Announcement PDF RNS Number : 5878O Genedrive PLC 03 October 2019 genedrive plc ("genedrive" or the "Company") Audited Final Results genedrive plc (AIM: GDR), the near patient molecular diagnostics company, announces its audited Final Results for the year ended 30 June 2019. Financial Highlights · Revenue up 21.6% to £2.36m (2018: £1.94m) · Successful fund-raise of £6.0m (gross), a combination of £3.5m equity and £2.5m convertible loan · Cash at 30 June 2019 of £5.2m (2018: £3.5m) · Unaudited cash at 26 September 2019 £3.9m Operational Highlights · Genedrive® Hepatitis C (HCV) assay registered in 12 countries · World Health Organization process under way to Pre-Qualify the Genedrive® Hepatitis C test £0.9m of orders fulfilled for the US Department of Defense (DoD) with further orders on hand for delivery in 2019/20 Antibiotic Induced Hearing Loss (AIHL) test time reduced to under 30 minutes and hospital training for trials commenced post year end · · David Budd, Chief Executive Officer of Genedrive plc, said: "With two assays now on market and two assays in development, we continue to make good progress on delivering our strategy. On behalf of the Board, I would like to thank our shareholders for their continued support during the year and we look forward to an exciting future." For further details please contact: genedrive plc David Budd: CEO / Matthew Fowler: CFO www.genedriveplc.com +44 (0)161 989 0245 Peel Hunt LLP James Steel / Oliver Jackson +44 (0)20 7418 8900 Stanford Capital Partners Limited Patrick Claridge / John Howes +44 (0)20 3815 8880 Walbrook PR Ltd (Media Relations & Investor Relations) Paul McManus / Anna Dunphy +44 (0)20 7933 8780 or genedrive@walbrookpr.com +44 (0)7980 541 893 / +44 (0)7876 741 001 Notes to Editors About genedrive plc genedrive plc is a molecular diagnostics company developing and commercialising a low cost, rapid, versatile, simple to use and robust point of need molecular diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications. The Genedrive® HCV-ID kit has received CE-IVD Certification and has been launched in Africa and Asia Pacific. genedrive has distribution agreements with subsidiaries of Sysmex Corporation for the distribution of the Genedrive® platform in the EMEA and SE Asia (ex-India), and with ARKRAY Healthcare pvt Ltd for the distribution of the Genedrive® HCV-ID Kit and Genedrive® platform in India. The Company has assays on market for the detection of certain biological targets and has tests in development for tuberculosis (mTB) and Antibiotic Induced Hearing Loss (AIHL). Further details can be found at: www.genedriveplc.com and www.genedrive.com. CHAIRMAN'S STATEMENT We are executing our strategy to drive material revenues by June 2022 The Company remains focused and increasingly positioned to exploit opportunities in lowand middle-income countries with our Global Health assays (HCV and mTB) and in developed markets with our military and hearing assays (DoD and AIHL). We remain committed to the opportunities achievable by a focused molecular testing company. Core to the execution of our plan was the fund-raising of £6.0m (gross) in December 2018, which supports our aims and has strengthened our cash position. Delivering Our Strategy I am pleased that we are executing on our strategy to deliver material revenues from multiple assays by the end of our financial year ending 2022. During the year we saw revenue growth from our on-market assays (HCV and DoD) and good progress with our new product development programmes. Despite the positive progress overall, commercialisation of our HCV assay has lagged behind our previous expectations principally owing to a slower than anticipated rate of country registrations and the overall level of funding for HCV drugs and diagnostics. Funding remains in its infancy in many countries, requiring increased focus on those countries where we believe the opportunity looks likely to grow. We now expect the revenue ramp for the assay to occur in the year to June 2020, behind our original plans. Our commercial relationship with the DoD exceeded our expectations in the year and underpinned much of our financial performance. We fulfilled large orders for both assays and units during the year totalling £0.9m. Discussions with the customer have progressed and we are confident of further orders. Owing to the nature of the work we still lack absolute clarity on the potential, but the continued engagement and order flow provides us with confidence on the future business and the performance of Genedrive® as an effective molecular diagnostic technology. Governance and People The Board recognises that a strong governance framework, internal controls, values and culture firmly embedded across the organisation are vitally important and, as such, the Board remains focused on ensuring its own effectiveness and that of the governance processes throughout the Group. We believe we have a Board that reflects our strategy and ambition and will continue to review its effectiveness. Outlook Overall our on-market assays are beginning to build commercial traction. Multiple orders for DoD products were fulfilled in the year and we already have new orders for 2019/20. HCV commercialisation has been slower than anticipated, but we hope to overcome delays encountered in the next 12 months and remain optimistic of WHO pre-qualification by the end of the calendar year. Looking further ahead, we have exciting opportunities with AIHL and mTB. The AIHL assay could be transformative to the lives of many