2014 Audited Preliminary Results

RNS Number : 3608K
hVIVO plc
16 April 2015
 



For immediate release 07:01: 16 April 2015

 

HVIVO PLC

("hVIVO" or the "Company")

 

AUDITED PRELIMINARY RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2014

hVIVO plc (AIM: HVO), the pioneer of human challenge models of disease, is pleased to announce its audited preliminary results for the year ended 31 December 2014.

Financial Highlights

 

§ Revenue reduced to £18.5 million (2013: £27.5 million);

 

§ Gross profit £5.5 million and gross profit margin 29.6% (2013: gross profit £8.3 million and gross profit margin 30.2%);

 

§ Investment in R&D expense (excluding provision against virus inventory) rose to £10.7 million (2013: £1.2 million) reflecting expansion of our discovery research and product validation capabilities;

 

§ Cash outflow from operating activities of £16.6 million (2013: £2.2 million) and purchase of property, plant and equipment of £1.4 million (2013: £3.1 million);

 

§ Successful fundraising completed in the year raising £33.6 million before expenses (2013: £25.5 million raised); and

 

§ Strong financial position with short-term deposits, cash and cash equivalents of £50.8 million at 31 December 2014 (2013: £35.8 million)

 

Operational Highlights

 

§ Added new Board members that bring market and corporate development expertise that align with our broader growth strategy

 

§ Deepening our discovery research capabilities, strengthening our strategic leadership and building out our commercial expertise, including building a global sales team pursuing both clinical trial services and also collaborations around our Pathomics capabilities

 

§ Accelerated strategy for broadening our human challenge model platform to discover novel biomarkers and drug targets that will shepherd the next generation of therapeutics and diagnostic products

 

§ Conducted landmark RSV product validation studies for Alios and Gilead

 

§ Developed viral exacerbation challenge model for asthma

 

§ Completed Activiomics acquisition, adding powerful technology and key expertise for protein identification as we progress our Pathomics discovery products

 

§ Successfully characterised new H3N2 virus for challenge model studies

 

§ Established purpose built research and development laboratory facility in Welwyn Garden City

 

§ Attracted more than 190,000 volunteers over the last 3 years to participate in clinical studies and achieved 97% on-time enrollment success rate

 

§ Launched new name today that reflects our pioneering vision: hVIVO

 

Commenting on today's results, Kym Denny, Chief Executive Officer, said:

 

"This was a year of many firsts for us. With fewer than anticipated human challenge clinical trials being conducted in 2014 due to market shifts, our revenue was £18.5 million with gross profit margin of 29.6% and cash as at 31 December 2014 of £50.8 million.  We took advantage of this operational gap by accelerating hVIVO's R&D programmes and our "Pathomics" approach, combining omics and pathway analysis.  Following investor support and a successful £33.6 million fundraise in August 2014, we fast-tracked our sample collection capabilities to deliver the first influenza pathomics map and the first commercial asthma model.  We conducted two landmark studies in RSV in record time and proudly watched our RSV model transform RSV disease research. We are well placed for achieving our objectives for 2015 and remain fully engaged with our customers regarding both our product validation and pathomics capabilities and opportunities."

 

 

For further information please contact:

 

hVIVO plc                                                                                          +44 207 756 1300

 

Kym Denny (CEO)

Graham Yeatman (Chief Financial and Business Officer)

 

Media Enquiries                                                      +44 203 021 3933 / +44 7854 979 420

 

Colin Paterson (Director of Marketing, Communication and PR)

 

              

Numis Securities Limited                                                                      +44 207 260 1000

 

Michael Meade / Freddie Barnfield (Nominated Adviser)

James Black / Michael Burke (Corporate Broking)

 

 

Notes to Editors:

hVIVO plc ("hVIVO") is a life sciences company pioneering a technology platform of human disease models to accelerate drug development and discovery in respiratory and infectious diseases.  Based in the UK, hVIVO has conducted over 40 clinical studies, involving more than 1,950 volunteers for a range of leading industry, governmental and academic clients.

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

2014 was a volatile year for infectious disease. Pharmaceutical organisations worked to stay ahead of viral disease outbreaks, such as Ebola, while public health officials grappled with a surprisingly severe flu season. Responding to these changes challenged the best prepared businesses, with pharmaceutical organisations shifting priorities to focus on developing new vaccines, and public health organisations reevaluating their flu preparation processes.

 

In spite of the market turmoil, we stayed focused on our overarching strategic objective to build long-term shareholder value by leveraging our hVIVO platform to accelerate third party drug development programmes and through our own R&D programmes to harvest the biological insight of our 'disease in motion' samples, to create the next generation of treatments and diagnostics for respiratory diseases.

