Final Results

RNS Number : 4568Z

Oxford BioDynamics PLC

25 January 2022

 

25 January 2022

Oxford Biodynamics Plc

("OBD" or the "Company" and, together with its subsidiaries, the "Group")

FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

AND

NOTICE OF ANNUAL GENERAL MEETING

Oxford BioDynamics Plc (AIM: OBD), a global biotechnology company advancing personalized healthcare by developing and commercializing precision medicine tests for life-changing diseases, today announces its final results for the year ended 30 September 2021.

Highlights

Corporate and operational highlights

§ Initial launch of EpiSwitch® CST (COVID-19 Severity Test) (March 2021)

§ Launch of EpiSwitch® Explorer Array Kit allowing researchers to access OBD's EpiSwitch® technology platform (March 2021)

§ Lease and fitout of expanded UK lab and office space (April - September 2021)

§ Receipt of prestigious FNIH Partnership for Accelerating Cancer Therapies (PACT) grant award (August 2021)

§ Expansion of strategic focus to include development and commercialization of laboratory tests in addition to existing projects with pharma partners (December 2020)

§ Strengthening of Senior Management Team and Board, including the appointment of Matthew Wakefield as Non-Executive Chairman (December 2020)

Financial highlights

§ Revenue of £0.3m (FY20: £0.5m)

§ Operating loss of £7.5m (FY20: £5.0m), reflecting planned increased R&D, staff, general and administration costs and depreciation.

§ Cash and term deposits of £4.3m as at 30 September 2021 (FY20: £11.5m).

Post-year end highlights

§ EpiSwitch® CST (COVID severity test) fully available on market in US (November 2021)

§ Raising of £3.6m ($5m) by way of subscription from leading US-based healthcare fund, Armistice Capital Master Fund Ltd (October 2021)

§ Opening of US offices in Gaithersburg, Maryland (October 2021)

Commenting on the results, Jon Burrows, Chief Executive Officer of Oxford BioDynamics, said:  

"Since embarking on transitioning the Company onto a commercial trajectory last year, 2021 has been a year of necessary fortitude for all at OBD. There were many challenges put before us during the year, exacerbated by the ongoing COVID-19 pandemic. We successfully worked through the myriad operational and logistical frustrations and the EpiSwitch® CST product finally became fully available in November. Indeed, the global team has skilfully used these learnings to finish development and tee up our flagship CiRT (Checkpoint inhibitor Response Test) product for immuno-oncology to hit the market imminently. Our fundamentals as a commercial group are now primed across the pillars of Clinical Diagnostic Testing, Pharma Clinical Development and Life Sciences Research. I firmly believe that in 2022 we will begin to see rewards for the hard work that has been done and I look forward to updating shareholders as the year progresses."

-Ends-

Notice of Annual General Meeting

The Company's Annual General Meeting will be held at 3140 Rowan Place, John Smith Drive, Oxford Business Park South, Oxford, OX4 2WB , UK on 30 March 2022 at 12.00 pm.

The information included in this announcement is extracted from the Annual Report, which was approved by the Directors on 24 January 2022. Defined terms used in the announcement refer to terms as defined in the Annual Report unless the context otherwise requires. This announcement should be read in conjunction with, and is not a substitute for, the full Annual Report.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which is part of domestic UK law pursuant to the Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) ("UK MAR"). Upon the publication of this announcement, this inside information (as defined in UK MAR) is now considered to be in the public domain.

For further details please contact:

Oxford BioDynamics Plc	Tel: [phone]
Jon Burrows, CEO Paul Stockdale, CFO
Shore Capital - Nominated Adviser and Broker	Tel: [phone]
Advisory: Stephane Auton / John More Broking: Fiona Conroy
Instinctif Partners - Financial PR	Tel: [phone]
Melanie Toyne-Sewell / Nathan Billis	[e-mail]
PCG Advisory Group - US Investor Relations	Tel: [phone]
Jeff Ramson / Kirin Smith	[e-mail] / [e-mail]

 CHIEF EXECUTIVE OFFICER'S REVIEW
 

The OBD team has achieved remarkable progress over the last year, with the launch of the Group's first products and the expansion of its UK and US infrastructure leaving the business well positioned for commercial success as we enter 2022. In particular, the forthcoming launch of the flagship EpiSwitch® CiRT test in the US will mark a major advance towards the expanded strategic aims announced a little over a year ago. I am pleased to report to shareholders on the progress made during and after the financial year ended 30 September 2021 and immensely proud of the team that has pivoted OBD onto a more commercial footing.

The proprietary products we have developed and launched, based on OBD's EpiSwitch® technology, represent the first fruits in an entirely new market of commercially available, clinically validated and usable 3D genomic tests. 3D genomics will continue to play a crucial role in the personalized medicine revolution and OBD is excellently placed to benefit from the growth that we anticipate in this market over the coming years.

EpiSwitch® CiRT (Checkpoint Inhibitor Response Test)

The Group's flagship EpiSwitch® CiRT will be launched shortly once all clinical validation processes are completed. We announced in December 2021 that the final stages of clinical validation of CiRT were being constrained by the resurgence of COVID-19 in the US, causing staffing shortages and surging demand for the processing of COVID diagnostic tests at our partner lab. All validation testing has progressed well to date and as this report goes to press we anticipate launching CiRT® in the near future.

The test benefits cancer patients by assisting oncologists to reach an informed decision on whether to recommend immune checkpoint inhibitor (ICI) therapy. Every cancer patient travels a unique, difficult route from diagnosis to treatment that includes taking complex decisions with their doctor. Many patients are considered for ICI immunotherapy - a different approach to chemotherapy or radiation - that work with a patient's own immune system to find and fight cancer. ICIs have been the paramount breakthrough in cancer treatment in recent years, used as first or second lines of treatment for over 50 cancers. However, fewer than one third of patients receiving ICIs generally respond. Most given ICIs have no benefit and can be seriously impacted by toxicity affecting almost any organ. For these patients, treatment with the wrong therapy delays other options and may come with unnecessary and significant financial costs.

