Business and trading update

RNS Number : 6903V

IXICO plc

17 December 2013

 



17 December 2013

IXICO plc

Business and trading update

Assessa™ launched; trading remains on budget

IXICO plc (Ticker: IXI) ("IXICO" or the "Company"), the brain health company, today announces a business update and includes a trading update for its underlying business, IXICO Technologies Limited (formerly IXICO Limited) for the four and a half months ended 14 October 2013.

Highlights

·      Successful integration of IXICO Technologies Limited and Phytopharm plc and renaming of the enlarged group as IXICO plc

·      Launch of Assessa™, our proprietary platform to support timely and accurate diagnosis of dementia

o  Widened collaboration with InHealth Limited to provide Assessa™ and complementary services within the UK and Eire

o  Initial piloting of Assessa™ in a community setting in collaboration with partners

·      Memorandum of understanding signed with Beijing Union Medical and Pharmaceutical General Corporation during the UK trade mission to China following which IXICO has also been awarded its first contract for specialist drug development services with a Chinese pharmaceutical company

·      Awarded a new contract to provide clinical trials services by a top fifteen global pharmaceutical company with whom IXICO has not previously worked

o  Contract is for early phase clinical trial for an investigational drug for the treatment of mild to moderate Alzheimer's disease

o  IXICO has now been awarded contracts by eight of the top fifteen global pharmaceutical companies

·      IXICO's work in dementia recognised by Prime Minister David Cameron in his speech to the G8 Dementia Summit on 11 December 2013

·      Awarded Stratified Medicine Grant by the Technology Strategy Board, the UK's innovation agency

Financial Highlights

·      Revenue and expenses in line with budget with the operating loss reflecting planned increased investment to develop Assessa™, the Company's diagnostic platform

·      Combined cash deposits of approximately £5.7 million as at 15 October 2013 of which an estimated £4.8 million available to the Company (following payment of certain Transaction costs and redundancy payments)

Commenting on the results, Andy Richards, Chairman of IXICO said:

"The launch of Assessa™ is a key landmark in IXICO's corporate history. We look forward to updating shareholders on its progress as we develop international markets for the product over the next few years.  We are pleased to report that trading remains on budget. Our clinical trials and experimental medicine businesses remain at the heart of IXICO and we continue to support our customers and partners in these clinically and commercially important markets.  We are delighted to be admitted to AIM and welcome the former Phytopharm shareholders to IXICO and look forward to building value for all our shareholders and stakeholders."

Enquiries

IXICO plc

[phone]

Derek Hill, CEO

Charles Spicer, Director

Peel Hunt LLP (Nominated Adviser and broker)

[phone]

James Steel

Oliver Jackson

FTI Consulting Limited (U.K. Investor and Media Relations)

[phone]

John Dineen

Simon Conway

About IXICO

IXICO, the brain health company, was founded in 2004 with a mission to translate image acquisition, management and analysis technology and know-how, which the founders had developed together, into commercial products targeting the expanding area of imaging to inform decision-making during drug development. This has resulted in commercially successful products being launched in the clinical trials (Phase 0-III) and experimental medicine markets and more recently launched into the wider clinical diagnostic market. Since incorporation, IXICO has been awarded contracts by eight of the top 15 global pharmaceutical companies as well as leading biotechnology companies. In October 2013, IXICO plc was admitted to trading on AIM. More information is available on www.ixico.com

IXICO plc

("IXICO" or the "Company")

Chairman and Chief Executive's statement

We are pleased to present the results for our underlying business, IXICO Technologies Limited (formerly IXICO Limited) for the four and a half months ended 14 October 2013.  Historical financial information in respect of IXICO Limited for the three years ended 31 May 2013 was presented in the Company's AIM admission document published on 23 September 2013 (the "Admission Document").  The financial information set out below therefore covers the 'stub period' prior to completion of the reverse takeover with Phytopharm plc (the "Transaction") and the Admission to AIM of the enlarged group (renamed IXICO plc) on 15 October 2013 ("Admission").