 

The shifting market dynamics this year meant we had the opportunity to accelerate our own R&D programmes, and with the support of our shareholders, we fasttracked our initial sample collection in flu and asthma into 2014, allowing us to begin to unravel the key cellular and molecular causes of these diseases via our newly named process, 'pathomics.' We conducted two landmark RSV trials, one which led to a leading journal publication and another that was tied to a substantial acquisition of a biotech company by a big pharma. At the same time, we watched with pride as our RSV challenge model took its rightful place as a leading drug development tool in the fight against RSV infection. There can be little doubt that our RSV hVIVO model has revolutionised the RSV research space, allowing researchers to test their products in a disease area that has historically been inaccessible to early phase subject recruitment, and encouraging the development of much needed vaccines and therapeutics for an infection that is the leading cause of hospitalisation in children under the age of 5 in the UK alone. For both these studies, we pushed the speed limit we had established and delivered the trials in under 8 months.

 

Changing gears

 

For 2014, our revenue was £18.5 million with gross profit margin of 29.6% and cash as at 31 December 2014 of £50.8 million. Fewer than anticipated human challenge clinical trials were conducted in 2014, a result of significant drug class delays and, late in the year, the Ebola outbreak whereby many companies redirected their flu research teams onto their nascent Ebola treatments and vaccines. Given that a fundamental asset of our model is its ability to 'flip' from third party trials to internal pathomics discovery sample collection, we reacted quickly and took advantage of the gap created in our capacity to advance our flu pathomics programme at a much faster pace. While we are seeing a slow return from third parties to flu programmes moving forward, it will take time for the industry's momentum to be regained. As a result we re-evaluated our spending, our staff skill mix and our planned investments in the light of unexpectedly being significantly further along in our discovery work and reprioritised our resources accordingly. Of key note was our decision to put on hold our Chesterford Research Park premises plans, prior to the initiation of building works. As a result, we were able to bring forward the investments necessary to achieve our first pathomics map (which describes the human host response to flu infection) in early 2015.

 

August 2014 fundraise and the hVIVO Model of Viral Exacerbation of Asthma

 

We first described our aspirations to map out the cellular and molecular causes of disease during our August 2014 fundraise, when we were delighted to raise £33.6 million from both existing and new shareholders, together with the tremendous support and encouragement we received. This funding, in addition to our reprioritised spending, enabled us to accelerate considerably ahead of plan our work in influenza, and it will continue directly to fuel the subsequent pathomics projects that will lead to the identification of biomarkers and new drug targets. In addition, the August 2014 fundraise also allowed us to accelerate our work in asthma, which is the first new human challenge model that we have built since the RSV model was launched in 2006. We chose our latest venture to be in an adjacent market to the respiratory infection space we have long since dominated: Asthma. It has been suggested that over 80% of all exacerbations of asthma are due to the HRV16 cold virus, and thus a viral exacerbation model would be a welcome addition in the drug development tool kit for effective new asthma products.

 

As with our RSV model, we believe that our asthma viral exacerbation model will prove to be a new Gold Standard in early phase research for a previously out of reach area of study. Our first calibration experiment was performed with the aim of developing a safe, reproducible, and clinically relevant asthma human challenge model. Twentyone asthmatic volunteers participated in the study and we obtained our first samples from subjects during the course of an asthma exacerbation in response to viral infection with HRV16 using our hVIVO platform. The samples collected during the study were used for developing the model and for performing pathomics analysis. We are now the only life science company to have a commercial asthma exacerbation challenge model capable of delivering on an industrial scale. In addition to new models, in 2014 we conducted important expansion experiments into the Over 45 age group, preparing us to develop a human model of COPD in the future, as well as expand our healthy volunteer panel to include the subsection of the population that fared so poorly during this unexpectedly harsh flu season.

 

Our market leader status was further strengthened with the successful characterisation and production  of  a new pharmaceutical grade H3N2 virus, whose symptomology and infectivity rates produces a more natural infection, making it a valuable tool for future influenza challenge studies. We continued to sustain our market leading volunteer enrolment success rate (97%) with a database of volunteers of 190,000 strong and growing.

 

Positioning for future growth

 

In preparation for our future growth and development as a leading edge clinical development and discovery platform technology company, 2014 saw us deepening our discovery research capabilities, strengthening our strategic leadership and building out our commercial expertise.

 

Scientific discovery and pathomics

 

In March 2014, we completed the £4.0 million acquisition of Activiomics Limited, a private UKbased proteomics company, which adds a powerful technology and key expertise under the leadership of Dr Neil Torbett, for protein identification as we progress our pathomics discovery projects.

