Preliminary Results

RNS Number : 9249S

Evocutis PLC

29 November 2011

 



Press Release

29 November 2011

Evocutis plc

("Evocutis" or "the Company" or "the Group")

Preliminary Results for the year ended 31 July 2011

Evocutis plc (AIM: EVO), the dermatological experts that deliver innovation through advanced laboratory and clinical evaluations of skincare products for the healthcare and cosmetic markets, today announces its preliminary results for the year ended 31 July 2011.

Highlights:

·     Significant improvement in the formulation of SYN1113 for treatment of acne

·     New collaboration with Sinclair IS Pharma regarding the potential commercialisation of delmopinol

·     Commercial discussions have started regarding SYN1039, and the synergistic combination of SYN0269 with SYN0693; both opportunities are for treatment of body odour

·     Acquisition of Leeds Skin Centre for Applied Research Limited and placing of new ordinary shares raising £2 million before costs in May 2011

·     Commercial deal revenues increased by over 50% to £0.23 million (2010: £0.15 million)

·     Adjusted operating loss* of £1.086 million (2010: £1.028 million)

·     Operating loss of £1.219 million (2010: £1.106 million)

·     Year end cash at bank of £2.32 million (2010: £1.74 million)

·     Net cash outflow from operating activities reduced to £1.01 million (2010: £1.08 million)

·     Loss per share reduced to 0.90p (2010: 1.14p)

*(before exceptional acquisition costs, share-based payment charges, depreciation and amortisation)

Post year-end highlights:

·     Completed integration of Leeds Skin into the Company

·     Change of name to Evocutis plc from Syntopix Group plc in October 2011

Commenting on the results, Dr Stephen Jones, Chief Executive Officer, said: "This year has been transformational for the business. The Company increased revenues, progressed the product pipeline, and formed a new collaboration with the specialty pharma group, Sinclair IS Pharma.  Additionally, the Company acquired Leeds Skin, which brings into the business a unique skincare model for the testing and development of new dermatology products.  Since the year end close, Leeds Skin has been integrated into the business, and the Group has changed its name to Evocutis.

"The Group enters the year with a cash balance of £2,316,000 and is well positioned for sustainable growth.  The technology acquired with the Leeds Skin business provides us with immediate revenue streams, and in the longer term potential product sales and/or licensing deals particularly in the fields of acne and dry skin, offering the prospect of excellent long-term growth."

- Ends -

Enquiries:

Evocutis plc
Dr Stephen Jones, Chief Executive Officer	[phone]
Tom Bannatyne, Chairman	www.evocutis.com

Nominated Advisor - Zeus Capital Ltd
Tom Rowley / Andrew Jones	Tel: [phone]
	www.zeuscapital.co.uk

Broker - XCAP Securities plc
Karen Kelly	Tel: [phone]
John Grant	www.xcapgroup.co.uk

Media enquiries:

Abchurch Communications
Sarah Hollins / Adam Michael / Jamie Hooper	Tel: [phone]
[e-mail]	www.abchurch-group.com

Notes to editors

About Evocutis plc

With a rich portfolio of new product opportunities, Evocutis offers antimicrobial and dermatological expertise to the cosmetic, consumer healthcare and pharmaceutical industries.

Being uniquely able to combine research for laboratory testing, advanced skin models and clinical testing, Evocutis offers a complete service for the development of skin care products and ingredients. Through research and testing we enable our clients to advance the discovery of skin care products that actually work.

Evocutis works with companies at all stages of the product development pipeline offering R&D solutions from ownable technology platforms through to tailored research, and now provides an independent commercial testing facility to the pharmaceutical and healthcare industries. Unique characteristics of its colonised full thickness model of human skin (LabSkin^TM) allow rapid, cost effective screening of, for example, anti-aging, anti-inflammatory and antimicrobial ingredients and products for use on skin.

Offering high quality contract research services, Evocutis specialises in Human Skin Microbiology, tissue culture systems and Human Volunteer and Clinical Dermatology Research.

