clinical trials and, if ultimately successful, as a companion diagnostic for a drug once approved.

The team has built a significant expertise in laser capture microscopy (LCM) and is working to establish future collaborations with client partners for this expertise. Projects are largely dependent on the success of the drug development projects with which they are involved.

During the year we continued to work closely with a key international pharma company on the clinical expansion of our oncogene test from blood myeloproliferative disorders. The testing programme continues to be well received and we anticipate the extension of our work as the clinical trials for the drug is rolled out.

Revenues during the year amounted to £1.8m (2014: £2.4m). The outturn resulted from an unexpected project cancellation caused by factors unrelated to the data generated within the project.

Preclinical Research Services

Preclinical Research Services generated revenues of £2.3m (2014: £2.9m).

Whilst this was not a positive outcome, a full review and reorganisation of our business development focus has been undertaken. New processes have been established with improved quote levels now being evidenced.

During the year, we learned that the NIH/NIAID will not be extending their funding to the University of Maryland Baltimore (UMB) beyond September 2015. With the contract having generated c.£1m annual revenues in recent years for the Company, this news represents a significant disappointment. However, our international reputation in the field of radiation sickness is anticipated to offer additional sub-contracting opportunities and, overall, we expect the net negative impact to be modest.

The division delivers bespoke preclinical (and early clinical) services testing efficacy and specificity of client drugs.

The team offer internally developed models and assays in the disease areas of oncology, oncology supportive care (mucositis), inflammatory bowel disease, rheumatoid arthritis and dermatology. Each disease area is served by specialist core technologies (imaging, FACS analysis, histopathology, immunohistochemistry and multiplexing) to support drug, target and protein biomarker validation.

Preclinical Research Services delivers successful but niche services. Whilst there have been setbacks during the year, the reputation of the team within the drug development industry remains strong with key repeat business from large pharma and continues to present good opportunities for useful synergies and business development going forward.

Novel Therapies

We continue to retain the expertise and intellectual property of the Novel Therapies division. Although we have not incurred any fresh investment in the Novel Therapies division, we will continue to review our position in the light of growth in our core business.

Management Changes

As noted earlier, I was appointed Chairman May 2015, taking over from David Evans. David is a highly experienced and successful business leader, playing a key role in the development of the Company since his appointment in 2005.

In August 2015 we announced that Matthew Walls would be leaving his position as CEO and his resignation was confirmed on 23 October 2015. Matthew had been CEO since 2007 when the Company was listed on AIM. His period of office has been characterised by an outstanding work ethic together with an ability to initiate key developments for the Company. On behalf of the Company, I would like to thank both David and Matthew for their huge contribution in developing Epistem as a public company.

I will continue to act as CEO on an interim capacity. The search for a new CEO is progressing well and I am committed to staying with the business as non-executive Chairman once a new CEO is appointed.

Outlook

In Genedrive^®, I believe that Epistem has created a significant new diagnostic platform targeting the exciting area of Point of Care diagnostics. This development has been achieved with very modest resources in comparison to peer developments and, whilst we have experienced delays, we have in the coming months the opportunity to redress the balance with the important launch of the TB test in India.  In conjunction with developing our India distribution partners, we have to establish a strong and successful diagnostics commercial capability to match our existing development profile. We will not seek to raise external expectations until a track record of sales is established but anticipate updating shareholders at the announcement of the next Interim Results.

Successful validation of our TB test will allow us to reactivate programmes with various support agencies which have expressed strong interest in Genedrive^®. In particular, we look forward to working with GHIF and its support network in addressing global health challenges.

Beyond launching our TB test, we have substantial development opportunities to progress, notably with Hepatitis C in collaboration with the Pasteur Institute and pathogen detection with the US Department of Defence.

Our services operations require careful nurturing. With sensible management, we are optimistic that the net loss of revenues resulting from the loss of our UMB contract in the current period will be limited and our ability to generate substantial returns from our niche services will in future periods be re-established.

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.

Dr Ian Gilham

Chairman

28 October 2015

CONSOLIDATED INCOME STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2015

		2015	2014
		£000	£000
Revenue		3,703	4,497
Other Income - development grant funding		814	1,264
Revenue & Other Income		4,517	5,761
Contract costs		(3,933)	(4,489)
Discovery and development costs		(2,942)	(2,037)
General administrative costs		(1,682)	(1,530)
Operating (loss)		(4,040)	(2,295)
Finance income/(costs)		616	(54)
(Loss) on ordinary activities before taxation		(3,424)	(2,349)
Taxation on ordinary activities		399	656
Total comprehensive Income for the financial year		(3,025)	(1,693)
(Loss) per share (pence)
Basic		(30.2)p	(17.4)p
Diluted		(30.2)p	(17.4)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2015