EpiSwitch® CiRT identifies individuals with a high likelihood of response to ICIs, including treatment with anti-PD-L1 and anti-PD-1 immunotherapies. It is the only smart blood test that specifically reports a patient's likely response to ICI monotherapy. The test is taken before the start of ICI treatment to inform a physician who is considering whether to recommend ICIs, enabling the physician and patient to make a more informed and confident decision on whether to start on an ICI or consider other options - without any lost time.

EpiSwitch® CiRT will be available through the Group's partnership with NEXT Molecular Analytics (VA, USA). The test is being clinically validated in NEXT's CLIA-certified laboratory, demonstrating best-in-class performance, with high specificity (93%), sensitivity (84%), accuracy (86%) and PPV (97%).

As well as directly benefiting patients and oncologists, the EpiSwitch® CiRT represents an opportunity to save amounts spent on ICI therapy that does not benefit patients (thought to be in excess of $10 billion annually in the US alone).

The Group's commercial team began pre-selling the EpiSwitch® CiRT to oncologists in late 2021 and post-launch will be focused on generating sales, including through an extensive digital marketing campaign. Concurrently, the Group will collate evidence of the test's use and clinical utility to be fed into our ongoing interaction with US healthcare payors.

EpiSwitch® CST (COVID Severity Test)

EpiSwitch® CST is the Group's first proprietary test, initially launched in March 2021 and fully available to the US market later in 2021. As previously announced, the validation and reproducibility work to enable the Group's partner lab to perform the test to clinical standards took longer than anticipated, in part because technology transfer teams could not work alongside one another whilst COVID-related restrictions were in place. The unfortunate recent resurgence of the COVID-19 pandemic in late 2021 as well as the likelihood that further variants will emerge mean that, despite the delays experienced in 2021, the Group continues to see a significant opportunity for EpiSwitch® CST as an important tool to assess personalized risk in case of infection with the SARS-CoV-2 virus.

The test is being marketed digitally direct to consumers, initially in the US, and can be ordered for patients by healthcare practitioners through the Group's covidseveritytest.com site.

The OBD product development team learnt a lot through the process of technology transfer and clinical validation associated with EpiSwitch® CST. Delays to the test's availability were of course frustrating for many of the Group's stakeholders, including management, staff teams and shareholders. However, the process of developing and validating EpiSwitch® CST, including transferring an EpiSwitch® qPCR to a commercial, CLIA-registered laboratory in the US for the first time, provided invaluable experience which was immediately applied by the team to the development of EpiSwitch® CiRT.

EpiSwitch® Explorer Array Kits

We first announced our intention to open up OBD's EpiSwitch® technology to researchers across the world in December 2020 and the launch of the EpiSwitch® Explorer Array Kit, along with an associated supply and resale agreement with Agilent Technologies (NYSE:A) was completed in March 2021. These kits allow those engaged in R&D in academia or commercial settings to interrogate their own samples using OBD's EpiSwitch® 3D genomics platform. The kits include OBD's proprietary biochemical reagents, alongside custom-designed microarray slides, manufactured by Agilent Technologies, that include almost one million of OBD's custom probes for identifying key features in the 3D structure of the genome.

The Group has successfully engaged with researchers for a number of prestigious academic institutions, providing training in the use of the kit and advice on including the use of 3D genomic testing, and specifically EpiSwitch® Explorer Array Kits, in R&D funding proposals.

Expanded UK and US infrastructure

During the year, the team also delivered on the upgrading of the Group's UK and US infrastructure to support our expanded strategy. At 24,000 sq ft, the new UK laboratory and office space in Oxford is around four times the size of the previous premises. Design work began in earnest in the first quarter of 2021, with construction completed in time for the Group to move in, in September 2021. The newly installed laboratories allow the business to operate our core activities simultaneously, without having to run (for example) product development and work for pharma customers in the same rooms, requiring time-consuming resetting of laboratory equipment. In addition, the Group had already outgrown its existing office space - the new offices and meeting space in Oxford allow for our planned expansion and are already facilitating improved collaboration within the team.

Shortly after the year-end, the Group also opened its office and training space in Gaithersburg, MD. The new space is conveniently located for many of the Group's US commercial team.

Grant awards, publications and presentations

In August 2021, OBD was awarded an FNIH Partnership for Accelerating Cancer Therapies (PACT) grant to use the EpiSwitch® platform for accurate prediction of a patient's response to Immune Checkpoint Inhibitors (ICIs) from a routine blood sample. The grant is worth $910,000 over two years. PACT is a precompetitive collaboration between the National Institutes of Health (NIH), National Cancer Institute (NCI), US Food and Drug Administration (US-FDA), and 12 leading pharmaceutical companies which seeks to provide a systematic approach to cancer biomarker investigation in clinical trials by supporting development of standardized assays.

The two-year $910,000 PACT grant awarded to OBD will fund extended application of the EpiSwitch® technology used in the development of the Group's EpiSwitch® CiRT to the analysis of primary and acquired resistance to ICI in several trials, including over 186 longitudinal samples from an observational trial, encompassing at least four separate ICI therapies and seven common cancer types.

In awarding the PACT grant, the reviewers highlighted the strengths of OBD's success in applying the EpiSwitch® platform for biomarker discovery, the prior experience of the team, the clinical practicality of non-invasive EpiSwitch testing from blood and the high relevance of the 3D genomic epigenetic modality. Income from the grant is expected to be recognized in the years ending 30 September 2022 and 2023. A total of £169,000 was included in grant creditors at the year end in respect of the PACT grant.

OBD is also one of 26 participants in the EU-funded HIPPOCRATES consortium (Health initiatives in psoriasis and psoriatic arthritis consortium European states) which as a whole was awarded a total of €21 million over five years in July 2021. Psoriasis is an autoimmune disease that primarily affects the skin. However, 20-30 % of people with psoriasis develop a condition called psoriatic arthritis (PsA), which results in pain, joint stiffness and fatigue and can dramatically impact the quality of life of those affected. PsA is very hard to diagnose, and it is not possible to predict which psoriasis patients will go on to develop PsA.

The aim of the HIPPOCRATES project is to deliver knowledge and tools that will make it easier to identify psoriasis patients who are at greatest risk of developing PsA and to diagnose them faster. In addition, the team hopes to make it easier to predict how fast a patient's condition is likely to worsen, and which treatments are most likely to be effective for them. The Group's contribution to the project will include developing predictive and theranostic biomarkers for PsA using its EpiSwitch® platform. Income from the grant will be recognized during its five-year term. £44,000 of upfront funding received before the year-end was included in grant creditors at the year end.