children as well as placing genedrive at the front line of NHS urgent care for neonates. In addition to the UK market, the test has applicability across Europe and North America and represents significant potential for the Company should we be able to access these markets. The mTB assay would also give the Company access to the large and well-funded tuberculosis testing market. I remain confident of genedrive's ability to deliver growth from its on-market assays and genuinely excited by the potential of our in-development assays. Finally I would like to take this opportunity to thank our staff, customers and shareholders for their valuable support during the year. Dr Ian Gilham Chairman 3 October 2019 CHIEF EXECUTIVE'S STATEMENT Overview The opportunities for genedrive plc are significant. We are working and developing products for important global healthcare and environmental pathogen concerns, based in the dynamic and scientifically rich city of Manchester. Over the past few years we have recruited and cultivated a talented team of experienced, clever, and knowledgeable IVD professionals that share my vision of building a business that contributes to global efforts in the eradication of disease and providing more immediate patient care. Each week we make strides forward in our development, positioning in the market, and commercial capability of the Company and its products. During the year we continued to execute on our strategy to bring material assay revenues to genedrive by the financial year ending June 2022. The fund raising in December 2018 (£6.0m gross) improved our cash position and strengthened our balance sheet. We now have two products on market: HCV and our military portfolio for the US DoD; and two exciting products in development: AIHL and mTB. Continued successful execution of this strategy will leave the Company well placed to generate returns for our shareholders. Our Performance with On Market Assays HCV The Genedrive® HCV ID Kit is the first low cost, qualitative HCV molecular decentralised testing product on the market. Molecular testing for HCV represents a potentially large market for Genedrive® that should be efficiently serviced via our partnerships, which include Sysmex for EMEA and Asia, Arkray for India and others for rest of world regions. The process to Pre-qualify (PQ) the HCV product with WHO is currently on-going. The process of registrations and approvals is often not in our direct control, and we use our experience and judgement to predict timelines. The WHO PQ site Quality Audit was completed in January with no significant findings. However, the clinical study is taking much longer than originally expected owing to a shortage of certain low viral level samples for analysis, and then subsequently the need to repeat some small sets of data collection So while the process continues past our originally expected timelines, we remain optimistic that we can achieve WHO pre-qualification by the end of the calendar year. Similarly, in country registrations are taking longer than anticipated. As the first entry of Genedrive® into these markets, most countries require a performance study after the registration process, the duration of which can be unpredictable. At June 2019 Genedrive was registered in 12 countries, below our initial target. We are targeting additional registrations during 2019/20 and significantly we expect the product will be approved for distribution in India by January. India is the largest single market for our product and we are confident of attracting demand during 2019/20. Pathogen detection tests for US DoD The initial development phase of the DoD agreement ended in the prior year and transitioned into a standard commercial arrangement. We were very pleased to see the strong uptick in the commercial volume received during 2019. We fulfilled multiple large orders and booked £0.9m of revenue. Quality issues with a component supplier meant another large DoD order was delayed into the 2019/20 fiscal year. The supply issue was ultimately resolved and we will soon complete establishment of dual sourcing for this key component. The DoD have placed orders for 2019/20, remained fully positive and engaged during this supply issue and supported the move to a second supplier. The DoD work has been a real success for genedrive, supporting the development of Genedrive® capabilities, providing funding to the Group, delivering a complex product to the customer specification, and providing ongoing revenue. Their continued engagement and support makes us very optimistic about the future potential of the business and we remain confident it will be a recurring part of our future revenues. In-Development Assays AIHL The Group was part of an award from UK NHS National Health Research in June 2018 for the development and implementation of a point of care test for the prevention of hearing loss in newborn children. This opportunity is well suited to genedrive's design, needing multiple, low cost units to deliver fast testing at a point of need. The full value of the award was just over £1m with £0.6m allocated to genedrive. The programme is approximately halfway through, now entering clinical validation. Since commencing the grant work we have reduced the test time to under 30 minutes, which easily exceeds the clinical turn-around time requirement. Hospital trials for the clinical validation are scheduled to commence in November, and should take circa six months. These trials will assess the application of the assay in an urgent care