When it comes to advanced laboratory and clinical evaluations of skincare products for the health and cosmetic markets, the Evocutis focus is simple: intelligent and specialised R&D input. 

For further information, please see www.evocutis.com.

Chairman's and Chief Executive Officer's Report

Introduction

Evocutis plc is the new name for Syntopix Group plc. Following a General Meeting on 20 October 2011, the new name became effective on 25 October 2011 (ticker "EVO").

The Group continued to attract more business during the year, and the Board is pleased to report that the Company achieved revenues of £227,000, an increase of £76,000 from the previous year.  These revenues were as a result of agreements with major consumer healthcare companies.  Operating loss (before exceptional acquisition costs, share-based payment charges, depreciation and amortisation) was £1,086,000 (2010: £1,028,000).

Acquisition of Leeds Skin Centre for Applied Research Limited ("Leeds Skin")

Following a fund raise of £2 million (before costs) by means of the issue of 50,000,000 ordinary shares at 4 pence each, Syntopix acquired the entire issued share capital of Leeds Skin on 24 May 2011.  This is now allowing the Group's strategy to evolve and our vision is to become the most flexible and responsive skin R&D company, capable both of developing products and offering laboratory services to the dermatological industry.

Delivering clinically proven products to cosmetic and consumer healthcare companies continues to be a priority, and the acquisition has now provided the Group with near-term revenue-generating technologies.  This bodes extremely well for the long-term viability of the Group.  In order to reflect the strengths and aspirations of both Syntopix and Leeds Skin and re-brand the business, the Group was renamed Evocutis plc in October 2011.

Commercial agreements

The business update issued on 27 April 2011 provided details on the agreements reached with several companies.  Since that time, the Group has significantly improved the formulation of SYN1113 (for the treatment of acne).  This compound has very positive clinical and consumer feedback data, which coupled with its enhanced, patent-protected formulation now offers an improved opportunity for a commercial agreement, which is being actively pursued.  The Group continues its dialogue with Sinclair IS Pharma, and we are collaborating in the writing and subsequent filing of a patent regarding delmopinol and should commercialisation occur, Evocutis will share in the financial gains.

The synergistic combination of SYN0269 with SYN0693 is being considered by a partner company as a key antimicrobial system in a product for the prevention of body odour. A patent application has been submitted for this combination. Additionally, SYN1039 is being considered by a large cosmetics and toiletries company for inclusion in a product for the prevention of body odour, and discussions are underway.

Leeds Skin - the business

Leeds Skin is a company located in Wetherby, Yorkshire that runs an independent commercial testing facility specialising in human skin microbiology, living skin equivalent tissue culture systems, and human volunteer and clinical dermatology research.  Leeds Skin provides laboratory service facilities for general microbiology applications and high quality contract research services and consultancy to the pharmaceutical, personal products and healthcare industries.

The significant cell biology experience of Leeds Skin will complement the Group's microbiological expertise, aiding development of products.  A key attraction was Leeds Skin's world leading Living Skin Equivalent tissue culture system technology (LabSkin™), a unique human equivalent skin which can be used to model various properties associated with human skin (anti-inflammatory, anti-ageing etc.).  Together, the Group will have the capacity to run both clinical and laboratory studies to make rational choices of active compounds and confirm product claims.  This will put the Group in an extremely strong position to identify and develop products in-house to treat a variety of skin problems.  Leeds Skin is a profitable company with an impressive, blue-chip client base.

Dr Richard Bojar (who was the founder and is a director of Leeds Skin) and Dr Anthony Jeremy remain with the Company, and Dr Bojar has joined the Evocutis Board as a director and Chief Scientific Officer. The Group has now relocated and is based in Wetherby, benefitting from a facility with much more space and freedom to expand than the Group's former premises in Bradford.

