Final Results

RNS Number : 9191P

Epistem Holdings plc

11 October 2011

 



RNS Press Release

For release: 11^th October 2011: 7.00 AM 

Preliminary Results to the 30 June 2011 

Epistem Holdings Plc (LSE: EHP), the biotechnology and personalised medicine company, announces today its preliminary results for the year ended 30 June 2011.

Overall, the 2010/11 financial year saw Epistem continue to build on historic performance.  

The past year has seen a strengthening in the development of the Company's major divisional programmes, whilst ensuring a solid financial performance.

Highlights  

· Sales of £5.8m with strong underlying programme growth

· Third consecutive year of growth in profit at all levels and increased Earnings Per Share

· Announcement of significant Biomarker oncology collaboration with Sanofi-Aventis

· 19% sales growth in Preclinical Research Services   

· Development and first sales of Genedrive^TM 'Point of Care' molecular diagnostic device

· Discussions ongoing around Novel Therapies regenerative medicine and oncology programmes  

· Strengthening trading outlook 

For further details please contact: 

Epistem Holdings Plc 

Matthew Walls: Chief Executive Officer                                               ++44 (0)7887 501998

John Rylands: Finance Director                                                                 ++44 (0)161 606 7244      

Peel Hunt LLP 

James Steel                                                                                                       ++44 (0)207 418 8900

Vijay Barathan

De Facto Financial Ltd 

Mike Wort, Anna Dunphy                                                                               ++44 (0)207 556 1063

Chairman's Statement

I am pleased to report a strengthening in the Company's core programmes of development and ongoing improvement in Epistem's results for the year ended 30 June 2011.

Whilst market and general economic conditions remain volatile across many areas of the economy, Epistem continues to differentiate itself through its growth, advancing technologies and firm commitment to growing investor returns. 

Results

Further details of the results for the period are covered in the Chief Executive Officer's review, but financially the year to 30 June 2011 saw the Company deliver revenues of £5.8m (2010: £5.7m). Based on this trading performance the Company generated an after tax profit of £0.4m (2010: £0.3m). Cash reserves at the end of the period were £3.6m (2010: £5.4m) with the cash reduction reflecting continued investment in our Novel Therapies and Personalised Medicine portfolio. During the year the Company made good progress across each of its three divisions:

·    Contract Research Services revenues grew by 19% to £3.0m (2010: £2.5m).  The extension of our service offerings and renewal of the US government biodefence contract enabled the division to deliver a solid performance over the year.  Despite continuing market uncertainties, the division continues to build on and extend its core scientific strengths to provide a firm platform for future growth.  

·    Personalised Medicine revenue growth increased 39% over the year to £1.1m (2010: £0.8m), largely driven by the announcement of the three year Sanofi-Aventis oncology biomarker collaboration announced in March 2011.   

·    The development of our Genedrive™ molecular diagnostic device continues to make excellent progress with clinical trials now underway across a number of diagnostic areas, including pharmacogenomics, infectious disease and biodefence. Genedrive recorded its maiden sales revenues at the end of the financial year and we are very encouraged by the level of interest in the device and its broad range of applications.   

·    Novel Therapies's drug development programme continues to advance. The funded research phase of the Novartis collaboration was completed at the end of February 2011 generating £1.6m over the year (2010: £2.4m). Internal development continues around leads emerging from the Novartis collaboration. Collaborative discussions are also being progressed with other potential partners in the areas of Regenerative Medicine and Oncology. The timings of license opportunities and future development funding remains difficult to accurately predict.        

·    The Company now reports its third consecutive year of profit generation and growth in earnings per share to 4.9p (2010: 3.8p).

Outlook

Epistem continues to build on its scientific and technical strengths as it transforms into a diverse, technology leading and profitable biotechnology and personalised medicine group with the prospect of strong revenue growth. Against a backdrop of market uncertainty, Epistem remains vigilant, whilst increasingly positive about its future growth and development.