The year also saw further validation of OBD's technology through publications and invited presentations. The Group's scientists had papers published on prostate cancer ("Chromatin conformation changes in peripheral blood can detect prostate cancer and stratify disease risk groups" in the Journal of Translational Medicine, January 2021, with collaborators from University of East Anglia, Norfolk and Norwich NHS Trust, Imperial College London and University of Essex), COVID-19 ("3D genomic capture of regulatory immuno-genetic profiles in COVID-19 patients for prognosis of severe COVID disease outcome" in BioRxiv, March 2021 and "Development and validation of blood-based prognostic biomarkers for severity of COVID disease outcome using EpiSwitch 3D genomic regulatory immuno-genetic profiling" in MedRxiv, June 2021) and, post-year end on immuno-oncology ("Development and validation of blood-based predictive biomarkers for response to PD-(L)-1 checkpoint inhibitors: evidence of a universal systemic core of 3D immunogenetic profiling across multiple oncological indications" in MedRxiv, December 2021).

The Group's Chief Scientific Officer gave a presentation at the Boston Society's Applied Biomarker Analysis event in October 2020 entitled "Clinical Biomarkers for Immune Health in 3D Genomics: From Auto-Immunity to Immuno-Oncology and COVID Severity" and post-year end in November 2021, with the Group's Chief Data Officer, presented an "Introduction to EpiSwitch" to the Walter and Elisa Hall Institute of Medical Research (WEHI), Melbourne, Australia.

IP portfolio development

OBD has again continued to add to its international patent portfolio over the year, which now extends to 18 families, covering a variety of claims relating to the Group's technology, both broad and specific applications of it, and the Group's pipeline of proprietary tests. The Group's intellectual property is not limited to its patent estate, but also includes significant proprietary know-how and increasingly, brand value as more EpiSwitch® products are developed and launched.

Post-year end fundraise

In October 2021, the Group raised £3.62 million (US$5 million) by way of a subscription for 7,791,803 new shares at 46.5p per share ("Subscription") from leading US-based healthcare fund, Armistice Capital. Warrants to subscribe for 7,791,803 new ordinary shares at 58.125p per share were issued to Armistice Capital following approval at the Company's general meeting in November 2021. This was an important step for the Group, with the Subscription not only providing funding to accelerate the commercialization of the EpiSwitch® product line, particularly the EpiSwitch® CiRT test, but also representing a bridge to the US capital markets by adding the Company's first US-based institutional investor.

Planning for progress in 2022

It is gratifying to review progress against the goals the Group set itself a year ago, to drive near-term commercialization of the EpiSwitch® technology, via multiple commercial pathways, which began with EpiSwitch® CST, making our biomarker arrays and 3D genome bioinformatics tools commercially available to the R&D market (EpiSwitch® Explorer Array Kits), expanding our team and infrastructure, continuing to work with pharma to leverage the insights of our 3D genome knowledgebase, and, shortly, launching EpiSwitch® CiRT. At the same time, the delays faced, particularly to the full availability of EpiSwitch®CST, have been frustrating and very positive feedback and engagement from pharma partners was not translated, in the year under review, to significant new revenue.

The Group therefore enters 2022 "full steam ahead" to generate value for our shareholders: EpiSwitch® CiRT will be launched soon, EpiSwitch®CST is available in the US, we are engaging with researchers keen to use the Explorer Array Kit, and we are planning for further revenue-generating work for pharma customers.

Dr Jon Burrows

Chief Executive Officer

Oxford BioDynamics Plc

Business performance and position: financial review

Overview

This section of the annual report provides a summary explanation of the Group's financial performance and cash flow over the year and its financial position at the year-end.

More information is provided in the financial information and notes on the following pages. Note 2 includes a description of the Board's assessment and conclusion that it is appropriate to adopt the going concern assumption in preparing the accounts, but that a number of factors exist that, taken together, present a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern and, therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business.

Financial performance

The table below summarises the principal elements of the Group's financial performance and provides an explanation of what is included in each element and why it has changed since last year.

Element	Comprising:	2021   £m	2020   £m	Year-on-year change £m	Main drivers of movement
Revenue	Revenue from contracts with pharma customers	0.34	0.46	0.12 decrease	Contract revenue driven by timing of receipt of samples from customers. Similar level to previous year.
R&D expenditure	Lab consumables, equipment maintenance etc	(0.90)	(0.62)	0.28 increase	Increased internal R&D activity including on development of proprietary tests.
Staff costs	Staff and directors' remuneration and benefits	(3.77)	(2.75)	1.02 increase	Full year of FY20 recruits, plus in-year recruitment.
General and other admin costs	Other costs including marketing, legal and other professional services	(1.85)	(1.32)	0.53 increase	Increases of £0.3m PR and marketing costs, £0.2m legal and professional costs, £0.1m consultancy and £0.1m insurance and premises-related costs offset by £0.2m reduction in travel-related expenses.
Share option charges	Charges spreading fair value of options over their vesting period	(0.25)	(0.25)	-	-
Depreciation and amortization	Depreciation and amortization of intangible assets, property plant and equipment and right-of-use assets.	(1.09)	(0.47)	0.62 increase	Accelerated depreciation of leasehold improvements and right-of-use asset associated with former UK lab and offices. Increased patent amortization charge and depreciation on expanded asset base.
Operating loss		(7.51)	(4.95)	2.56 increase	As noted above.
Finance income	Interest income and foreign exchange gains	0.03	0.12	0.09 decrease	Lower cash and term deposit balances during the year.
Finance costs	Calculated lease interest, foreign exchange losses	(0.15)	(0.08)	0.07 increase	Higher lease interest costs on new UK property.
Tax	UK R&D tax credits offset by current and deferred taxes in subsidiaries	0.95	0.60	0.35 increase	Higher R&D costs and R&D-related staff costs.

		2021	2020
Loss per share	Loss for the year divided by weighted average number of shares in issue	(7.2)p	(4.7)p	2.5p increase	Entirely driven by increase in loss for the year.