setting, and are focused around the practical implications of testing neonates in a variety of intensive care environments. Product launch is planned for Autumn 2020 and it is expected that commercial traction from early adopters will follow swiftly on from clinical approvals, with further demand anticipated following write-up and inclusion in pediatric care guidelines; if successful there is every reason to be positive for widespread adoption across the NHS. The market is attractive as being both large and at a higher margin compared to Global Health related tests. Outside of the UK the test will be equally applicable in Europe and North America, although we would likely need to partner for entrance into North America owing to the costs of regulatory hurdles. mTB (Tuberculosis) The market for mTB testing is one of the largest molecular testing markets in the world and in terms of market dynamics it is well defined. It is an important market for the Group and a vital component of our strategy. We were awarded a £1.1m development grant from Innovate UK in January 2018 to develop an automated sample module for the Genedrive® system. The project commenced at the start of the financial year and much of the product development performed to date has been covered under the grant. During the year we have also reformulated the test and designed the Innovate funded companion product to the Genedrive® that automates the extraction and concentration of mTB from a patient sample. As price is a significant driver in the developing world, we positioned costings at the core of design and have the potential to deliver at a market leading cost point at volume. We remain on track to bring a product to market in the financial year ending June 2021 further supporting our assay strategy. Outlook We have two assays on market and two assays in development. While the year has seen slower commercial traction on HCV than we hoped, growth in DoD and the prospects for 2019/20 are positive and the Group is focused on generating material revenues across multiple assays during the financial year ending 2022. Our pipeline provides us with confidence that we will continue to make good progress. David Budd Chief Executive Officer 3 October 2019 FINANCIAL REVIEW Overview Revenue and other income for the year was £2.4m (2018: £1.9m). Research and development costs were £4.9m (2018: £5.2m) while administration costs were £1.9m, down slightly from the prior year (£2.0m). The operating loss for the year was £4.0m (2018: £7.4m) and is stated after the effects of exceptional items. Financing costs were £0.5m (2018: £0.4m), broadly in line with the prior year. The finance cost of the convertible loans was £0.9m (2018: £0.5m), offsetting this finance cost were £0.6m (2018: £nil) of gains; which arose on the December 2018 amendment of the convertible loan and on share price movements in the year. In addition there was a £0.3m loss (2018: £0.1m gain) on the US dollar denominated convertible loan owing to the dollar exchange rate. The tax credit for the year was £0.9m (2018: £0.8m) and the expected tax receivable on the balance sheet is £1.0m (2018: £1.0m). The loss for the financial year after tax was £3.6m (2018: £6.0m). Exceptional items Two items have been separated out on the income statement to give a clear picture of underlying trading for the year. As part of the fund-raise that closed in December 2018, the terms of deferred consideration payable to the former owners of Visible Genomics were amended. The fair value of the amended terms was £0.6m lower than the pre-amendment figure and this gain has been treated as exceptional on the face of the income statement. On 8 June 2018 the Group disposed of the business and assets of its Services Divisions. The balance sheet at that time included deferred consideration of £0.5m. During June 2019 the acquirer made a payment under the terms of the deferred consideration clauses for its first six months of trading. The payment was under the forecasted amount and as such the deferred consideration on the balance sheet has been written down to its expected value. A charge of £0.2m has been recorded to reflect the lower than expected first six months payment. The exceptional income in the period was £0.4m compared to an exceptional cost of £2.1m in the prior year which was an impairment to the carrying value of intangible assets. Cash Resources Net cash outflow from operations was £4.6m (2018: £3.8m). The Operating losses were £4.4m (2018: £4.3m) with working capital consuming £0.2m (2018: £0.6m contribution). The tax credit received was £1.0m (2018: £1.2m) and relates to cash received under the Corporation Tax Research and Development tax relief scheme operated in the UK. The current year tax debt is £1.0m (2018: £1.0m). The net proceeds from financing activities were £5.6m (2018: £nil). The proceeds from equity were £3.2m and £2.4m from the issue of the new convertible loan note. Cash paid to the former owner of Visible Genomics of £0.3m has been included in net financing as the payment was contingent on a successful fund-raise. The increase in cash was £1.7m (2018: £1.6m decrease) meaning a closing cash position of £5.2m (2018: £3.5m). Balance Sheet Balance sheet net liabilities at 30 June 2019 totaled £2.5m (30 June 2018: £2.4m). The Company was in a net liability position throughout the year and so section 656 of the Companies Act 2006 was not a requirement. Non-current assets closed at £0.3m (2018: £0.5m). The decline is owing to the write-down in the carrying