The microbiological expertise of Syntopix will be complemented by the cell biology expertise of Leeds Skin, putting Evocutis in the position to offer laboratory and clinical services.  These services will include the detection and determination of antimicrobial compounds and product activity in laboratory models and clinical studies, as well as laboratory systems that model various properties associated with human skin (anti-inflammatory, anti-ageing etc.) to allow rational choices of active compounds, and confirmation of product claims.

Evocutis will be able to offer a combination of technical expertise to both raw material suppliers of compounds and product development companies in the consumer healthcare and pharmaceutical arenas.

Markets and opportunities

The skin care business continues to grow, with anti-acne and anti-ageing products leading the way (Global Industry Analysts Inc., Jan 2011).  Evocutis will be in a position to exploit these trends with product offerings, and support services.  The Group continues to believe that there is a major global demand for antimicrobial compounds in the consumer healthcare and cosmetic markets.  The opportunities are principally in the areas of acne, oral hygiene, hair care and deodorants.

With a proprietary database of over 3,200 compounds and a variety of laboratory and clinical services at its disposal, the Group believes it is well placed to provide innovative solutions to companies seeking antimicrobials.  In March 2009, the EU banned the sale of cosmetic products tested on animals. In March 2013, the EU is going to ban the sale of any product that contains any ingredient tested on animals (for the purposes of the Directive).  Owing to the global nature of the cosmetic and consumer healthcare businesses, this is effectively a worldwide ban.

The Group believes that LabSkin™ offers product suppliers and manufacturers a uniquely powerful tool for understanding the efficacy of their compounds and/or products for a variety of indications. With the combination of LabSkin™ testing and our Clinical and Laboratory facilities, we believe that Evocutis is in a unique position to be able to provide support to those companies wishing to innovate in skin science.  The key feature of LabSkin™ is that it can be colonised with microorganisms, thereby better reflecting true-life conditions of the skin surface.

No other commercial laboratory skin model can do this.  Additionally, LabSkin™ is being validated for use in the understanding of compounds and products that are efficacious as anti-inflammatories and anti-ageing agents.  The applicability of LabSkin™ in understanding the action and efficacy of sunblock treatments will be established in 2012.

Product development

SYN1113, in its patented formulation designed to enhance speed of penetration and efficacy, continues to represent the Group's lead opportunity for the treatment of acne.  The formulation approach used for SYN1113 is being examined for its ability to enhance the speed and efficacy of delivery of future compounds in the pipeline. SYN0693 in combination with SYN0117 would be the next anti-acne candidate to enter development, since the combination has been shown to be synergistic and shows excellent pre-clinical efficacy.

Several candidates (e.g. SYN0017 for oral care and SYN1039 for body odour) are being assessed by various third parties, and continue to represent promising opportunities for products requiring effective antimicrobials.  The Group is evaluating the possibility of developing products for the treatment of dry skin, using our own internal technology capability for the rational design and testing of efficacious products.  Progress on this front will be reported as and when appropriate.

Intellectual property

Our patent portfolio continues to be strengthened by careful strategic management.  The Group currently has 22 core families of patents/applications.  Of these 11 are granted in the UK and they are all at various stages of application in key territories.  After careful review, the Group has taken the decision not to patent the LabSkin™ technology, preferring to keep the Intellectual Property as know-how rather than have it published. 

Outlook

The Group enters the year with a cash balance of £2,316,000 and is well positioned for sustainable growth.  The technology acquired with the Leeds Skin business provides us with immediate revenue streams, and in the longer term potential product sales and/or licensing deals particularly in the fields of acne and dry skin, offering the prospect of excellent long-term growth. 