Revenues and expenses during the period were in line with budget with the operating loss reflecting the planned increased investment to develop the Company's diagnostic platform, Assessa™.  During the period, we won significant new business from existing customers.  As this financial period pre-dates Admission, none of the costs associated with being a public company are included.

Update on trading and business development since Admission

Following completion of the Transaction, IXICO has achieved several key milestones in its development as a public company.  We have launched our Assessa™ diagnostic platform with a market-leading partner.  We have continued our planned commercialization of products and services in Asia through signing a memorandum of understanding with the innovation arm of the Chinese Academy of Medical Sciences.  Meanwhile, within the clinical trials market, we have won business from new customers and been awarded additional grant funding as part of a prestigious consortium of research and commercial collaborators. 

Assessa™ launch

As announced on 11 December 2013, IXICO has launched Assessa™, its decision-support tool for diagnosing dementia and at the same time signed heads of terms to widen its collaboration with InHealth Limited ("InHealth"), a major supplier of diagnostic and healthcare services to the NHS and private health providers. In partnership with InHealth, IXICO is now starting to provide selective access to Assessa™ in the UK and Eire.  It is anticipated that this service will incorporate a detailed assessment of the patient's cognition, together with an in-depth analysis of a brain MRI scan, patient and GP liaison and support services post diagnosis.  As part of the partnership, InHealth will supply patient bookings and administration services and the clinical scanning capabilities associated with either MRI or PET CT scanning which it already provides in the UK and Eire.  IXICO will supply Assessa™ and the appropriate cognitive assessment tools.  The objective of the collaboration is to establish appropriate models of diagnostic services and service provision in a personalised care context. 

IXICO is separately piloting the use of Assessa™ in a community setting in a collaboration with InHealth, Cambridge Cognition plc ('CamCog'), the NHS in Sussex, Brighton and Sussex Medical School, Imperial College London and the Alzheimer's Society.  This pilot will evaluate the benefits of this integrated approach on the patient pathway, and model the impact on NHS and social care costs.  Approximately £3.3 million is being invested by the collaborators in this project, of which £2.1 million has been secured as government grant funding from the UK Biomedical Catalyst Fund.  This project is integrating IXICO's Assessa™ with CamCog's CANTABmobile™ computerized cognitive testing product.  InHealth is providing local access to radiology services in Sussex ensuring convenience for patients and their families and greater access to care.  Imperial College is developing novel digital technologies for future combination products and the Alzheimer's Society is supporting the project by ensuring the needs of patients and their carers are fully considered and are undertaking an initial impact assessment on the first 200 patients assessed.

G8 Dementia Summit

We were delighted to have IXICO's work in the dementia field recognised by the UK Prime Minister, David Cameron, in his speech to the G8 Dementia Summit on 11 December 2013.  IXICO's executive team continues to support the formulation of international dementia policy and thought leadership through involvement in the legacy plans from the G8 Dementia Summit.  

MOU in China

As announced on 2 December 2013, IXICO was part of the UK Prime Minister's recent trade mission to China, and on that visit, signed a Memorandum of Understanding with Beijing Union Medical and Pharmaceutical General Corporation (UMP), the innovation arm of the Chinese Academy of Medical Sciences.  IXICO and UMP will work together to support dementia diagnosis, advance public understanding of dementia and evaluate new treatments for dementia. Following the execution of the memorandum, IXICO has also been awarded its first contract for specialist drug development services with a Chinese pharmaceutical company.