Despite the challenging market conditions, each division continues to strengthen its technology and expertise.  The Contract Research Services division is building an international profile and reputation for its proprietary models and continues to enhance its relationship with the NIH under our US biodefence contract. We expect further growth from the division over the coming year. The Personalised Medicine division has seen improved growth over the past year, which coupled with our rapidly advancing molecular diagnostic system Genedrive^TM, will accelerate the growth of the division.  The Novel Therapies drug discovery collaboration with Novartis has now completed its funding stage and the ongoing development of hits/leads emerging from the research funding stage continues. Whilst the timing of license and development opportunities remains difficult to judge, we remain optimistic about the strength of our hits/lead programme.  We are currently in discussions with a number of other collaborative partners in relation to our regenerative medicine and oncology hits/lead portfolio. Epistem continues to refine its discovery and development technology to position itself as a world leader in therapeutic discovery in the field of epithelial stem cell regulation.

With the profile and visibility of each of our business divisions increasing, we expect to see the Company further strengthen its financial performance over the coming year.

I would like to thank the CEO for his support and leadership, the Board and our employees for their effort and commitment in driving Epistem's progress over the past year, as well as our investors whose valued support has provided a stable platform for our continued growth.

David Evans

Chairman

10^th October 2011

Chief Executive's Review

Epistem continues to make strong progress in building itself into an internationally recognised Drug Discovery and Personalised Medicine company.      

The financial results for the Group presented in this announcement reflect the Group's trading results for the year to 30 June 2011 and for the comparative period to 30 June 2010. 

Headline progress over the year included;

·              Sales of £5.8m with strong underlying programme growth.

·              Third year of profit growth and an increase in earnings per share

·              Announcement of Biomarker oncology collaboration with Sanofi-Aventis

·              19% sales growth in Preclinical (Contract) Research Services

·              Development and initial sales of Genedrive^TM 'Point of Care' molecular diagnostic device

·              Novel Therapies' discussions ongoing in regenerative medicine and oncology

·              Strengthening trading outlook

Integrated business model

The Company continues to progress its integrated business model, with each division targeting revenue growth and profitability. The establishment of our independent divisions has created a strong portfolio of growing and profitable business units rarely seen in a biotechnology business model. Epistem provides a financially robust business, whilst offering the potential of significant financial upside from our Novel Therapies, Personalised Medicine and Contract Research Services divisions. We continue to enhance and exploit our integrated core competence in epithelial stem cell biology and personalised medicine, whilst retaining commercial independence across each of our divisions.

Financial review

The Company reports a turnover of £5.8m (2010: £5.7m) for the year ended 30 June 2011. Revenues were underpinned by the Contract Research Services division, which delivered sales of £3.0m (2010: £2.5m) a 19% year-on-year increase. The Personalised Medicine division saw sales increase to £1.1m (2010: £0.8m), with the Novel Therapies division reporting sales of £1.6m (2010: £2.4m). 

Consolidated territory revenues were split US 68% (2010: 79%), EU/ROW 27% (2010: 14%) and UK 5% (2010: 7%). The percentage split in revenues reflecting the strong growth in EU sales offsetting the reduced US revenue position over the year.

Strengthening Contract Research Services sales helped the division deliver a 34% increase in year on year operating profit of £1.0m (2010 £0.7m). Growth in the Personalised Medicine division helped by the announcement of the Sanofi-Aventis collaboration offset our ongoing investment in the development of our Biomarker (RNA Amp^TM) and Diagnostics (Genedrive^TM) technologies to record its first substantive operating profit of £0.1m (2010 loss £0.1m). Novel Therapies reported a reduced year on year operating profit position of £0.6m (2010 £1.0m), reflecting the completion of the research funding from the Novartis collaboration in February 2011. Central administration cost remained steady at £1.3m (2010: £1.3m).

The Group reported profit after tax for the year was £0.4m (2010: £0.3m) with headcount in the company at 55 (2010: 51).