	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 2013	146	18,230	(182)	1,013	(2,484)	(4,668)	12,055
Allotment of ordinary shares	-	-	-	-	-	-	-
Share issue costs	-	-	-	-	-	-	-
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	-	-	-	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
Issue of Consideration shares	7	1,393	-	-	-	-	1,400
Exercise of options	1	79	-	(29)	-	29	80
Lapse of options	-	-	-	(11)	-	-	(11)
Purchase of own shares (SIP)	-	-	32	-	-	-	32
Recognition of equity-settled
share-based payments	-	-	-	205	-	-	205
Total comprehensive income for the year	-	-	-	-	-	(3,025)	(3,025)
At 30 June 2015	158	20,088	(196)	1,197	(2,484)	(9,218)	9,545

CONSOLIDATED BALANCE SHEET

As at 30 June 2015

			2015		2014
			£000		£000
Non-current assets
Intangible assets			7,191		6,785
Plant and equipment			805		840
Deferred taxation			30		154
			8,026		7,779
Current assets
Inventories			163		-
Trade and other receivables			2,191		1,125
Tax receivables			685		1,474
Cash and cash equivalents			4,928		4,238
			7,967		6,837
Liabilities
Current liabilities
Deferred income			50		86
Trade and other payables			1,123		1,016
Deferred consideration payable in shares			1,250		2,650
			2,423		3,752
Net current assets			5,544		3,085
Total assets less current liabilities			13,570		10,864
Liabilities payable in 1 - 5 years
Convertible Bond			4,025		-
Net Assets			9,545		10,864
Capital and reserves
Called-up equity share capital			158		150
Share premium account			20,088		18,616
Employee share incentive plan reserve			(196)		(228)
Share options reserve			1,197		1,032
Reverse acquisition reserve			(2,484)		(2,484)
Retained earnings			(9,218)		(6,222)
Total shareholders' equity			9,545		10,864

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2015

 

			2015	2015	2014	2014
			£000	£000	£000	£000
Cash flows from operating activities
		Operating (loss) for the year		(4,040)		(2,295)
		Depreciation, amortisation and impairment		387		712
		Research Credits		(202)		(211)
		Share based payment expense		194		158
Operating (loss) before changes in working capital and provisions
				(3,661)		(1,636)
	(Increase) in inventories			(163)		-
	(Increase)/decrease in trade & other receivables			(1,066)		881
	(Decrease) in deferred income			(36)		(124)
	Increase/(decrease) in trade & other payables			107		(791)
Net cash (outflow) from operations				(4,819)		(1,670)
	Tax received			1,513		578
Net cash (outflow) from operating activities
				(3,306)		(1,092)
Cash flows from investing activities
	Interest received		16		15
	Acquisition of non-current assets		(758)		(1,482)
Net cash outflow from investing activities
				(742)		(1,467)
Cash flows from financing activities
	Issue of Convertible Bond		4,700		-
	Cost of issue of Convertible Bond		(100)		-
	Interest paid		(212)		-
	Exercise of share options		80		390
	Purchase of own shares (SIP)		(22)		(46)
Net cash inflow from financing activities				4,446		344
Net (decrease)/increase in cash equivalents				398		(2,215)
Foreign exchange adjustments				292		(69)
Cash and cash equivalents at beginning of year				4,238		6,522
Cash and cash equivalents at end of year				4,928		4,238
Analysis of net funds
	Cash at bank and in hand			4,928		4,238
Net funds				4,928		4,238

 

 

 

 

NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2015

1.      Business segments

	Preclinical
	Research	Personalised	Novel
	Services	medicine	Therapies	Unallocated	Total
	£000	£000	£000	£000	£000
Twelve months ended 30 June 2015
Income	2,322	2,195	-	-	4,517
Segment trading result	135	(2,204)	-	(1,593)	(3,662)
Add Research Credits	111	91	-	-	202
less depreciation and amortization	(163)	(173)	-	(50)	(386)
Less fixed asset impairment	-	-	-	-	-
less equity-settled share-based payments	(15)	(140)	-	(39)	(194)
Operating profit/(loss)	68	(2,426)	-	(1,682)	(4,040)
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)
2.   Geographical segments
				2015	2014
				£'000	£'000
United Kingdom				912	1,879
Europe				1,061	1,157
United States of America				2,034	2,555
Asia				510	170
Revenue				4,517	5,761

3.      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 10,011,341              (2014: 9,757,923)

The dilutive weighted average number of shares in issue during the year was 10,314,444  (2014: 10,529,558)

4.   Finance Income and Costs
				2015	2014
				£'000	£'000
Accounting adjustment on issue of the Convertible Bond				1,004	-
Movement in fair value of derivative embedded in Convertible Bond				73	-
Finance cost of Convertible Bond				(417)	-
Foreign exchange movement in Convertible Bond				(298)	-
Interest receivable on cash deposits				16	15
Foreign exchange surpluses/(losses)				238	(69)
Finance Income/(costs)				616	(54)

5.  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

 

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