Cash flow

Net cash used in operating activities for the year ended 30 September 2021 was increased at £5.92m (2020: £3.40m). The increase in operating cash outflow broadly matches the movement in operating loss, when depreciation and amortization and share options charges (which are "non-cash" items) are excluded. Net cash generated by investing activities was £2.83m (2020: £4.58m). As shown in more detail on the cash flow statement, the Group received £2.64m (2020: £nil) of funds by way of lease incentives and capital contributions associated with the lease of its new UK headquarters. Spend on additions of tangible and intangible fixed assets amounted in total to £3.09m (2020: £0.46m), much of which was associated with the fit-out of the new UK headquarters, including lab equipment. The investing activities figure also includes the effect of withdrawing funds from notice accounts and the maturity of term deposits with an initial maturity of between three and twelve months: a net inflow of £3.22m (2020: £4.91m). Net cash used in financing activities was £0.80m (2020: £0.18m), being property lease payments accounted for under IFRS 16.

Overall, there was a net decrease in cash and term deposits for the year ended 30 September 2021 of £7.17m (2020: £3.99m) including exchange losses on opening non-sterling denominated deposits of £0.05m (2020: £0.08m).

Financial position

Cash and term deposits at 30 September 2021 totalled £4.3m (2020: £11.5m), the increased net outflow compared to the prior year mainly resulting from higher operating costs.

Total assets at 30 September 2021 were £15.38m (2020: £14.93m), with increases in "right-of-use" assets associated with the Group's leased properties, tangible and intangible fixed assets and to a lesser extent, inventories more than offsetting the overall reductions in cash and other assets.

Total liabilities increased to £8.7m at 30 September 2021 (2020: £1.8m), reflecting lease liabilities associated with the Group's new UK facilities and trade creditors associated with the final stages of their fit-out. The increased long-term provisions balance is also associated with the Group's UK property.

CONSOLIDATED INCOME STATEMENT

YEAR ENDED 30 SEPTEMBER 2021

		2021		Restated 2020
		£000		£000
Continuing operations	Note
Revenue	4	341		456
Research & development costs (excluding staff costs)		(898)		(622)
Staff costs		(3,768)		(2,747)
General & other admin costs		(1,850)		(1,321)
Share option charges		(251)		(253)
Depreciation and amortization		(1,088)		(467)
Other operating income		2		3
Operating loss		(7,512)		(4,951)
Share of loss from equity accounted investments	3	-		(36)
Finance income		31		121
Finance costs		(148)		(80)
Loss before tax		(7,629)		(4,946)
Income tax		947		597
Loss for the year from continuing operations	6	(6,682)		(4,349)

Loss attributable to:
Owners of the Company			(6,682)				(4,349)
Non-controlling interest			-				-
			(6,682)				(4,349)
Earnings / (loss) per share
From continuing operations
Basic and diluted (pence per share)	7		(7.2)				(4.7)
STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 30 SEPTEMBER 2021
				2021				Restated 2020
				£000				£000
		Note
Loss for the year		6		(6,682)				(4,349)
Exchange differences on translation of foreign operations that may be reclassified to the income statement				(35)				(11)
Total comprehensive income for the year				(6,717)				(4,360)
Total comprehensive income attributable to:
Owners of the Company				(6,716)				(4,359)
Non-controlling interest				(1)				(1)
				(6,717)				(4,360)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
		2021		Restated 2020		Restated 2019
		£000		£000		£000
Assets	Note
Non-current assets
Intangible fixed assets	8	1,152		869		555
Property, plant and equipment	9	2,828		700		891
Right-of-use assets	10	4,718		480		-
Deferred tax asset		-		-		-
Investments accounted for using the equity method	3	-		-		36
Total non-current assets		8,698		2,049		1,482
Current assets
Inventories		392		323		243
Trade and other receivables		1,951		1,053		1,183
Fixed-term deposits		2,163		5,387		10,300
Cash and cash equivalents		2,175		6,119		5,198
Total current assets		6,681		12,882		16,924
Total assets		15,379		14,931		18,406
Equity and liabilities
Capital and reserves
Share capital	11	926		926		926
Share premium		16,740		16,740		16,740
Translation reserves		159		193		203
Share option reserve		3,022		3,018		2,788
Retained earnings		(14,171)		(7,736)		(3,468)
Equity attributable to owners of the Company		6,676		13,141		17,189
Non-controlling interest		17		18		19
Total equity		6,693		13,159		17,208
Current liabilities
Trade and other payables		1,661		1,102		1,081
Lease liabilities	12	634		130		-
Provisions		-		42		-
Current tax liabilities		-		13		25
Total current liabilities		2,295		1,287		1,106
Non-current liabilities
Lease liabilities	12	5,953		411		-
Provisions		408		65		92
Deferred tax		30		9		-
Total non-current liabilities		6,391		485		92
Total liabilities		8,686		1,772		1,198
Total equity and liabilities		15,379		14,931		18,406

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2021
	Share  capital		Share premium		Transla- tion reserve		Share option reserve		Retained earnings		Attribu- table to share- holders		Non-con- trolling interest		Total
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 October 2020, as previously stated	926		16,740		193		3,018		(7,314)		13,563		18		13,581
Correction to investments accounted for using the equity method	-		-		-		-		(422)		(422)		-		(422)
At 1 October 2020, restated	926		16,740		193		3,018		(7,736)		13,141		18		13,159
Loss for the year	-		-		-		-		(6,682)		(6,682)		-		(6,682)
Other comprehensive income for the period	-		-		(34)		-		-		(34)		(1)		(35)
Total comprehensive income for the period	-		-		(34)		-		(6,682)		(6,716)		(1)		(6,717)
Share option credit	-		-		-		251		-		251		-		251
Lapse of vested share options	-		-		-		(247)		247		-		-		-
At 30 September 2021	926		16,740		159		3,022		(14,171)		6,676		17		6,693
Year ended 30 September 2020
	Share  capital		Share premium		Transla- tion reserve		Share option reserve		Retained earnings		Attribu- table to share- holders		Non-con- trolling interest		Total
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 October 2019, as previously stated	926		16,740		203		2,788		(3,082)		17,575		19		17,594
Correction to investments accounted for using the equity method	-		-		-		-		(386)		(386)		-		(386)
Adjustment arising on adoption of IFRS 16	-		-		-		-		58		58		-		58
At 1 October 2019 (restated, adjusted)	926		16,740		203		2,788		(3,410)		17,247		19		17,266
Loss for the year	-		-		-		-		(4,349)		(4,349)		-		(4,349)
Other comprehensive income for the period	-		-		(10)		-		-		(10)		(1)		(11)
Total comprehensive income for the period	-		-		(10)		-		(4,349)		(4,359)		(1)		(4,360)
Share option credit	-		-		-		253		-		253		-		253
Lapse of vested share options	-		-		-		(23)		23		-		-		-
At 30 September 2020 (restated)	926		16,740		193		3,018		(7,736)		13,141		18		13,159