 

We made a number of key executive appointments during the year to deepen our scientific expertise and prepare for our journey. Dr Tony Lockett, our Senior Medical Director, took on an expanded role as Chief Medical Officer with responsibility for patient safety, medical governance and new model development. Two highly respected leaders from major global pharmaceutical companies joined our Discovery Research management team. Dr Chris Poll, Executive Vice President Research and Development, was appointed to lead our discovery activities, supported by Dr Paul Whittaker, Vice President, Discovery Research, Research and Development. We set out to establish cutting edge facilities for our expanded team. In August 2014 we leased a purpose built laboratory facility in Welwyn Garden City, designed to host and centralise our Research and Development operations. The new facility accommodates both benchbased scientists as well as our bioinformaticians who provide the essential analysis of our gene and protein profiling.

 

Corporate Leadership

 

To guide us forward, we added new Board members that bring market and corporate development expertise that align with our broader growth strategy. These additions include highly successful innovators, entrepreneurs and genomic pioneers.

 

Jaime Ellertson joined the Board in June 2014 as NonExecutive Chairman, succeeding David Norwood who continues as a NonExecutive Director. Jaime has a strong track record of leading fast growing, data and service driven companies through phases of rapid expansion, both in the private and public arena.

 

James F Winschel became a NonExecutive Director of the Company in October 2014 and is Chairman of the Audit Committee. Jim's commercial and global clinical research experience, with specific focus on market growth, will be invaluable going forward.

 

Trevor Nicholls joined the Board as a NonExecutive Director in May 2014 and brings an outstanding track record in building international businesses in the life science industry, and invaluable experience in the genomics and proteomics field.

 

Alison Fielding joined the Board in July 2014 and is Chairman of the Remuneration Committee. A highly respected and entrepreneurial leader, Alison has a track record of creating and building highperforming companies based on scientific innovation.

 

At the close of the financial year, Graham Yeatman, our Finance Director, was promoted to Chief Financial and Business Officer with responsibilities to drive greater commercialisation of the business and to create a more flexible, scalable and efficient cost base for our developing operations.

 

Commercial Expertise

 

To achieve our strategic ambitions, we are expanding our business and market development efforts through new and effective sales channels and developing further our partnerships with pharmaceutical clients, helping to drive revenues.

 

In November, Reid Tripp was appointed as Executive Vice President for Business Development and Marketing. Reid is based in the US and brings considerable commercial sales leadership experience, specialising in new product development. We are adding capabilities for promoting proactive outreach, market penetration and client engagement activities, with a global sales team pursuing both clinical trial services and also collaborations around our pathomics discoveries.

 

hVIVO - new name, pioneering vision

 

I am delighted to announce the formal launch of our new Company name hVIVO plc.

 

Human volunteers are at the heart of all we do. Changing the Company name to hVIVO plc reflects the revolutionary step of using human models of disease to develop treatments for humans. A pioneering concept in drug testing deserves a pioneering name to best describe it and we chose hVIVO.

 

The 'h' celebrates the human aspect of our unique process to accelerate drug development. Humans, in the shape of willing clinical trial volunteers, provide a living sample that we utilise in a clinically controlled environment in our pioneering Human Challenge Model.

 

VIVO represents the science of clinical testing on living organisms and in this case, the human sample, which is at the very heart of our business.

 

This name change to hVIVO reflects our expanded vision and a new human dimension to the way we discover and develop drugs and diagnostics.

 

Summary

 

hVIVO is embarking on the next stage of its exciting journey, broadening the human challenge model platform to discover novel biomarkers and drug targets that will shepherd the next generation of therapeutic and diagnostic products. The Alios and Gilead product validation studies clearly showed how we help organisations deliver better treatments, faster.

 

The Company is well placed to achieve its objectives for 2015 and remains fully engaged with its customers regarding both its product validation and pathomics capabilities and opportunities. We are excited to be expanding our platform into new disease areas, developing the industry's first commercial asthma model this year.

 

I would like to pay tribute to our management and staff throughout the Group who have worked so hard during the year to pioneer our space and position hVIVO for significant future growth. Also, to thank our investors for their continued support and encouragement during our journey todate and with respect to our plans for the future.

 

As hVIVO plc going forward, we look forward to embracing fully the power of our human models of disease. I can't wait to see what we can achieve in 2015 and beyond.

 

 

 

Kym Denny

Chief Executive Officer

 

15 April 2015

 

 

 

FINANCIAL REVIEW

 

The reduction in Human Challenge Model (HCM) client engagements during 2014 and our fundraise in August 2014 enabled significant acceleration of investment in our research and development programmes. We continued to diversify our investments and strengthen our commercial capabilities and expertise, so we can discover and bring to market new opportunities faster and help our clients accelerate their drug development. The ongoing development of new hVIVO models of disease, the recruitment of senior experienced scientific expertise from big pharma and the acquisition of Activiomics has provided the platform for hVIVO to discover novel biomarkers that will enable the next generation of therapeutic and diagnostic products. 