Thomas Bannatyne - Chairman

Stephen P Jones - Chief Executive Officer

29 November 2011

Consolidated statement of comprehensive income

for the year ended 31 July 2011

	2011		2010
	£000	£000	£000	£000
Revenue 3		227		151
Research and development		(792)		(757)
General and administration		(671)		(558)
Other operating income		17		58
Analysis of operating loss:
Operating loss before share-based payment charges, acquisition costs, depreciation and amortisation	(1,086)		(1,028)
Share-based payment charges	(54)		(47)
Acquisition costs	(42)		-
Depreciation and amortisation	(37)		(31)
Operating loss		(1,219)		(1,106)
Finance income		3		-
Loss before taxation		(1,216)		(1,106)
Taxation		137		110
Loss after taxation for the year and total comprehensive income attributable to equity shareholders		(1,079)		(996)
Loss per ordinary share 4
Basic and diluted (pence)		(0.90p)		(1.14p)

Consolidated statement of financial position

As at 31 July 2011

	2011	2010
	£000	£000
Non-current assets
Property, plant and equipment	177	29
Goodwill	489	-
Other intangible assets	444	-
Total non-current assets	1,110	29
Current assets
Current tax recoverable	120	110
Trade and other receivables	201	60
Cash and cash equivalents	2,316	1,737
Total current assets	2,637	1,907
Total assets	3,747	1,936
Current liabilities
Trade and other payables	(176)	(145)
Current tax payable	(34)	-
Total current liabilities	(210)	(145)
Non-current liabilities
Deferred tax liabilities	(119)	-
Total non-current liabilities	(119)	-
Total liabilities	(329)	(145)
Net assets	3,418	1,791
Equity attributable to equity holders of the company
Called up share capital	1,732	1,071
Share premium reserve	7,632	6,282
Share based payments reserve	279	225
Merger reserve	979	338
Retained earnings	(7,204)	(6,125)
Total equity	3,418	1,791

Consolidated statement of changes in equity

for the year ended 31 July 2011

		Share	Share-based
	Share	premium	Payments	Merger	Retained
	capital	reserve	Reserve	reserve	earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 August 2009	772	4,657	178	338	(5,129)	816
Loss for the year and total comprehensive income	-	-	-	-	(996)	(996)
Transactions with owners:
Share-based payment charge	-	-	47	-	-	47
Issue of shares	299	1,708	-	-	-	2,007
Expenses of share issue	-	(83)	-	-	-	(83)
At 31 July 2010	1,071	6,282	225	338	(6,125)	1,791
At 1 August 2010	1,071	6,282	225	338	(6,125)	1,791
Loss for the year and total comprehensive income	-	-	-	-	(1,079)	(1,079)
Transactions with owners:
Share-based payment charge	-	-	54	-	-	54
Issue of shares	661	1,500	-	641	-	2,802
Expenses of share issue	-	(150)	-	-	-	(150)
At 31 July 2011	1,732	7,632	279	979	(7,204)	3,418

Consolidated statement of cash flows

for the year ended 31 July 2011

	2011	2010
	£000	£000
Cash flow from operating activities
Loss after tax	(1,079)	(996)
Tax on losses	(137)	(110)
Finance income net of finance costs	(3)	-
Depreciation	27	31
Amortisation of intangible assets	10	-
Share-based payment charges	54	47
Changes in working capital	6	(190)
Taxation received	112	141
Net cash outflow from operating activities	(1,010)	(1,077)
Cash flow from investing activities
Purchase of property, plant and equipment	(67)	(4)
Purchase of business, net of cash acquired	(105)	-
Finance income	3	-
Net cash outflow from investing activities	(169)	(4)
Cash flow from financing activities
Issue of share capital	2,000	2,007
Expenses of share issue	(150)	(83)
Repayment of short term loans	(92)	-
Net cash flow from financing activities	1,758	1,924
Net increase in cash and cash equivalents	579	843
Cash and cash equivalents at the beginning of the year	1,737	894
Cash and cash equivalents at the end of the year	2,316	1,737

Notes

1.       The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 July 2011 or the year ended 31 July 2010 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts.  The information has been derived from the audited statutory accounts for each of those years upon which an unqualified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  

The financial statements for the year ended 31 July 2010 have been filed with the Registrar of Companies. The audited accounts for the year ended 31 July 2011 will be posted to all shareholders in due course and will be available upon request by contacting the Company Secretary at the Company's registered office.

2.       Basis of preparation

The financial statements have been prepared in accordance with the Companies Act 2006, Article 4 of the IAS Regulation and International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and related interpretations, as adopted by the European Union.

The financial statements are also in compliance with IFRS as issued by the International Accounting Standards Board.

The financial statements have been prepared using the historical cost convention, as modified by the revaluation of certain items, as stated in the accounting policies.

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

3.       Segment information

Operating segment information is reported based on the financial information provided to the Board of Directors, which is regarded as the 'Chief Operating Decision Maker' (CODM).  The CODM considers that the Group has one operating segment, being 'Pharmaceutical and consumer healthcare'.  No geographic information is regularly provided to the CODM.

The CODM assesses the performance of the Group by reference to group-wide results.  The group-wide measures of results are 'operating loss' and 'loss for the year'.  Both these measures are disclosed on the face of the Statement of comprehensive income.  No differences exist between the basis of preparation of the performance measures used by the CODM and the figures presented in the consolidated financial statements. 

Geographical information

The UK is the Group's country of domicile.

	2011	2010
Revenue by location of customer	£000	£000
UK	142	141
USA	35	10
France	8	-
Germany	42	-
Total revenue	227	151

	2011	2010
Revenue by location of group entity	£000	£000
UK	227	151
Total revenue	227	151

Other information

Revenue for both the current and previous financial year was generated from the rendering of services.

For the year ended 31 July 2011, our three largest customers accounted for approximately 64%, 19% and 12% of total revenues respectively. In the year ended 31 July 2010, our single largest customer accounted for approximately 98% of total revenues.

Non-current assets all relate to the Group's single operating segment.

4.       Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares. 

The Group has one class of potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.  However, due to losses incurred in the year there is no dilutive effect from the potential exercise of these share options.

	Loss for	Weighted	Loss per
	the year	average number	share
Basic and diluted loss per share	£000	of shares	(pence)
Year ended 31 July 2011	(1,079)	119,631,060	(0.90p)
Year ended 31 July 2010	(996)	87,195,720	(1.14p)

The weighted average number of shares for the year ended 31 July 2010 has been adjusted to reflect the 10 for 1 subdivision of shares which took place on 23 May 2011 as if that subdivision had been effective for the whole financial period.

5.         Acquisition

On 23 May 2011, Evocutis plc acquired 100% of the issued share capital of Leeds Skin Centre for Applied Research Limited, an independent research and testing company specialising in skin microbiology, living skin tissue culture and clinical dermatology, based in the UK.  The fair value of the purchase consideration for the acquisition was £1,060,000 which comprised £258,750 of cash and the remainder of £801,562 by way of the issue of 16,031,250 ordinary shares of £0.01 each at a price of 5 pence per share.  The fair value of the shares issued equates to the mid market price of the shares at close of business on 22 May 2011. 

Transaction costs amounted to £42,000 which have been recognised within General and administration costs in the Statement of comprehensive income.  The purpose of the acquisition was to acquire Leeds Skin's significant cell biology experience along with living skin equivalent tissue culture system technologies which will aid the Group's development of products.

		Fair
	Book	value	Fair
	value	adjustments	value
	£000	£000	£000
Net assets acquired
Property, plant and equipment	97	11	108
Other intangible assets	-	454	454
Trade and other receivables	104	59	163
Cash and cash equivalents	153	-	153
Deferred tax provision	(6)	(128)	(134)
Other liabilities	(173)	-	(173)
	175	396	571
Goodwill			489
Total consideration			1,060

The goodwill arising on the acquisition reflects the potential for business synergies and further sales growth following the acquisition of an established market participant.  None of the goodwill recognised is expected to be deductible for income tax purposes. 

The acquisition has been accounted for using the purchase method of accounting.  Revenue of £11,000 and a loss of £56,000 from Leeds Skin Centre for Applied Research Limited has been recognised since the acquisition date and is included in the Statement of comprehensive income.  Had this acquisition taken place at the start of the financial year, the estimated revenue and loss of the combined group for the current year was £698,000 and £825,000 respectively.

 

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