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 SEPTEMBER 2021

		2021		Restated 2020
		£000		£000
	Note
Loss before tax for the financial year	6	(7,629)		(4,946)
Adjustments to reconcile loss for the year to net operating cash flows:
Net interest		83		(102)
Share of loss from equity accounted investments		-		36
(Profit) on disposal of property, plant and equipment		-		(1)
Depreciation of property, plant and equipment		571		318
Depreciation of right-of-use assets		404		113
Amortization of intangible assets		113		36
Net foreign exchange movements		10		71
Movement in provisions		(99)		15
Share based payments charge		251		253
Working capital adjustments:
(Increase) / decrease in trade and other receivables		(560)		136
Increase in inventories		(69)		(80)
Increase in trade and other payables		416		165
Operating cash flows before interest and tax paid		(6,509)		(3,986)
R&D tax credits received		608		598
Tax paid		(17)		(13)
Net cash used in operating activities		(5,918)		(3,401)
Investing activities
Interest received		56		123
Lease incentive received		2,636		-
Purchases of property, plant and equipment		(2,693)		(107)
Purchases of intangible assets		(396)		(350)
Proceeds from disposal of tangible assets		-		1
Decrease in term deposits		3,224		4,913
Net cash generated by investing activities		2,827		4,580
Financing activities
Lease payments		(804)		(181)
Net cash used in financing activities		(804)		(181)
Net (decrease) / increase in cash and cash equivalents		(3,895)		998
Foreign exchange movement on cash and cash equivalents		(49)		(77)
Cash and cash equivalents at beginning of year		6,119		5,198
Cash and cash equivalents at end of year		2,175		6,119

1.  Corporate information

Oxford Biodynamics plc is a public limited company incorporated United Kingdom, whose shares were admitted to trading on the AIM market of the London Stock Exchange on 6 December 2016.   The Company is domiciled in the United Kingdom and its registered office is 3140 Rowan Place, John Smith Drive, Oxford Business Park South, Oxford, OX4 2WB.  The registered company number is 06227084 (England & Wales).

The Group is primarily engaged in the commercialization of proprietary molecular diagnostics products and biomarker research and development. 

2.  Basis of the announcement

Basis of preparation

The final results for the year ended 30 September 2021 were approved by the Board of Directors on 24 January 2022. The final results do not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but are derived from audited accounts for the year ended 30 September 2021 and the year ended 30 September 2020.

This announcement is prepared on the same basis as set out in the audited statutory accounts for the year ended 30 September 2021. The accounts for the years ended 30 September 2021 and 30 September 2020, upon which the auditors issued unqualified opinions, also had no statement under section 498(2) or (3) of the Companies Act 2006. The auditors' report includes reference to the material uncertainty relating to going concern. See below for more details of the going concern assessment performed by the Board of Directors.

While the financial information included in this results announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards in conformity with the Companies Act 2006, this announcement does not in itself contain sufficient information to comply with IFRS.

Reporting currency

The consolidated financial statements are presented in pounds sterling (GBP), which is also the Company's functional currency.

Going concern

In assessing the appropriateness of adopting the going concern assumption, the Group and Parent Company has prepared a detailed financial forecast ("the base case") for the period ending 30 September 2023. The forecast includes:

• estimates of likely revenue arising from the Group's and Parent Company's proprietary products (based on the Group's and Parent Company's own assessments of market opportunities and independently commissioned market research)
• anticipated revenues from contracts with pharmaceutical partners
• operating costs reflecting continued expansion of the Group's and Parent Company's staff teams in the US and UK and increased spend to support the Group's and Parent Company's products
• capital expenditure on lab equipment, software and patents

The Directors consider that the base case represents a reasonable best estimate of the performance of the Group and Parent Company over the period to 30 September 2023. In the base case, both product and contract revenue are anticipated to be significantly higher than was the case in the year ended 30 September 2021. Further, in the base case, revenues are also forecast to grow in subsequent years and these increases in revenue would be necessary to allow the Group and Parent Company to continue to expand its staff team and to continue to develop and launch successive products.

The Group and Parent Company has also modelled a reasonably likely "downside scenario", which assumes significantly reduced and/or delayed product and project revenues.

The Directors are satisfied that in the base case scenario, the Group and Parent Company would be able to continue as a going concern, although this would require delaying some planned discretionary spending in early 2023 by a short period. In the downside scenario, after taking action to reduce costs, it would be likely that the Group and Parent Company would need either to generate increased sales revenue or to obtain additional funding, most likely by around the third quarter of 2023.

In preparing the base case, the Directors note the existence of a number of factors that increase the difficulty inherent in predicting the Group's and Parent Company's performance, including its cash generation. These include:

• a lack of sufficient historical information from which to reliably predict sales volumes, long-term prices and timing of receipts from customers in respect of the Group's and Parent Company's proprietary products ( EpiSwitch® CST, EpiSwitch® CiRT and EpiSwitch® Explorer Array Kit). Each of these products is now or will shortly be available, but in the case of the proprietary tests, this has only been the case relatively recently.
• uncertainty regarding the progression of the COVID-19 pandemic, which had a negative impact on business development activity with pharmaceutical partners. In the event of a significant worsening of the impact of the pandemic, anticipated revenue arising from research projects for pharma customers may be delayed or not received.
• although the Group and Parent Company has successfully raised £3.62m in equity funding from investors post-year end, at the time of signing the accounts, there is no guarantee that it will be able to access further cash resources.
• at the levels of forecast revenue and expansion of the Group's and Parent Company's staff team included in the base case, the Group would need to delay some planned discretionary spend in early 2023 in order to preserve cash resources.