Cash reserves at the end of the year were £3.6m (2010: £5.4m).  The underlying reduction in cash over the year primarily relates to investments made in our Novel Therapies and Personalised Medicine divisional developments with the growth in trade debtors from our US biodefence and Sanofi-Aventis collaborations.

Earnings per share increased to 4.9p per share (2010: 3.8p).

Operating review

Contract Research Services

Contract Research Services delivered a 19% year-on-year growth in revenue. Whilst market and industry conditions remain challenging, our specialist preclinical services maintained solid growth with its larger pharmaceutical clients.

Territory sales increases were reported across our major US and EU markets, the UK market now accounts for only 5% of our consolidated divisional sales. EU growth was underpinned by a growing bias towards collaborative business with the larger pharmaceutical and biotechnology groups. We continue to develop and enhance our core expertise and proprietary preclinical offering with our inflammatory bowel disease and immunohistochemistry models showing strongest growth over the year.  New client relationships and aggregate contract values also continued their trend of year-on-year increase over the year.

During the year we announced the renewal of our role within the US National Institutes of Health's biodefence programme. We have worked closely with the US biodefence group over the past five years and the renewal over the next 5 years provides solid support for our recognition by the US NIH and FDA groups as 'Subject Material Experts' (SME) in radiation treatment. We made good progress throughout the year in expanding the programme of test agents targeting treatment of radiation sickness following a nuclear incident.

The new financial year promises to build on last year with the advent of new product developments in oncology (imaging), hair immunohistochemistry and advanced inflammation models from which we anticipate further growth.

Personalised Medicine

Biomarkers

With an increasing industry trend towards individualised patient treatment and increasing regulatory pressures for improved measures of 'personalised' drug effect, Biomarker revenues stepped up to £1.1m (2010: £0.8m) over the year. The reported revenues were buoyed by the Sanofi-Aventis biomarker and commercialisation collaboration announced in March 2011. The collaboration utilises Epistem's proprietary RNA amplification technologies (RNA Amp^TM) and oncology bioinformatics to provide biomarker discovery and translational support across the Sanofi-Aventis oncology development programme. We anticipate further expansion in the scope and growth of the collaboration over this financial year. The Biomarker division has also expanded its other transcriptomic offerings to provide a suite of models covering preclinical and clinical pharmacodynamic measures. Our translational model is also expected to unfold across other partner collaborations and disease areas over the coming year. We are also preparing to integrate our identified biomarker panels with our new Genedrive^TM system to enable a full discovery, preclinical and clinical translational offering.  

Diagnostics.

As part of our expanding technology offering in Personalised Medicine, Epistem's new diagnostic device  'Genedrive' made its first sales at the end of the financial year.  We expect to see rapid growth of sales of the device and assays over the current financial year. Genedrive is targeting a near patient, low cost and rapid turnaround (less than 30 mins) molecular diagnosis across a broad spectrum of disease areas. Genedrive is now in a number of clinical trials and assay development has commenced across a broad number of pharmacogenomic, infectious disease and other biosurveillance based programmes. Successful clinical studies were recently completed in India for Tuberculosis and we expect to see strong growth in this and other infectious disease areas over the coming year.  In the UK we are taking part in National Police Improvements Agency (NPIA) programme to enable crime scene testing for DNA fingerprinting.  We will be informing investors about other clinical studies over the coming months and the Board believes that Genedrive is expected to be both novel and disruptive in its market position and we anticipate significant revenue growth and interest in our diagnostic strategy over the coming year.                       

The growth in Personalised Medicine revenues enabled the division to report its first operating profit. Our portfolio of personalised medicine technologies is driven by an increasing medical focus around effective patient treatment, higher regulatory requirements and the need for rapid, low cost and sensitive molecular diagnostic testing. Our proprietary technologies are well positioned to capitalise on this market growth.

Novel Therapies

The Novel Therapies collaboration with Novartis completed the research phase of the collaboration in February 2011 and we are now continuing the development of our novel hits/leads identified under the collaboration. Whilst the collaboration remains ongoing, no further funding payments have been received from Novartis. The timing of a license opportunity and/or ongoing funding support remains difficult to judge, but we remain confident in our development programme and the prospect of future license and funding support.     

Hits/leads generated are being developed across both regenerative medicine and oncology and we are making good progress in advancing our selected novel leads. The core cell biology and signalling pathways which regulate the cell/stem cell continue to be validated and better understood as we identify the specific genes and pathways which regulate the characteristics of the cell. Alongside the Novartis collaboration, we are in discussions with other pharmaceutical/biotech groups and we expect to see developments in this area over the next financial period.      

We are now beginning to scale up our own proprietary leads and a focused group of small molecules to establish our proprietary portfolio of agents which regulate signalling pathways and cell biology.

We will also continue to evaluate our other drug discovery and development opportunities with major industry players to identify new lead developments and to expand our discovery and early stage development platform.

Current trading and outlook

Epistem has developed a rich portfolio of technology and business opportunities which we expect to maintain our continued profitability and sustain growth. The past year has seen us strengthen our internal expertise across our core divisional programmes and this careful preparation is expected to deliver further growth over the coming year. The business model has traditionally been dependent on service and license based revenues, but with the advent of our first molecular diagnostic product (Genedrive^TM), revenues are expected to accelerate quickly over the coming year.

We continue to supplement our management team with world class, innovative individuals who fit with the culture and dynamism of the Company. We will also build on our corporate and board strength and supplement our scientific advisory board and advisory committees as appropriate.

Our shareholder interest and support remains strong and we will ensure that our ongoing investor communications continue to nurture this relationship.

A strengthening operational and financial position confirms our belief that the year ahead will continue to generate substantial increases in our forecast revenues. We remain selective in considering complementary technology, acquisitions and in-licensing, with few opportunities thus far meeting our high expectations. We continue to remain alert in our outlook in these uncertain times.

We remain firmly fixed on building shareholder value by providing a high margin, diverse and rapidly growing portfolio of world class technologies.    

I would like to thank the Board, management and employees for their help and support over the past year. I would also like to thank our investors for their continued support and interest in our exciting and rapidly growing Company.

Matthew H Walls

Chief Executive Officer

10 October 2011

CONSOLIDATED INCOME STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2011

		2011	2010
		£000	£000
Revenue		5,752	5,740
Contract costs		(3,072)	(2,697)
Discovery and development costs		(979)	(1,433)
General administrative costs		(1,316)	(1,298)
Operating profit		385	312
Finance income		18	40
Finance costs		(46)	(2)
Profit on ordinary activities before taxation		357	350
Taxation on ordinary activities		28	(60)
Total comprehensive Income for the financial year		385	290
Earnings per share (pence)
Basic		4.9p	3.8p
Diluted		4.3p	3.3p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2011

	Share Capital	Share Premium Account	Employee Share incentive plan reserve	Share options reserve	Reverse acquisitions reserve	Retained earning	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 July 2009	108	8,467	-	606	(2,484)	(3,937)	2,760
Allotment of ordinary shares	11	2,873	-	-	-	-	2,884
Share issue costs	-	(135)	-	-	-	-	(135)
Purchase of own shares (SIP)	-	-	(43)	-	-	-	(43)
Exercise of options	-	1	-	(1)	-	-	-
Recognition of equity- settled share-based payments	-	-	-	28	-	-	28
Total comprehensive income for the year	-	-	-	-	-	290	290
At 30 June 2010	119	11,206	(43)	633	(2,484)	(3,647)	5,784
Purchase of own shares (SIP)	-	-	(45)	-	-	-	(45)
Recognition of equity-settled share-based payments	-	-	-	58	-	-	58
Total comprehensive income for the year	-	-	-	-	-	385	385
At 30 June 2011	119	11,206	(88)	691	(2,484)	(3,262)	6,182

CONSOLIDATED BALANCE SHEET

As at 30 June 2011

		2011	2011	2010	2010
		£000	£000	£000	£000
Non-current assets
Intangible assets			1,075		135
Plant and equipment			567		608
Deferred taxation			520		536
			2,162		1,279
Current assets
Trade and other receivables		1,910		1,011
Tax receivables		117		150
Cash and cash equivalents		3,620		5,371
			5,647		6,532
Liabilities
Current liabilities
Deferred income		75		974
Trade and other payables		1,447		1,014
Obligations under finance leases		-		37
Corporation taxation		-		2
			1,522		2,027
Net current assets			4,125		4,505
Total assets less current liabilities			6,287		5,784
Non-current liabilities
Liabilities payable 1 - 5 years			(105)		-
Net Assets			6,182		5,784
Capital and reserves
Called-up equity share capital			119		119
Share premium account			11,206		11,206
Employee share incentive plan reserve			(88)		(43)
Share options reserve			691		633
Reverse acquisition reserve			(2,484)		(2,484)
Retained earnings			(3,262)		(3,647)
Total shareholders' equity			6,182		5,784

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2011

 

			2011	2011	2010	2010
			£000	£000	£000	£000
Cash flows from operating activities
		Operating profit for the year		385		312
		Depreciation, amortisation and impairment		194		169
		Share based payment expense		58		28
Operating profit/(loss) before changes in working capital and provisions
				637		509
	(Increase) in trade and other receivables			(899)		(191)
	(Decrease) in deferred income			(899)		(1,326)
	Increase in trade and other payables			433		293
Net cash (outflow) from operations				(728)		(715)
	Finance costs		(46)		-
	Interest received		18		40
	Tax received		75		-
				47		40
Net cash (outflow)/inflow from operating activities
				(681)		(675)
Cash flows from investing activities
	Acquisition of fixed assets		(1,093)		(308)
Net cash outflow from investing activities
				(1,093)		(308)
Cash flows from financing activities
	Proceeds from issue of share capital		-		2,884
	Expenses of share issue		-		(135)
	Purchase of own shares		(45)		(43)
	Increase/(decrease) in borrowings		68		(48)
Net cash inflow from financing activities				23		2,658
Net increase in cash equivalents				(1,751)		1,675
Cash and cash equivalents at beginning of year				5,371		3,696
Cash and cash equivalents at end of year				3,620		5,371
Analysis of net funds
	Cash at bank and in hand			3,620		5,371
Net funds				3,620		5,371

 

 

NOTES TO THE PRELIMINARY RESULTS TO 30 JUNE 2011

Business segments

	Contract Research	Personalised	Novel
	Services	medicine	Therapies	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Twelve months ended 30 June 2011
Revenue	3,002	1,130	1,620	-	5,752
Segment trading result	1,029	148	716	(1,256)	637
less depreciation and amortization	(55)	(38)	(74)	(27)	(194)
less equity-settled share-based payments)	(7)	(17)	(1)	(33)	(58)
Operating profit/(loss)	967	93	641	(1,316)	385
Twelve months ended 30 June 2010
Revenue	2,519	800	2,421	-	5,740
Segment trading result	759	(51)	1,067	(1,265)	510
less depreciation and amortisation	(31)	(36)	(80)	(22)	(169)
less equity-settled share-based payments	(6)	(12)	-	(11)	(29)
Operating profit/(loss)	722	(99)	987	(1,298)	312
Geographical segments
				2011	2010
				£'000	£'000
United Kingdom				273	412
Europe				1,452	782
United States of America				3,901	4,524
Asia				126	22
				5,752	5,740

 

Earnings per share

Basis of Calculation

The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the weighted average number of ordinary shares in issue during the year less the weighted average number of Matching Shares held by the Epistem Share Investment Plan which are not yet vested.

The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares in relation to share options and share warrants. The number of share options has been adjusted to take into account the issue price and the fair value, consistent with IAS 33, "Earnings per share".

The weighted average number of shares in issue during the year was 7,933,983 (2010: 7,649,732)

The dilutive weighted average number of shares in issue during the year was 8,972,757 (2010: 8,725,670)

 

END

 

 

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