 

Financial KPIs

2014

2013

Revenue

£18.5m

£27.5m

Gross profit

£5.5m

£8.3m

Gross profit margin

29.6%

30.2%

Research and development expense

£10.7m

£1.2m

(excluding provision against virus inventory)

 

 

(Loss)/profit for the year

£(18.4)m

£1.5m

Short-term deposits, cash and cash equivalents

£50.8m

£35.8m

 

HCM client engagements

 

Revenue for the year ended 31 December 2014 was £18.5 million (2013: £27.5 million). hVIVO has a small number of high value HCM client engagements, such that delay or cancellation of client engagements has a significant effect on our revenue. Reduced revenue impacts operational efficiency, economies of scale and gross profit margin. However hVIVO has mitigated the impact by taking steps to adjust and make more flexible our cost base and utilising the capacity of staff and facilities to accelerate our internal research and development programmes.

 

Research and development expense 

 

The Group's research and development expense (excluding provision against virus inventory) was £10.7 million this year (2013: £1.2 million). This increase reflects the expansion of our discovery research and product validation capabilities and in particular disease research (pathomics), data mining and analysis, sample acquisition and product validation processes.

 

Administrative expense 

 

Administrative expense was £17.7 million (2013: £7.3 million). The increase is primarily due to a higher management and administrative staff cost base, higher premises and IT costs, and the use of external consultants to support the Group's pace of growth, increasing size and complexity. In addition, expenses include impairment of leasehold additions and increases in provisions.

 

Finance income 

 

The Group invests its surplus funds in bank deposits and money market investments of up to one year. In the year ended 31 December 2014 interest income was £0.4 million (2013: £0.2 million).

 

Taxation

 

The Group makes claims each year for research and development tax credits and, since it is loss-making, elects to surrender these tax credits for a cash rebate. The amount credited to the consolidated income statement in respect of amounts received and receivable for the surrender of research and development expenditure is £3.9 million for the year ended 31 December 2014 (2013: £2.7 million) due to the increased research and development activity during the year. In addition, a £0.3 million deferred tax adjustment in respect of the acquisition of Activiomics Limited has been credited to the consolidated income statement.

 

Consolidated statement of financial position

 

As of 31 December 2014 total assets less liabilities amounted to £61.2 million (2013: £42.9 million) including short-term deposits of £28.0 million (2013: £22.5 million) and cash and cash equivalents of £22.8 million (2013: £13.3 million).

 

The principal movements in the consolidated statement of financial position during the year were:

 

·      additions to goodwill and intangible assets of £1.7 million and £2.5 million respectively, as a result of the acquisition of Activiomics Limited;

·      purchases of property, plant and equipment of £1.4 million;

·      increase in inventories of £0.6 million;

·      decrease in trade and other receivables of £2.9 million;

·      increase in research and development tax credit receivable of £1.4 million;

·      increase in short-term deposits of £5.5 million;

·      increase in cash and cash equivalents of £9.5 million;

·      increase in provisions of £3.0 million; and

·      decrease in current trade and other payables of £3.7 million.

 

Cash flow

 

The principal cash flows in the year were as follows:

 

Inflows: 

·      net proceeds on issue of shares of £32.8 million (2013: £25.0 million); and

·      finance income of £0.4 million (2013: £0.2 million).

 

Outflows: 

·      cash outflow from operating activities of £16.6 million (2013: £2.2 million);and

·      purchase of property, plant and equipment of £1.4 million (2013: £3.1million).

 

Key performance indicators 

 

The Directors consider the principal financial performance indicators of the Group to be:

·      revenue;

·      gross profit;

·      gross profit margin;

·      research and development expense;

·      net profit or loss; and

·      short-term deposits, cash and cash equivalents.

 

The Directors consider the principal nonfinancial performance indicators of the Group to be:

 

·      the expansion of the HCM and its increasing acceptance by global pharmaceutical companies and regulatory agencies;

·      development of new human challenge models;

·      research and development in other disease areas including asthma;

·      development of intellectual property from our discovery research and product validation capabilities and in particular disease research (pathomics), data mining and analysis, sample acquisition and product validation processes; and

·      collaboration opportunities with global pharmaceutical companies.

 

These elements are discussed within the Chief Executive Officer's statement.