The Directors do not believe that any of the factors above is unusual or unexpected for the Group and Parent Company at this point in its progress. However, shareholders should be aware that there is uncertainty around its ability to generate sufficient revenues and the timing of receipts from customers, the ability to raise sufficient finance to meet its expected costs, and the potential unexpected impact of COVID-19 on future business development activities.  These conditions present a material uncertainty which may cast significant doubt on the Group and Parent Company's ability to continue as a going concern and, therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business.

Critical judgements in applying the Group's accounting policies

The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements.

Identification of the Group's cash-generating unit

In carrying out the impairment review of patent assets set out in more detail below, Management exercised judgement in determining that the Group currently has one cash-generating unit (CGU). Guidance states that CGUs are "the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows for other assets or groups of assets".

The Group's strategy was expanded in December 2020, to include the development and commercialization of proprietary tests. As at 30 September 2021 there were two lab developed test products that were either launched or close to launch, namely the EpiSwitch® CST and EpiSwitch® CiRT tests. Revenue from products and customer contracts is reported separately to Directors in the Group's internal management accounts. However, it is not currently possible to assign separate groups of OBD assets to particular cashflows. With very limited exceptions, people, premises, equipment and patents are generally applied to both product and customer contract revenue streams. This position may change as i) dedicated product sales and marketing teams are developed, ii) dedicated product development support lines are established in the Group's laboratories.

At present, Management conclude that the Group has one CGU, relating to all commercial exploitation of its EpiSwitch® technology. If this judgement were to be incorrect and the Group determined to contain more than one separately identifiable CGU, as part of the impairment review of the Group's patent assets conducted at the year end, it would have been necessary to estimate the recoverable value of each CGU separately and to allocate patents to those CGUs.

Impairment review

Intangible assets are reviewed for indicators of impairment at the end of each reporting period. An impairment review of patent assets was conducted as at the year end, principally because the reduction in the Company's share price during and after the second half of the year ended 30 September 2021 was considered to be an indicator of potential impairment. In addition, an impairment review is required for any assets not yet being amortized.

As noted above, Management identified that at the current stage in the Group's development, it includes a single CGU, to which all patent assets are allocated. Management consider that the recoverable amount of the Group's single CGU is based on its fair value less cost of disposal, and that this value is attributable to its intellectual property, including patents and know-how, and its other assets, including property plant and equipment. The most reliable available estimate for the fair value of the Group's CGU as a whole is the market capitalisation of the Company's shares. As at 30 September 2021, this equated to approximately £40.5m. As an estimate of the value attributable to the Group's intellectual property, including its patents, Management compared the market capitalisation of the Company, less an estimated cost of disposal of 5%, to the gross value of the Group's assets other than patents (£14.3m as at 30 September 2021). The excess of the Company's market capitalisation less cost of disposal over its gross assets other than patents was therefore approximately £24m, compared to a carrying value of patent assets of £1.196m. Management further reviewed each of the Company's patent families for other indicators of impairment, principally obsolescence, and determined that no such indicators existed at the year end. Management therefore concluded that no impairment of the Company's capitalized patents existed at the year end.

Management consider that a reduction in the Company's market capitalization to an amount comparable to the carrying value of its non-patent assets would lead to a reduction in the recoverable amount of its patent assets, potentially to nil. Management will continue to assess, at the end of each reporting period and more frequently if necessary, whether there are indicators that any of the Group's assets may be impaired.

Estimate of incremental borrowing rate in accounting for leases under IFRS 16

As stated in Note 2 , in recognising a lease liability and right-of-use asset under IFRS 16 the Group has used an estimated incremental borrowing rate of 3%. The Group does not have any borrowings, so in order to apply IFRS 16 it was necessary to estimate the incremental borrowing rate that would be faced by the Group. The rate of 3% was determined following enquiry with the Group's bankers. If the interest rate used in the calculation were higher, this would have the effect of reducing the size of both the lease liability and right-of-use asset, reducing the depreciation charge and increasing the interest charge in the consolidated income statement. The table below shows the impact of a change of +/-2% in the estimated incremental borrowing rate. There would be no change to operating cash flows or lease payments as a result of a change in the estimate of the incremental interest rate.

Estimated incremental interest rate:		1%		5%
		£000		£000
Impact on consolidated income statement for the year ended 30 September 2021
Right-of-use asset depreciation		(68)		59
Operating Loss		(68)		59
Finance costs (lease interest)		120		(101)
Loss for the year from continuing operations		52		(42)
Impact on balance sheet as at 30 September 2021
Right-of-use asset		650		(563)
Lease liability (current and non-current)		(619)		539
Net assets		31		(24)

3.  Prior period adjustment of carrying value of investment in associate

On 5 October 2018, the Group exercised its option to acquire a 30% shareholding in Holos Life Sciences (Singapore) Pte Ltd ("Holos"), a Singapore-based company which is not listed on any public exchange, for a nominal amount. The Group subsequently invested $540,000 (£422,000) in that entity as part of an interim fundraising. As at 30 September 2021, the Group owned 28.84% of Holos' issued share capital and the Group is determined to have acquired significant influence over its activities. Accordingly, Holos is accounted for as an associate undertaking, using the equity method.

Under IAS 28 'Investments in Associates and Joint Ventures', an investor's share of losses of an equity-accounted investee is recognized, until the carrying amount of the investor's equity interest in the investee is reduced to zero. In the accounts for the years ended 30 September 2019 and 30 September 2020, the Group's investment in Holos was incorrectly accounted for as goodwill, and subject to reviews for impairment. In accordance with IAS 28, the carrying value of the Group's holding in Holos has been restated to recognize the Group's share of losses incurred by Holos for the two financial years ending 30 September 2019 and 30 September 2020.

As a result, the Group's investment of £422,000 has been reduced by £386,000 for the period ended 30 September 2019, being the Group's share of the loss incurred by Holos during that year, as disclosed in the 2019 annual report. The following year, the Group's share of the loss incurred by Holos was £107,000, of which £36,000 has been recognized, reducing the carrying amount of the Group's investment in Holos to zero. This restatement had no impact on operating or other cashflows.