value of deferred consideration receivable on the disposal of the Services business. The portion of consideration for Services that will be received at least 12 months from the balance sheet date has been fair valued, discounted and reported as non-current, £0.2m (2018: £0.3m). Current assets of £6.9m (2018: £5.4m) included cash of £5.2m (2018: £3.5m) following the successful December 2018 fund-raise and tax receivable of £1.0m (2018: £1.0m) for the current year Corporation Tax Research and Development tax claim. The remaining working capital related items make up £0.8m (2018: £0.9m). Current liabilities were £1.2m (2018: £2.7m) with the large reduction related to the amendment to the Visible genomic contingent consideration agreement that saw elements of the prior year liability move to equity £0.3m, an element paid £0.3m and the remainder credited to the income statement as an exceptional gain £0.6m. Capital and reserves were bolstered by the December 2018 fund-raise, with a £3.2m equity injection in addition to the £0.3m of shares to be issued as part of the Visible genomics amendment. Matthew Fowler Chief Financial Officer Financial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Year ended 30 June 2019 £'000 Year ended 30 June 2018 £'000 2,362 (4,877) (1,934) (4,449) 439 (4,010) (508) (4,518) 882 (3,636) 1,938 (5,180) (2,022) (5,264) (2,111) (7,375) (413) (7,788) 758 (7,030) 9 (3,636) 1,063 (5,967) 11 (14.0) (37.6) 11 (14.0) (31.9) Note 30 June 2019 £'000 30 June 2018 £'000 12 13 164 153 317 165 340 505 14 15 13 123 556 106 971 5,184 6,940 171 551 172 980 3,529 5,403 (88) - Note Continuing operations Revenue Research and development costs Administrative costs Trading loss Exceptional items Operating Loss Net finance costs Loss on ordinary activities before taxation Taxation on ordinary activities Loss for the financial year from continuing operations Discontinued operations Profit for the year from discontinued operations Loss/total comprehensive expense for the financial year Loss per share (pence) from continuing operations - Basic and diluted Loss per share (pence) from continuing and discontinued operations - Basic and diluted 2 3 3 4 3 7 8 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2019 Assets Non-current assets Plant and equipment Contingent consideration receivable Current assets Inventories Trade and other receivables Contingent consideration receivable Current tax asset Cash and cash equivalents Liabilities Current liabilities Deferred revenue 16 17 Trade and other payables Deferred consideration payable in shares 18 19 Net current assets Total assets less current liabilities Convertible bond Net liability Capital and reserves Share capital Called-up equity share capital Other reserves Accumulated losses Total deficit (1,129) (1,217) 5,723 6,040 (8,518) (2,478) (1,470) (1,250) (2,720) 2,683 3,188 (5,625) (2,437) 510 282 28,112 24,745 (31,100) (27,464) (2,478) (2,437) The financial statements were approved by the Board of Directors and authorised for issue on 3 October 2019. They were signed on its behalf by: David Budd Chief Executive Officer Matthew Fowler Chief Financial Officer Company number: 06108621 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 Other Accumulated Balance at 30 June 2017 Share issue Transfer of shares to SIP members Equity-settled share-based payments Transactions settled directly in equity Total comprehensive expense for the year Balance at 30 June 2018 Share issue Deferred consideration equity component Equity-settled share-based payments FX on translation of overseas assets Transactions settled directly in equity Total comprehensive expense for the year Balance at 30 June 2019 Share capital £'000 281 1 1 282 228 228 510 reserves £'000 24,657 33 55 88 24,745 3,015 315 49 (12) 3,367 28,112 losses Total equity £'000 £'000 (21,497) 3,441 1 33 55 89 (5,967) (5,967) (27,464) (2,437) 3,243 315 49 (12) 3,595 (3,636) (3,636) (31,100) (2,478) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2019 Cash flows from operating activities Operating loss for the year Depreciation, amortisation and impairment Exceptional items (all non-cash) ATL Research credits Share-based payment (credit)/expense Operating loss before changes in working capital and provision Decrease/(increase) in inventories Decrease in trade and other receivables Increase/(Decrease) in deferred revenue (Decrease) in trade and other payables Cash flow from discontinued operations Net cash outflow from operations Tax received Net cash outflow from operating activities Cash flows from investing activities Finance income 7 Acquisition of plant and equipment and intangible assets, net of loss on disposals Proceeds from disposal of discontinued operations 13 Cash paid to settle deferred consideration Net cash inflow/(outflow) from investing activities Cash flows from financing activities Proceeds from share issue 25 Proceeds from bond issue Net inflow from financing activities Net increase/(decrease) in cash equivalents Cash and cash equivalents at beginning of year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year Analysis of net funds Cash at bank and in hand Net funds NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 16 Year ended 30 June 2019 £'000 Year ended 30 June 2018 £'000 (4,010) 98 (439) (89) 49 (4,391) (12) 60 88 (346) (4,601) 980 (3,621) (7,375) 3,117 (59) (12) (4,329) 241 119 (115) (547) 864 (3,767) 1,220 (2,547) 18 13 (97) 57 (300) (322) (24) 957 946 3,243 2,366 5,609 1,666 3,529 (11) 5,184 (1,601) 5,129 1 3,529 5,184 5,184 3,529 3,529 General Information genedrive plc ('the Company') is a company incorporated and domiciled in the UK. genedrive plc and its subsidiaries (together, 'the Group') is a molecular diagnostics business developing and commercialising a low-cost, rapid, versatile, simple to use and robust pointof-need or point-of-care diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications. genedrive plc is a public limited company, whose shares are listed on the London Stock Exchange Alternative Investment Market. 