 

 

 

Graham Yeatman

Chief Financial and Business Officer

 

15 April 2015

 

 

 

hVIVO plc

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

           

 

 

 

 

 

 

 

2014

2013

 

 

 

 

 

 

Note

£'000

£'000

Revenue

 

 

 

 

 

 

18,472

27,490

Cost of sales

 

 

 

 

 

 

(12,999)

(19,177)

Gross profit

 

 

 

 

 

 

5,473

8,313

Research and development expense (excluding provision against virus inventory)

 

 

 

 

 

 

(10,733)

(1,198)

Research and development expense - provision against virus inventory

 

 

 

 

 

3

(58)

(1,270)

Administrative expense

 

 

 

 

 

 

(17,730)

(7,253)

Loss from operations

 

 

 

 

 

 

(23,048)

(1,408)

Finance income

 

 

 

 

 

 

358

226

Finance costs

 

 

 

 

 

 

(15)

(11)

Loss before taxation

 

 

 

 

 

 

(22,705)

(1,193)

Taxation

 

 

 

 

 

4

4,269

2,705

(Loss)/profit for the year

 

 

 

 

 

 

(18,436)

1,512

Total comprehensive (loss)/profit for the year attributable to owners of the parent

 

 

 

 

 

 

(18,436)

1,512

(Loss)/earnings per share - basic (pence)

 

 

 

 

 

5

(31.3p)

3.2p

(Loss)/earnings per share - diluted (pence)

 

 

 

 

 

5

(31.3p)

2.9p

 

 

All activities relate to continuing operations.

 

The Group has no recognised gains or losses other than the (loss)/profit for the year.

 

 

 

hVIVO plc

Consolidated Statement of Financial Position

As at 31 December 2014

 




2014

2013



Note

£'000

£'000

 

Assets





 

Non-current assets





 

Goodwill


6

 

1,722

-

 

Intangible assets


7

 

3,333

1,079

 

Property, plant and equipment


8

 

3,153

3,667

 



 

8,208

4,746

 

Current assets





 

Inventories


9

 

3,731

3,116

 

Trade and other receivables


10

 

2,904

5,851

 

Research and development tax credit receivable



 

3,806

2,425

 

Short-term deposits


11

 

28,007

22,500

 

Cash and cash equivalents


12

 

22,826

13,310

 



 

61,274

47,202

 

Total assets



 

69,482

51,948

 

Equity and liabilities





 

Equity





 

Share capital



 

3,383

2,686

 

Share premium account



 

72,498

37,363

 

Share-based payment reserve



 

249

239

 

Merger reserve



 

4,199

4,199

 

Other reserve



 

921

-

 

Retained deficit



 

(20,066)

(1,630)

 

Total equity



 

61,184

42,857

 

Non-current liabilities





 

Other payables


14

 

550

625

 

Provisions


15

 

3,130

110

 



 

3,680

735

 

Current liabilities





 

Trade and other payables


13

 

4,618

8,356

 



 

4,618

8,356

 

Total liabilities



 

8,298

9,091

 

Total liabilities and equity



 

69,482

51,948

 

 

 

hVIVO plc

Consolidated Statement of Changes in Equity

For the year ended 31 December 2014

 



Share

Share-based






Share

premium

payment

Merger

 

Other

Retained

Total


capital

account

reserve

reserve

 

reserve

deficit

equity


£'000

£'000

£'000

£'000

 

£'000

£'000

£'000

As at 1 January 2013

2,049

13,013

217

4,199

-

(3,142)

16,336

Proceeds from shares issued:








Placing net of related expenses

637

24,350

-

-

-

-

24,987

Total transactions with owners in their capacity as owners

637

24,350

-

-

-

-

24,987

Profit for the year

-

-

-

-

-

1,512

1,512

Share-based payment expense

-

-

22

-

-

-

22

As at 31 December 2013

2,686

37,363

239

4,199

-

(1,630)

42,857

Proceeds from shares issued:

Acquisition of subsidiary

50

2,987

-

-

921

-

3,958

Issue of new shares

-

15

-

-

-

-

15

Placing net of related expenses

647

32,133

-

-

-

-

32,780

Total transactions with owners in their capacity as owners

697

35,135

-

-

921

-

36,753

Loss for the year

-

-

-

-

-

(18,436)

(18,436)

Share-based payment expense

-

-

10

-

-

-

10

As at 31 December 2014

3,383

72,498

249

4,199

921

(20,066)

61,184

 

 

 

hVIVO plc

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

 

 








2014

2013








£'000

£'000

 

Cash flow from operating activities









 

Loss before income tax







(22,705)

(1,193)

 

Adjustments for:









 

Depreciation of property, plant and equipment







 

1,221

812

 

Impairment of property, plant and equipment







 