Progress on trading

We remain encouraged by trading to date and the Company's current order book. Since the Transaction, the core clinical trials and experimental medicine business has generated ongoing revenues from its key customers, has won new business and continues to trade in line with budget.  IXICO has recently been awarded a contract to provide clinical trials services to an early phase clinical trial for an investigational drug for the treatment of mild to moderate Alzheimer's disease.  This trial is being sponsored by a top fifteen global pharmaceutical company with whom IXICO has not previously worked.  We have been informed that the decision to award the business to IXICO was positively influenced by our being admitted to AIM and having a significantly strengthened balance sheet.  Following this contract award, the Company has now been awarded contracts by eight of the top fifteen global pharmaceutical companies which we believe positions us strongly in our core clinical trials and experimental medicine markets. 

As emphasised in the Admission Document, the £3.6 million of revenue achieved in the twelve months ended 31 May 2013 was unusual as it included the accelerated completion of a major Alzheimer's clinical trial contract.  Comparable levels of activity are not expected to be achieved in the near term.  The Board's expectation is that revenue generated in the twelve months ended 31 May 2012 is more representative of IXICO's likely rate of revenue generation from pharmaceutical clinical trials in the current year ending 31 May 2014. 

Following Admission, we are appropriately strengthening the Company's human and other resources to allow us to operate effectively as a public company and to develop our diagnostic and experimental medicine businesses in particular.  Our current intention remains to finance this through the use of our cash resources, additional grant finance (where available) and any surplus cash generated from our clinical trials and experimental medicine business.  As emphasised in the Admission Document, we expect only modest revenues from Assessa™ in the first twelve months following its launch with gaining clinical adoption as the strategic priority.

Stratified Medicine Grant from the Technology Strategy Board

We were pleased to be featured by the Technology Strategy Board, the UK's innovation agency, as 'Dementia Pioneers' and one of its Success Stories (www.innovateuk.org/success-stories) detailing a funding relationship that stretches back five years.

As announced on 13 December 2013, IXICO has been awarded a Stratified Medicine Grant by the Technology Strategy Board.  For this project, a consortium led by IXICO, which includes Imperial College London as a research partner, and Medimmune Limited (the global biologics research and development arm of AstraZeneca)  and a second leading global pharmaceutical company as commercial partners, will apply a machine learning framework to a unique combination of reference data to develop a digital dementia prognosis tool.  Several further global pharmaceutical companies have expressed interest in joining the project as collaborators, and contributing clinical trial data in due course.  The total value of the 24 month research project is approximately £1 million.  The value of the grant is £633,962 of which £456,956 is allocated to IXICO and the remainder to Imperial College.  The pharmaceutical partners and collaborators are contributing scientific resources from their R&D teams and access to data from completed clinical trials.

This brings the total grant funding secured by IXICO in the last 18 months to approximately £2.6 million of which approximately £2.4 million remains to be drawn down by IXICO.

Post-transaction integration

Following Admission, we have undertaken a process to complete the integration of the two companies.  This has involved the integration of the remainder of the Phytopharm business, the termination of the contracts of its directors and employees, initiating the disposal process for the office facilities in Huntingdon and the disposal of various non-core assets.  Further details of this process will be provided in the annual report for the year ended 30 September 2013 which we expect to publish in February 2014.

Update on cash

As at 15 October 2013 IXICO had combined cash deposits of approximately £5.7 million of which an estimated £4.8 million is likely to be available as working capital for the Company following payment of various liabilities incurred by Phytopharm including redundancy payments and Transaction costs. The additional £2.4 million of grant funding available to IXICO will support our wider product development strategy and is not included in the cash deposit figure set out above.

Outlook

The launch of Assessa™ is a key landmark in IXICO's corporate history and we look forward to updating shareholders on its progress as we develop international markets for the product in the future.  Our clinical trials and experimental medicine businesses are key to IXICO and we look forward to continuing to support our customers and partners in these clinically and commercially important markets.   

We are delighted to have successfully achieved a quotation on AIM and thank all our directors, staff, shareholders and advisers for their hard work and support during the process.  We welcome the former Phytopharm shareholders to IXICO and look forward to building value for all our shareholders and stakeholders.