Impact of restatement on prior years:

Consolidated income statement	Restated 2020		As previously stated 2020		Restated 2019		As previously stated 2019
	£000		£000		£000		£000
Share of loss from equity accounted investments	(36)		-		(386)		-
Loss before tax	(4,946)		(4,910)		(3,772)		(3,386)
Loss for the year from continuing operations	(4,349)		(4,313)		(3,186)		(2,800)
Total comprehensive income for the year	(4,360)		(4,324)		(3,160)		(2,774)

Consolidated statement of financial position	Restated 2020		As previously stated 2020		Restated 2019		As previously stated 2019
	£000		£000		£000		£000
Investments accounted for using the equity method	-		422		36		422
Total non-current assets	2,049		2,471		1,482		1,868
Total assets	14,931		15,353		18,406		18,792
Retained earnings	(7,736)		(7,314)		(3,468)		(3,082)
Equity attributable to owners of the Company	13,141		13,563		17,189		17,575
Total equity	13,159		13,581		17,208		17,594
Total equity and liabilities	14,931		15,353		18,406		18,792

Interest in associate undertaking	Restated 2020		As previously stated 2020		Restated 2019		As previously stated 2019
	£000		£000		£000		£000
Carrying amount of the investment	-		422		36		422

4.  Revenue

All revenue is derived from the Group's principal activities, namely sales of proprietary products and biomarker research and development. Analysis of the Group's revenue by principal activities, geography and pattern of revenue recognition is as follows:

		2021		2020
		£000		£000
Continuing operations:
Sales of proprietary products
USA		-		-
Rest of World		-		-
		-		-
Biomarker research and development
USA		341		378
Rest of World		-		78
		341		456
Consolidated revenue		341		456

		2021		2020
		£000		£000
Continuing operations:
Revenue recognized at a point in time		-		14
Revenue recognized over time		341		442
		341		456

5.  Business segments

Products and services from which reportable segments derive their revenues

Information reported to the Group's Chief Executive Officer (who has been determined to be the Group's Chief Operating Decision Maker) for the purposes of resource allocation and assessment of segment performance is focused on costs incurred to support the Group's main activities. The Group is currently determined to have one reportable segment under IFRS 8, that of sales of proprietary products and biomarker research and development. This assessment will be kept under review as the Group's activity expands.

The Group's operating expenses and non-current assets, analysed by Geographical location were as follows:

		2021		2020
		£000		£000
Staff costs
UK		2,516		2,151
USA		1,162		505
Rest of World		90		91
Total staff costs		3,768		2,747
Research & development costs
UK		891		613
USA		-		-
Rest of World		7		9
Total research & development costs		898		622
General & other admin costs
UK		1,430		1,109
USA		393		166
Rest of World		27		46
Total general & other admin costs		1,850		1,321
Non-current assets
UK		8,301		1,952
USA		318		-
Malaysia		79		97
Total non-current assets		8,698		2,049

Information about major customers

The Group's revenues for the periods covered by this report are derived from a small number of customers, several of which represent more than 10% of the revenue for the period.  These are summarized below:

		2021		2020
		£000		£000
Revenue from individual customers each representing more than 10% of revenue for the period:		327		378

6.  Loss for the year

Loss for the year has been arrived at after charging:

		2021		2020
		£000		£000
Net foreign exchange losses / (gains)		34		61
Research and development costs (excluding staff costs)		898		622
Amortization of intangible assets		113		36
Depreciation and impairment of property, plant and equipment		571		318
Depreciation of right-of-use assets		404		113
Short-term lease expense (2020: operating lease rental expense)		-		38
Staff costs		3,768		2,747
Share-based payments charged to profit and loss		251		253

7.  Earnings per share

From continuing operations

The calculation of the basic and diluted earnings per share is based on the following data:

		2021		Restated 2020
		£000		£000
Earnings for the purposes of basic earnings per share being net loss attributable to owners of the Company		(6,682)		(4,349)
Earnings for the purposes of diluted earnings per share		(6,682)		(4,349)

		2021		2020
		No		No
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share*		92,559,771		92,559,771
		Pence		Pence
Earnings per share
Basic and diluted earnings per share		(7.2)		(4.7)

*Ordinary shares that may be issued on the exercise of options are not treated as dilutive as the entity is loss-making.

Two transactions occurred post year-end that would have significantly changed the number of ordinary shares or potential ordinary shares outstanding at the end of the period if those transactions had occurred before the end of the reporting period. These were as follows:

-  On 25 October 2021, the Company issued 7,791,803 new ordinary shares

-  On 11 November 2021, the Company issued 7,791,803 warrants to subscribe for new ordinary shares

8.  Intangible fixed assets

Group					Website development costs		Software development costs		Patents		Total
					£000		£000		£000		£000
Cost
At 1 October 2020					62		40		829		931
Additions					-		17		379		396
At 30 September 2021					62		57		1,208		1,327
Accumulated amortization
At 1 October 2020					33		23		6		62
Charge for the year					21		13		79		113
At 30 September 2021					54		36		85		175
Carrying amount
At 30 September 2021					8		21		1,123		1,152

Group					Website development costs		Software development costs		Patents		Total
					£000		£000		£000		£000
Cost
At 1 October 2019					62		32		487		581
Additions					-		8		342		350
At 30 September 2020					62		40		829		931
Accumulated amortization
At 1 October 2019					12		11		3		26
Charge for the year					21		12		3		36
At 30 September 2020					33		23		6		62
Carrying amount
At 30 September 2020					29		17		823		869

As at 30 September 2021, a total of £187,000 (2020: £504,000) of patent assets were not yet being amortized because their useful life was determined not to have begun.

The Group holds no intangible assets that are determined to have indefinite useful life.

9.  Property, plant and equipment

Group		Leasehold improvements			Office equipment		Fixtures and fittings		Laboratory equipment		Total
			£000		£000		£000		£000		£000
Cost
At 1 October 2020			576		133		62		1,620		2,391
Additions			1,987		37		90		591		2,705
Disposals			(562)		(10)		(46)		(68)		(686)
Exchange differences			-		-		-		(3)		(3)
At 30 September 2021			2,001		160		106		2,140		4,407
Accumulated depreciation
At 1 October 2020			237		72		37		1,345		1,691
Charge for the year			351		40		21		159		571
Eliminated on disposals			(562)		(10)		(46)		(68)		(686)
Exchange differences			-		-		-		3		3
At 30 September 2021			26		102		12		1,439		1,579
Carrying amount
At 30 September 2021			1,975		58		94		701		2,828
		Leasehold improvements			Office equipment		Fixtures and fittings		Laboratory equipment		Total
			£000		£000		£000		£000		£000
Cost
At 1 October 2019			576		77		59		1,558		2,270
Additions			2		60		4		68		134
Disposals			-		(4)		-		-		(4)
Exchange differences			(2)		-		(1)		(6)		(9)
At 30 September 2020			576		133		62		1,620		2,391
Accumulated depreciation
At 1 October 2019			166		48		29		1,136		1,379
Charge for the year			71		28		8		211		318
Eliminated on disposals			-		(4)		-		-		(4)
Exchange differences			-		-		-		(2)		(2)
At 30 September 2020			237		72		37		1,345		1,691
Carrying amount
At 30 September 2020			339		61		25		275		700

10.  Right-of-use assets

Group							Buildings		Other		Total
							£000		£000		£000
Cost
At 1 October 2020							734		-		734
Additions							4,968		18		4,986
Modification							(344)		-		(344)
Derecognition							(390)		-		(390)
At 30 September 2021							4,968		18		4,986
Accumulated depreciation
At 1 October 2020							254		-		254
Charge for the year							399		5		404
Eliminated on derecognition							(390)		-		(390)
At 30 September 2021							263		5		268
Carrying amount
At 30 September 2021							4,705		13		4,718

Group							Buildings		Other		Total
							£000		£000		£000
Cost
At 1 October 2019							734		-		734
Additions							-		-		-
Disposals							-		-		-
At 30 September 2020							734		-		734
Accumulated depreciation
At 1 October 2019							141		-		141
Charge for the year							113		-		113
Eliminated on disposals							-		-		-
At 30 September 2020							254		-		254
Carrying amount
At 30 September 2020							480		-		480

11.  Share capital of the Company

	2021		2021		2020		2020
	Number		£		Number		£
Authorized shares
Ordinary shares of £0.01 each - allotted and fully paid	92,559,771		925,598		92,559,771		925,598
Total	92,559,771		925,598		92,559,771		925,598

The Company has one class of ordinary shares which carry no right to fixed income. 

During the year, the Company did not issue any shares on the exercise of options (2020: nil).

12.  Lease Liabilities

Group		2021		2020
Maturity analysis:		£000		£000
Year 1 Year 2 Year 3 Year 4 Year 5+		824 819 817 813 4,282		145 145 145 145 -
Less: future interest charges		7,555 (968)		580 (39)
		6,587		541
Analysed as:
Current Non-current		634 5,953		130 411
		6,587		541

At 30 September 2021, the Group had committed to one property lease which had not yet commenced. The total future cash outflows payable under this lease are as follows:

				£000
Year ending 30 September 2022 Year ending 30 September 2023 Year ending 30 September 2024 Year ending 30 September 2025 Year 5+				69 74 74 12 -
				229

13.  Share-based payments

Equity-settled share option scheme

In November 2016, the Company established an Enterprise Management Incentive ("EMI") share option scheme, under which options have been granted to certain employees, and a non-employee option scheme with similar terms, except that options granted under it do not have EMI status. EMI and non-EMI share options were also previously granted under a share option scheme established in October 2008 ("the 2008 Scheme").  The Company does not intend to grant any further options under the 2008 Scheme. All of the schemes are equity-settled share-based payment arrangements, whereby the individuals are granted share options of the Company's equity instruments, namely ordinary shares of 1 pence each.

The schemes include non-market-based vesting conditions only, whereby the share options may be exercised from the date of vesting until the 10^th anniversary of the date of the grant. In most cases options vest under the following pattern: one-third of options granted vest on the first anniversary of the grant date; one-third on the second anniversary and one-third on the third anniversary.  The only exception to this pattern is 84,000 options which were granted in the year ended 30 September 2016 which vested immediately upon grant.

The options outstanding as at 30 September 2021 have exercise prices in the range of £0.34 to £2.10.

			2021				2020
	Number of options		Weighted average exercise price		Number of Options		Weighted average exercise price
			£				£
Outstanding at start of period	7,846,519		0.72		6,640,921		0.66
Granted during the period	1,632,798		1.00		1,275,598		1.06
Forfeited during the period	(952,833)		(0.84)		(70,000)		(1.88)
Exercised during the period	-		-		-		-
Outstanding at end of period	8,526,484		0.76		7,846,519		0.72
Exercisable at end of period	5,881,421		0.63		6,224,253		0.59
Weighted average remaining contractual life (in years) of options outstanding at the period end			4.39				4.33

					2021		2020
					£000		£000
Expense arising from share-based payment transactions					251		253

The fair value of share options has been estimated using the Black-Scholes option pricing model. Volatility has been estimated by reference to historical share price data over a period commensurate with the expected term of the options awarded. The assumptions for the options granted during the current and prior periods were as follows:

					2021		2020
					£000		£000
Share price at date of grant					£0.74		£0.57 to £1.02
Exercise price					£1.00		£1.00 to £1.58
Expected volatility					52%		47% to 52%
Dividend yield					0%		0%
Expected life of option					8.4 years		8.5 to 8.6 years
Risk free interest rate					0.86%		0.18% to 0.82%

14.  Events after the balance sheet date

On 25 October 2021, the Company announced that it had raised £3.62m, by way of a Subscription for 7,791,803 newly-issued ordinary shares of 1p each at a price of 46.5p per share, from leading US-based healthcare fund, Armistice Capital Master Fund Ltd ("Armistice Capital"). Subsequently, on 11 November 2021, the issue to Armistice Capital of 7,791,803 warrants to subscribe for new ordinary shares was approved by a general meeting of the Company's shareholders. The warrants have an exercise price of 58.125p and may be exercised for a period beginning one year and ending five years following the date of issuance.

 

END

 

 

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