672

-

 

Amortisation of intangible assets







 

435

2

 

Payment of Non-Executive Director fees by issue of shares







 

15

-

 

 

Share-based payment expense







 

10

22

 

Finance costs







 

15

11

 

Finance income







 

(358)

(226)

 

Loss/(Gain) on foreign exchange

Increase in provisions







 

8

3,020

(48)

110

 

Changes in working capital:









 

Increase in inventories







 

(615)

(1,503)

 

Decrease/(increase) in trade and other receivables







 

2,965

(3,156)

 

(Decrease)/increase in trade and other payables







 

(3,835)

1,640

 

Cash used in operations







 

(19,152)

(3,529)

 

Finance costs







 

(15)

(11)

 

Income tax refund







 

2,568

1,355

 

Net cash used in operating activities







 

(16,599)

(2,185)

 

Cash flows from investing activities









 

Acquisition of intangible assets







 

(148)

(1,081)

 

Acquisition of property, plant and equipment







 

(1,355)

(3,102)

 

Increase in balances on short-term deposit







 

(5,507)

(22,500)

 

Acquisition of subsidiary







 

67

-

 

Finance income







 

361

105

 

Net cash used in investing activities







 

(6,582)

(26,578)

 

Cash flows from financing activities









 

Net proceeds from issue of shares







 

32,780

24,987

 

Cash flow from other payables







 

-

750

 

Other payables repaid







 

(75)

(50)

 

Net cash generated from financing activities







 

32,705

25,687

 

Net (decrease)/increase in cash and cash equivalents







 

9,524

  (3,076)

 

Exchange (loss)/gain on cash and cash equivalents







 

(8)

48

 

Cash and cash equivalents at the start of year







 

13,310

16,338

 

Cash and cash equivalents at the end of year







 

22,826

13,310

 

 

 

hVIVO plc

Notes to the Consolidated Financial Statements

 

1.       Basis of the announcement

 

The audited preliminary results for the year ended 31 December 2014 were approved by the Board of Directors on 15 April 2015. The preliminary results do not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but are derived from accounts for the year ended 31 December 2014 and year ended 31 December 2013.

 

The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 December 2014. Those accounts upon which the auditors issued an unqualified opinion, also had no statement under section 498(2) or (3) of the Companies Act 2006.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, as adopted by the European Union (EU) (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS.

 

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of hVIVO plc is presented in pounds Sterling (£), which is also the functional currency of the Group.

 

The statutory accounts for the financial year ended 31 December 2014 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

Going concern

 

In determining the basis for preparing the financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the financial statements. As at 31 December 2014 the Group had short-term deposits, cash and cash equivalents of £50.8 million (2013: £35.8 million) and net current assets of £56.7 million (2013: £38.8 million).

 

Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding the status of client engagements and sales pipeline, future revenues and costs together with various scenarios which reflect growth plans, opportunities, risks and mitigating actions. The forecasts also include assumptions regarding the timing and quantum of investment in the Group's research and development programme. Whilst there are inherent uncertainties regarding the cash flows associated with the development of the hVIVO platform, together with the timing of signature and delivery of client engagements, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Company and Group are able to meet their liabilities as they fall due for the foreseeable future.

 

As part of its going concern review the Board has followed the guidelines published by the Financial Reporting Council entitled "Going Concern and Liquidity Risk Guidance for UK Companies 2009". Having made relevant and appropriate enquiries, including consideration of the Company's and Group's current cash resources and the working capital forecasts, the Directors have a reasonable expectation that the Company and Group will have adequate cash resources to continue to meet the requirements of the business for at least the next twelve months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

 

2.       Segmental information

 

The Group's Chief Operating Decision Maker, the Chief Executive Officer, is responsible for resource allocation and the assessment of performance. In the performance of this role, the Chief Executive Officer reviews the Group's activities, in the aggregate. The Group has therefore determined that it has only one reportable segment under IFRS 8 Operating Segments, which is "medical and scientific research services".

 

The Group carries out its main activities from the United Kingdom. The Group conducts sales activity in the US and in Europe which is carried out through hVIVO Inc and hVIVO Services Limited respectively. All revenue is derived from activities undertaken in the UK.

 

During the year ended 31 December 2014 the Group had five customers who generated revenues greater than 10% of total revenue. These customers generated 28%, 22%, 16%, 15% and 11% of revenue.

 

During the year ended 31 December 2013 the Group had five customers who generated revenues greater than 10% of total revenue. These customers generated 24%, 20%, 17%, 15% and 13% of revenue.

 

3.       Provision against virus inventory

 

Following a review of the virus inventory valuations as at 31 December 2013, a provision in full of £1.3 million against the carrying value of "Virus - work in progress" was recognised relating to a virus to be used in the development and commercialisation of new HCM models, where the new HCM models have not yet demonstrated technical feasibility. This expense was recorded within research and development expense and is presented separately in the consolidated statement of comprehensive income. As at 31 December 2014, the provision has increased by £58,000 as further costs were incurred developing the virus strain during the year.

 

A provision of £246,000 (2013: £301,000) against the carrying value of "Virus - finished goods" has been recognised due to management's assessment that the carrying values exceeded the net realisable values of such inventories resulting from changes in forecasted usage. A provision release of £55,000 has been recognised during the year within cost of sale.

 

4.       Taxation


Year ended

Year ended


31 December

31 December


2014

2013


£'000

£'000

Current tax:



Current year research and development tax credit

(3,806)

(2,425)

Adjustments in respect of previous periods

(143)

(280)

Deferred tax:



Origination and reversal of temporary timing differences

(320)

-


 

(4,269)

(2,705)

Factors affecting the tax charge for the period:



The income assessed for the year differs from the theoretical amount that would rise by applying the UK corporation tax rate of 21.49% (2013: 23.25%), as explained below:

Loss before taxation

(22,705)

(1,193)

Tax at the UK corporation tax rate of 21.49% (2013: 23.25%)

(4,880)

(277)

Expenses not deductible in determining taxable profit

160

18

Fixed asset timing differences not recognised

57

(779)

Current year research and development tax credit

(1,707)

(1,425)

Movement in unrecognised deferred tax asset

1,700

-

Temporary timing differences not recognise

544

38

Adjustments in respect of prior periods

(143)

(280)

Tax for the year

(4,269)

(2,705)

 

As at 31 December 2014, the Group had unrecognised deferred tax assets of £3.5 million (2013: £2.0 million) which primarily relates to losses. The Group has not recognised this as an asset in the consolidated statement of financial position due to the uncertainty of recovery.

 

5.       Earnings per share (EPS)

 

Basic earnings per share is calculated by dividing profit or loss for the year by the weighted average number of ordinary shares in issue during the year. Diluted EPS is computed based on the weighted average number of ordinary shares plus the effect of dilutive potential ordinary shares outstanding during the period based on the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and warrants.

 

Dilutive potential ordinary shares include share options and warrants.

 

The calculation of the basic and diluted EPS as included in the consolidated statement of comprehensive income is based on the following data:

 








Year ended

Year ended








31 December

31 December








2014

2013








£'000

£'000

Earnings




 

(Loss)/profit for the year







(18,436)

1,512

 

Number of shares




Weighted average number of ordinary shares for the purposes of basic EPS







58,839,405

47,963,221

Effect of dilutive potential ordinary shares:









- share options







-

3,744,509

 

- warrants







-

143,449

 

Weighted average number of ordinary shares for the purposes of diluted EPS







58,839,405

51,851,179

 

In the current year, the potential ordinary shares were not treated as dilutive as the Group is loss making, therefore the weighted average number of ordinary shares for the purposes of the basic and diluted loss per share were the same.

 

6.       Goodwill

 

 

 

 

 

 

 

 

 

2014

2013

 

 

 

£'000

£'000

At 1 January

 

 

-

-

Recognised on acquisition of subsidiary

 

 

1,772

-

At 31 December

 

 

1,772

-

 

The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired.

 

Consistent with our segmental reporting, the business has one cash generating unit to which all goodwill arising on acquisitions has been allocated. The recoverable amount of the cash generating unit is determined by reference to fair value of the cash generating unit less estimated costs of disposal. As at 31 December 2014, the recoverable amount of the cash generating unit was considered to be significantly in excess of its book value.

 

7.       Intangible assets

 




31 December

31 December




2014

2013




£'000

£'000

 

At 1 January



 

1,079

-

 

Additions at cost



 

148

1,081

 

Recognised on acquisition of subsidiary



 

2,541

-

 

Amortisation charge for the year



 

(435)

(2)

 

At 31 December



 

3,333

1,079

 

Intangible assets comprise software and acquired intellectual property.

 

8.       Property, plant and equipment

 






Leasehold

Plant and

Computer







improvements

machinery

equipment

Total






£'000

£'000

£'000

£'000

Cost:









At 1 January 2013





718

896

359

1,973

 

Additions





974

1,617

511

3,102

At 31 December 2013

 

Additions





1,692

 

727

2,513

 

455

870

 

173

5,075

 

1,355

 

Acqun. of subsidiary





 

-

 

22

 

2

 

24

At 31 December 2014





 

2,419

 

2,990

 

1,045

 

6,454

Accumulated depreciation:









At 1 January 2013





105

355

136

596

 

Charge for the year





277

356

179

812

 

At 31 December 2013





 

382

 

711

 

315

 

1,408

 

Charge for the year





 

293

 

650

 

278

 

1,221

 

Impairment loss





 

672

 

-

 

-

 

672

At 31 December 2014





 

1,347

 

1,361

 

593

 

3,301

Carrying amount:









At 1 January 2013





613

541

223

1,377

At 31 December 2013





1,310

1,802

555

3,667

At 31 December 2014





 

1,072

 

1,629

 

452

 

3,153

 

9.       Inventories








31 December

31 December








2014

2013








£'000

£'000

 

Laboratory and clinical consumables







67

104

 

Virus - finished goods







 

2,212

2,527

 

Virus - work in progress







 

1,452

485








 

3,731

3,116

 

Inventories expensed in the consolidated statement of comprehensive income are shown within cost of sales or research and development expense. All inventories are carried at the lower of cost and net realisable value.

 

In the year to 31 December 2014 finished goods inventories with a carrying value of £nil were written off (31 December 2013: £70,000) due to obsolescence and this expense is recognised in cost of sales.

 

A provision of £246,000 (2013: £301,000) against the carrying value of "Virus - finished goods" has been recognised due to management's assessment that the carrying values exceeded the net realisable values of such inventories resulting from changes in forecasted usage. A provision release of £55,000 has been recognised during the year within cost of sale.

 

Following a review of the virus inventory valuations as at 31 December 2013, a provision in full of £1.3 million against the carrying value of "Virus - work in progress" was recognised relating to a virus to be used commercially in HCM models, where the new HCM models have not yet demonstrated technical feasibility. As at 31 December 2014, the provision has increased by £58,000 as further costs were incurred developing the virus strain during the year.

 

10.     Trade and other receivables

 








31 December

31 December








2014

2013








£'000

£'000

 

Trade receivables







 

446

3,511

 

VAT recoverable







 

295

585

 

Other receivables







 

667

484

 

Prepayments







 

1,344

769

 

Accrued income







 

162

502








 

2,904

5,851

 

11.     Short-term deposits

 








31 December

31 December








2014

2013








£'000

£'000

 

Short-term deposits







28,007

22,500

 

Balances held on short-term deposits have maturity dates between six and twelve months from the point of investment.

 

12.     Cash and cash equivalents

 








31 December

31 December








2014

2013








£'000

£'000

 

Cash at bank and in hand







22,826

13,310

 

13.     Trade and other payables

 








31 December

31 December








2014

2013








£'000

£'000

 

Trade payables







 

2,754

2,083

 

Other taxes and social security







 

414

490

 

Other payables







 

177

186

 

Accruals







 

903

2,705

 

Deferred income







 

370

2,892








 

4,618

8,356

 

14.     Other payables








31 December

31 December








2014

2013








£'000

£'000

 

Amounts to be settled beyond one year







550

625

 

On 11 March 2013, the Group signed an Agreement for Lease with Queen Mary BioEnterprises Limited to develop the 3rd floor of the QMB Innovation Centre with a five-year term and an option to extend for another five years. As part of the agreement, QMB advanced the Group a repayable interest-free lease incentive of £750,000 to develop the 3rd floor, with £75,000 per annum repayable over a ten-year period. The lease incentive is recognised as a liability. In the event the Group does not exercise its option to extend the lease agreement for another five years, the remaining unpaid principal of the advance (£375,000) must be repaid at the end of the five-year contractual lease term.

 

15.     Provisions

 








31 December

31 December








2014

2013








£'000

£'000

Dilapidations provision

 

 

 

 

 

 

 

130

110

Onerous lease provision

 

 

 

 

 

3,000

-

 

 

 

 

 

 

 

 

3,130

110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Onerous lease provision

Dilapidations Provision

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

 

At 1 January 2014

 

 

 

 

 

 

 

-

110

110

 

Additional provision in the year

 

 

 

 

 

3,000

20

3,020

 

At 31 December 2014

 

 

 

 

 

 

 

3,000

130

3,130

 

Onerous lease provision of £3,000,000 (31 December 2013: £nil) represents the present value of costs to be incurred for the exit of premises leased by the Group. There is reasonable uncertainty around the likelihood and timing of the exit of the lease as negotiations will involve third parties. The provision is expected to be used during 2015 and 2016. Total expected costs to be incurred are £3,000,000.

 

Buildings dilapidations of £130,000 (31 December 2013: £110,000) represent the present value of costs to be incurred for the restoration of premises occupied by the Group. The provision is expected to be used during 2015 and 2018. Total expected costs to be incurred are £130,000.


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