Dr. Andy Richards	Professor Derek Hill
Chairman	Chief Executive

Ixico TECHNOLOGIES Limited

statement of comprehensive income

FOR THE PERIOD 1 JUNE 2013 TO 14 OCTOBER 2013

				Period ended 14 October 2013 £000
	Note
Revenue				1,061
Cost of sales				(312)
Gross profit				749
Other operating income
Other income				170
Operating expenses				(1,201)
Operating loss and loss on ordinary activities before taxation	2			(282)
Taxation	3			(16)
Total comprehensive expense for the period				(298)

Notes to the Financial information

Background

The financial information presented has been prepared under IFRS however this is not a set of interim financial statements and therefore the full provisions of IAS 34 'Interim Financial Reporting' have not been adopted.

The principal accounting policies adopted in the preparation of this financial information are set out below. These policies have been consistently applied to the financial information presented.

1.   Accounting policies and basis of preparation

Basis of preparation

The Financial Information has been prepared under International Financial Reporting Standards ("IFRS") as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Information has been prepared on a going concern basis and under the historical cost convention, modified by the revaluation of certain financial instruments.

The Financial Information does not constitute statutory accounts.

The Financial Information is presented in Sterling (£). This is the predominant functional currency of IXICO, and is the currency of the primary economic environment in which it operates. Foreign transactions are accounted within the Financial Information in accordance with the policies set out below.

Critical judgements

The preparation of the financial statements requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The main accounting judgements relate to the determination of the period over which research and development costs are recognised, the fair value of the loan notes and the share option charge and the underlying assumptions.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of revision and future years if the revision affects both current and future years.

IXICO recognises revenue with regard to amounts chargeable to customers under service contracts. The policy is to recognise testing services upon achievement of milestones set out in the related agreements. This is expected to approximate to the timing of the physical performance of the service activity on such contracts. In making its judgement, management considered the detailed criteria for the recognition of revenue from the provision of continuous services set out in IAS 18, Revenue.

Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue from short term professional services contracts, such as consultancy and training, is recognised as the service is performed.

Revenue on longer term contracts for services is recognised according to the substance of the Company's obligations under a contract. Where the substance of a transaction is that the Company's contractual obligations are performed gradually over time, revenue is recognised as contract activity progresses, to reflect the Company's partial performance of its contractual obligations. Where the substance of a contract is that a right to consideration does not arise until the occurrence of a critical event, revenue is not recognised until the event occurs.

Other income

Government grants received relating to tangible fixed assets are treated as deferred income and released to the statement of comprehensive income over the expected useful lives of the assets concerned. Other grants received are recognised on a work done basis.

Research and development

Research and development costs are written off to the statement of comprehensive income in the year in which they are incurred. All research and development costs, whether funded by grant or not, are included within operating expenses and classified as research and development costs.

All ongoing development expenditure is currently expensed in the year in which it is incurred.

Share - based payments

Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of equity instruments that will eventually vest. At each balance sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions.

The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.

Operating leases

Rentals under operating leases are charged to the statement of comprehensive income on a straight line basis over the lease term.

2.   Operating loss

Operating loss is the result for the Company before finance income, finance expense and taxation and is stated after charging the following operating expenses:

			Period ended 14 October 2013 £000
Research and development			323
Foreign exchange loss			56
Depreciation			10
Operating lease charges - land and buildings			46
Fees payable to the Company's auditor in respect of other services			24
Administrative expenses			742
			1,201

3.   Taxation

The tax assessed differs from the standard rate of corporation tax in the UK. The differences are explained below.

							Period ended 14 October 2013 £000
Loss before taxation							(282)
Loss before tax at the effective rate of corporation tax in the UK of 23.00%							(65)
Effects of:
Expenses not deductible for tax purposes							19
R&D uplifts net of losses surrendered for tax credits							(15)
Prior period adjustment							50
Unrelieved tax losses arising in the period							25
Depreciation in excess of capital allowances						2
Tax charge for the period							16

 

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