1. Significant accounting policies This note provides a list of the principal accounting policies adopted in the preparation of these consolidated financial statements to the extent that they have not already been disclosed in the other notes below. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods represented in these consolidated financial statements. Basis of accounting The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, IFRS Interpretations Committee ('IFRSIC') and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on a historical cost basis as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as 'the Group'). They are presented in pounds sterling and all values are rounded to the nearest one thousand (£k) except where otherwise indicated. Following the disposal of the Group's Services business, on 8 June 2018, the respective prior year results for this business are disclosed as a discontinued operation. The Group funds its day-to-day working capital requirements through its bank resources. Going concern: The Directors have concluded that it is necessary to draw attention to the revenue and cost forecasts in the business plans. In order for the Group and Company to continue as a going concern, there is a requirement to achieve a certain level of sales. Given the Company is in the early stages of commercializing its products, the forecast level of sales in the next 12 months is subject to uncertainty. If an adequate sales level cannot be achieved to support the Group and Company, the Directors have the options to reduce ongoing spend or seek additional funding from shareholders. While the Board is confident that it will achieve the required revenue and has a successful track record in both cutting costs and raising funds, there remains uncertainty as to the level of sales that will be achieved, the amount of cost reduction that may be required and the amount of funding that could be raised from shareholders. This combination of factors represents a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern. However, based on the relative likelihood of achieving versus not achieving, the Board believe it is appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements. These financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern. The auditors' report on the 2019 financial statements contains an "emphasis of matter regarding a material uncertainty relating to going concern" section, drawing attention to the existence of a material uncertainty that may cast significant doubt about the Group's and Parent Company's ability to continue as a going concern. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Inter-company transactions, balances and unrealised gains on transaction between Group companies are eliminated. Unrealised losses are also eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies. Revenue Revenue is measured at the fair value of the consideration received or receivable and net of discounts and sales-related taxes. Revenue recognition a. Contract revenue Contract revenue is recognised by reference to the stage of completion of the related transaction at the end of the reporting period. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group's activities, as described below. b. Collaboration & licensing revenue Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence agreements which are not directly related to ongoing research activity are recorded as deferred income and recognised as revenue over the anticipated duration of the agreement. Where the anticipated duration of the agreement is modified, the period over which revenue is recognised is also modified. Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological or regulatory hurdles in the research and development process are recognised as revenue upon the achievement of the specified milestone. Income which is related to ongoing research activity is recognised as the research activity is undertaken, in accordance with the contract. c. Other income - development grant funding Income receivable in the form of Government grants to fund product development is recognised as development grant funding over the periods in which the Group recognises, as expenses, the related eligible costs which the grants are intended to compensate and when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the income will be received. Government grants whose primary condition is that the Group should purchase or otherwise acquire non-current assets are recognised as deferred revenue in the Consolidated Balance Sheet and transferred to the Statement of Comprehensive Income on a systematic and rational basis over the useful lives of the related assets. d. Product sales Revenue from product sales is recognised on shipment to customers in line with contractual agreements. Segment reporting A segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks and returns that are different from those of other parts of the business. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing per