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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Abzena | LSE:ABZA | London | Ordinary Share | GB00BN65QN46 | ORD GBP0.002 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 15.75 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMABZA
RNS Number : 0272Z
Abzena PLC
12 December 2017
Abzena plc
Half year results: Growth strategy progressing
Cambridge, UK, 12 December 2017 - Abzena plc (AIM: ABZA, 'Abzena' or the 'Group'), a life sciences group providing services and technologies enabling the development and manufacture of biopharmaceutical products, publishes its half year results for the six months to 30 September 2017.
Highlights
-- Investment programme progressing in line with the growth strategy including:
o Upgrading of the biomanufacturing platform in San Diego through installation of stirred tank bioreactors,
o Lease anticipated on new premises to consolidate San Diego operations into one state-of-the-art facility,
o Remodelling of space in the Group's Bristol facility to create a GMP bioconjugation suite and additional process chemistry labs to support synthetic chemistry manufacturing, and
o Expected to move into new premises on Babraham Research Campus in Cambridge UK shortly to provide additional capacity for biology research services.
-- Group revenue increased to GBP9.6 million (H1 2017: GBP9.0 million), in line with the trading statement of September 2017
-- Gross profit was GBP4.0 million (H1 2017: GBP3.8 million), with gross service margin, excluding reimbursed manufacturing materials, of 44%
-- Adjusted EBITDA loss of GBP7.0 million (H1 2017: GBP3.1 million) and reported loss of GBP8.0 million (H1 2017: GBP4.0 million)
-- Raised GBP23.8 million (net of expenses) in April 2017 to fund capability enhancement and capacity expansion expected to be completed in FY20
-- Cash and cash equivalents of GBP16.9 million at 30 September 2017 (31 March 2017: GBP4.1 million)
-- ThioBridge(TM) technology and Composite Human Antibody product licence agreements signed with OBI Pharma Inc (Taiwan) and Telix Pharmaceuticals (Australia) respectively, with aggregate potential licence fees and milestone payments in excess of GBP150 million. These will become payable on achievement of certain development, regulatory and commercial milestones, plus potential royalties on ThioBridge(TM) ADC products
Post period end
-- Master services agreement secured for ADC manufacturing programme valued at more than $5 million with US biotech company
-- Installation of Sartorius stirred tank bioreactors for process development complete at San Diego facility and 500L GMP bioreactor to be installed imminently
-- Lease negotiated for 50,000 square foot building in San Diego to enable establishment of new GMP biomanufacturing facility as existing lease approaches expiry. New facility enables installation of 2000L bioreactors and co-location of process development and manufacturing groups. Partnership under negotiation with major biomanufacturing solution provider to equip and supply the facility in capital efficient manner
Dr John Burt, CEO of Abzena, commented:
"As previously reported in our September trading update, revenue growth in the first half was lower than initially expected. However, Abzena continues on its growth trajectory that, enabled by the investment secured this year and execution of the investment plans across our international business, is helping to establish Abzena as a significant solution provider for biopharmaceutical development of meaningful scale and impact.
"The recently announced ADC manufacturing agreement and other ongoing programmes utilise multiple facets of our integrated offering. These agreements indicate that our pharma and biotech customers appreciate the value and breadth of our solutions. As we start to realise the benefits of our investment programme, we are increasingly able to support our customers' development programmes all the way through into clinical trials.
"With the increased capabilities and expanded capacity coming online, we expect Abzena to continue to see increasing revenues on our path to scale and profitability."
-Ends-
Enquiries:
Abzena plc John Burt, Chief Executive Officer Julian Smith, Chief Financial Officer +44 1223 903498 Numis (Nominated Adviser and Broker) Clare Terlouw / James Black / Paul Gillam +44 20 7260 1000 N+1 Singer (Joint Broker) Aubrey Powell / Liz Yong +44 20 7496 3000 Instinctif Partners +44 20 7457 2020 Melanie-Toyne Sewell / Alex abzena@instinctif.com Shaw
Notes to Editors
About Abzena
Abzena (AIM: ABZA) provides proprietary technologies and complementary services to enable the development and manufacture of biopharmaceutical products.
The term 'ABZENA Inside' is used by Abzena to describe products that have been created using its proprietary technologies and are being developed by its partners, and include Composite Human Antibodies(TM) and ThioBridge(TM) Antibody Drug Conjugates (ADCs). Abzena has the potential to earn future licence fees, milestone payments and/or royalties on 'ABZENA Inside' products.
Abzena offers the following services and technologies across its principal sites in Cambridge (UK), San Diego, California (USA) and Bristol, Pennsylvania (USA):
-- Immunology research studies, including immunogenicity assessment of candidate biopharmaceutical products;
-- Protein engineering to create humanized antibodies and deimmunised therapeutic proteins; -- Cell line development for the manufacture of recombinant proteins and antibodies;
-- Contract process development and GMP manufacture of biopharmaceuticals, including monoclonal antibodies and recombinant proteins for preclinical and clinical studies;
-- Contract synthetic chemistry and bioconjugation research services, focused on antibody-drug conjugates (ADCs);
-- Proprietary site-specific conjugation technologies and novel payloads for ADC development; and -- GMP manufacturer of ADC linkers, payloads & combined linker-payloads.
For more information, please see www.abzena.com.
Overview
Through the first half of this financial year, the Group has continued to grow its business of providing integrated service and technology solutions to an international customer base that has included over 80 customers. Many of these are repeat customers using multiple aspects of the Group's biology, chemistry and manufacturing services.
Revenues for the first half of the year were GBP9.6 million, up 7.6% on the equivalent period last year, and broadly flat compared to the second half of the last financial year, as outlined in the September trading statement. The slower start to the period was attributed to fewer projects within the immunology business, a small number of large manufacturing projects that have taken longer to complete than expected, and certain other projects, including the recently announced ADC manufacturing programme, having been delayed by our customers until the second half of the year. The lower than expected revenue recognised in the period impacted the level of reported loss for the period which was GBP8.0 million (H1 2017: GBP4.0 million).
In April 2017, the Group raised GBP23.8 million (net of expenses), to invest principally in the two US businesses - biologics manufacturing in San Diego and ADC manufacturing in Bristol PA. Whilst the investment programme is underway, management expects increased capacity and capabilities to build gradually and to be complete by FY2020. As evidenced by continuing progression of customer programmes into manufacturing utilising the Group's services, including significant recent new contracts, the Group is successfully leveraging its technology and customer relationships to drive the growth of the business.
As part of the initial phase of the investment programme, the Group is upgrading its biologics manufacturing platform to use single-use disposable stirred tank bioreactors. A lease has been negotiated for a 50,000 sq.ft building in San Diego where the Group plans to consolidate the process development and manufacturing groups from the two current sites as well as enabling expanded GMP production with bioreactor capacity up to 2,000L. A $10 million investment will be made in the facility, a substantial part of which will be financed by the landlord for the internal remodelling of the building.
As at the end of November 2017, the Group held cash of GBP14.9 million. The Group is in a period of investment which is expected to generate substantial revenue growth to move Abzena towards proftability. To support this, the Board is pursuing options for a secured debt financing facility to fund a substantive part of the capital expenditure programme to realise these goals.
Post period end, the Group continues to benefit from its integrated service and technology offering, as evidenced by a series of new contracts, including the recent $5m ADC manufacturing contract. The majority of the $5 million value is expected to be recognised in FY19. This contract follows on from a long-term US chemistry services relationship that expanded to require additional services from across all three sites.
As described previously, due to the long-term nature of certain research and biomanufacturing service agreements entered into by the Group, revenue recognised under these contracts is based on management estimates of the stage of their completion. The performance of the services under these agreements is subject to scientific uncertainty as well as being dependent on the performance of inter-related activities by the customer and/or third parties. The uncertainties relating to these estimates and the performance of the contracts can lead to material uncertainty in the revenue to be recognised for any service project prior to completion.
Longer term, as the Group's operations expand and Abzena can service more clients concurrently, it is expected that the business will be more resilient to delays in individual contract commencement or performance. Consequently, whilst maintaining a vigilant approach to cost control, the Board remains focused on the growth of the business to achieve scale and sustainability.
Operational review
Manufacturing
Biomanufacturing revenues were mostly generated from process development and GMP manufacturing service delivered from the Group's San Diego facility, and increased 60% to GBP3.2 million (H1 2017: GBP2.0 million, FY 2017 GBP5.3 million), reflecting an increase in the number of programs carried out in San Diego. This amount includes reimbursement of materials used on manufacturing programmes and recharged to customers.
Excluding the materials reimbursement, the gross margin from biomanufacturing was 29.9%, reflecting the resource intensity of manufacturing with the current equipment. With the transition to stirred tank bioreactors and investment in higher-throughput automated purification equipment, the margin earned on manufacturing contracts is expected to improve along with the volume of work performed.
Cell line development revenues for the first half of the year declined by GBP0.1 million (12%) with the late stage cancellation by a customer of an expected contract anticipated to commence in the first half of the year.
Beyond the plans to expand the Group's manufacturing process development capabilities, the teams in Cambridge and San Diego are working closely together on customer projects that have or are expected to transition from cell line development through process development to GMP manufacture. The Group has acquired Sartorius stirred tank bioreactor systems, ranging from an Ambr250 mini-bioreactor system for process development through to a 500L bioreactor that is being installed during December, which, combined with advanced downstream processing equipment, offer significant process efficiencies over legacy systems.
Aligned with the investment in the manufacturing platform, the Group is adopting an integrated plan for GMP analytical services across the three sites, to leverage the centres of excellence within the Group. This capability ties into GMP manufacturing programmes but also has the potential to be sold independently of any specific manufacturing component.
Chemistry
Chemistry revenues increased modestly to GBP3.7 million (H1 2017: GBP3.5 million, FY 2017: GBP7.0 million) which reflected a slower than previously anticipated start to the year.
The Group's core bioconjugation capability resides within the Cambridge chemistry group, working with the group in Bristol, PA, as the latter pursues larger scale process development.
The Group offers not only the industry-renowned ThioBridge(TM) ADC conjugation technology, but also other conjugation technologies as required to suit particular customer requirements. It is also developing its own manufacturing process for specific important cytotoxic linker-payload reagents, both for new ADC programmes and for use with established clinical-stage ADCs.
The Group's chemistry services are expanding to embrace GMP manufacturing capability for ADC linker-payload reagents and the conjugation process to couple the antibody with the linker-payload reagents to create the ADC product for clinical investigation.
The investment programme at the Group's Bristol PA facility, to establish the GMP bioconjugation and scale-up chemistry capacity, is progressing and is expected to be operational in the first quarter of 2018 to fulfil anticipated customer demand.
Whilst the ADC field is typically considered in the context of cancer therapy, increasingly the Group is seeing demand for its synthetic chemistry and conjugation services for products with potential therapeutic benefit beyond cancer indications. The requests may utilise non-classical elements other than antibodies for targeting and cytotoxic compounds as the drug payload. These opportunities are coming to Abzena in recognition of the Group's chemistry capabilities and, in the case of certain programmes, use other areas of the Group's services within the Biology and Manufacturing domains.
Biology research services
Biology research services revenues declined in the first half of the year to GBP2.3 million (H1 2017: GBP3.2 million, FY 2017: GBP5.7 million), mostly because of a reduction in demand for immunology research studies (H1 2018: 45 projects; H1 2017: 60 projects) as the industry faces the conflicting demand for standardised immunogenicity assessment assays. Protein engineering revenues have been constrained by lack of capacity, which should be ameliorated when the Group moves into the new facility on Babraham Research Campus in early 2018.
Abzena's immunology group has long been recognised as a pioneer in the field of immunogenicity assessment and has expended considerable effort during the period to address these challenges, presenting enhanced assay capabilities at scientific conferences and engaging with key opinion leaders within major pharmaceutical companies. Abzena has recently taken on the leadership of the European Immunogenicity Platform assay group, which will enable a greater level of dialogue with the Group's key customers.
During the period, the Group's protein engineering team has been operating at full capacity. The inability to take on more work has resulted in the loss of certain potential new customer projects. The team will have greater space available to expand and work once the relocation to the new laboratories on the Babraham Research Campus has been completed in early 2018.
The bioassay group within the Biology division is increasingly being used to develop potency assays to support the development and release of products as part of manufacturing programmes. In time, this capability has the potential to make a meaningful contribution to Biology division revenues as well as strengthening the Group's overall manufacturing offering.
Abzena Inside portfolio
The development of products within the Abzena Inside portfolio is driven by the relevant pharmaceutical or biotech company developing the product; Abzena does not invest its own resources into these programmes and will provide updates based on publicly available information regarding progress advancement or termination of these programmes.
Whilst Abzena's services are not typically required in the later stages of clinical development, Abzena continues to play an active role in the ongoing development of some of the earlier stage preclinical programmes, such as Faron Pharmaceuticals' Clevegen, UCL's Magacizumab and certain ThioBridge(TM) development programmes.
In June, Bioverativ acquired True North Therapeutics for upfront consideration of $400 million and up to $425 million in milestone payments. As part of the acquisition, Bioverativ acquired worldwide rights to True North Therapeutics' first-in-class Abzena Inside monoclonal antibody, TNT009 (now redesignated as BIVV009) which is in clinical development to treat cold agglutinin disease. The Phase III studies for BIVV009 for treatment of cold agglutinin disease are anticipated to start by the end of 2017. This will be the second Phase III programme within the Abzena Inside portfolio. The other is Gilead's Andecaliximab in development for the treatment of gastric cancer, for which further clinical results are expected in the first half of 2018.
Also during the period, one of the unidentified Phase I programmes, being developed by a private US biotech company, has progressed into two Phase 1b/2a clinical trials.
The Group continues to expect to secure further licences for its antibody engineering Composite Human Antibody platform and ThioBridge(TM) ADC technology. However, in utilising the Composite Human Antibody technology, customers are increasingly choosing to pay technology access fees or licence payments rather than future royalties, contributing to the 39% increase in licence revenue to GBP0.4 million (H1 2017: GBP0.3 million FY 2017: GBP0.7 million).
During the period, the Group secured two licence deals related to Composite Human Antibody sequences that it had created, including the agreement announced in July with Telix Pharmaceuticals for the development of anti-PSMA radiopharmaceuticals for diagnostic and therapeutic use.
Facilities update
The Group's headquarters and Biology research and manufacturing laboratories in Cambridge will move into new facilities on the Babraham Research Campus in January 2018.
With the investment programme underway, the first half of the year was busy with planning and the start of operational improvements. These include establishing the GMP bioconjugation and scale-up chemistry capacity at the Group's Bristol, PA facility. This is progressing and is expected to be operational in the first quarter of 2018 to fulfil anticipated customer demand.
The first stirred tank bioreactors, with capacity up to 500L, are on track to be installed in December 2017 at the Group's San Diego biomanufacturing facility. This will provide a more reliable and technically advanced offering to customers and a reduction in the costs required to operate compared with the older Wave technology currently in use.
In seeking to ensure that the Group has the appropriate manufacturing facility and operations to support our customers, a lease has been negotiated on a 50,000 sq. ft. building in San Diego, close to the existing facility. It is planned that the process and analytical method development groups will relocate into this facility in April 2018 from the Torrey Pines laboratories. Following a remodelling of the facility to create two manufacturing suites to accommodate 500L and 2,000L single-use disposable stirred tank bioreactors, the manufacturing and quality groups will relocate to this facility in the first half of 2019. The Group has secured significant funding from the landlord for this new facility to enable the necessary remodelling and is in advanced negotiations with a major biomanufacturing solution provider for a preferred supplier relationship to equip and supply this facility, as well as for the Group's ADC manufacturing operations in Bristol PA. A further update will be provided in due course.
Board & Management changes
In the US, John Manzello has resigned for personal reasons from his role as President, Abzena (US), after having progressed the integration of the acquired US businesses into the Abzena group. Jim Mills, the Group's existing Senior VP Technical Operations, has taken over responsibility for the San Diego manufacturing business and will be spending the majority of his time in the US. His biomanufacturing experience will be particularly useful as the Group expands its capabilities and extends capacity as a result of the investment programme, and in particular planning for the successful relocation and expansion within the new facility to be leased in San Diego.
In September 2017, Lotta Ljungqvist joined the Board as a non-executive director, bringing her deep understanding of biomanufacturing and development services on to the Board. Lotta currently holds a dual role as President and CEO of GE Nordics, responsible for GE's growth in all sectors across the region. She is also CEO of BioProcess Innovation Hub, a government initiative, where she has been setting up a new facility aiming to support biotechnology companies in Scandinavia. Before taking on the dual role at GE Nordics she spent eight years with GE Healthcare Life Sciences as its Global Head of R&D BioProcess. During this time, the division doubled in size due to a series of acquisitions.
Stanford litigation
Following the filing of a complaint, as previously announced in August, by Stanford University (CA, USA) ("Stanford") in August with the Superior Court of the State of California in the County of San Diego naming as defendants Abzena plc and its subsidiaries, Abzena Inc. and PacificGMP, in respect of claims arising with regard to certain service contracts with PacificGMP, an initial responsive pleading seeking dismissal of the claim has been filed with the court.
The principal issue of the complaint arose prior to Abzena's acquisition of PacificGMP (the "Acquisition") in September 2015 as referenced in the Group's Circular dated 5 April 2017. Limited indemnification cover is provided by the former shareholders of PacificGMP as a portion of the acquisition consideration payable to the former PacificGMP shareholders. The amount of approximately $1.5m has been held in escrow since completion of the Acquisition in order to address this issue.
The Company and its advisers continue to believe that any liability, including costs associated with defending the claim, should be less than this and expect that any such aggregate liability will be adequately covered by the funds held in escrow.
Since filing the responsive pleading, Abzena has had further recent negotiations with Stanford seeking to reach a mutually agreeable solution which may lead to an agreed settlement. Further update announcements will be made as appropriate.
Current trading and outlook
Average bookings in the months since the period end are more than 30% higher than in the first half of the year.
The Board expects revenue in the second half of the year to be higher than as reported for the first half. The Group's investment in establishing GMP chemistry operations in Bristol and the accounting treatment for the anticipated new lease in San Diego will lead to slightly increased costs over prior expectations.
Within biology research services, the Group's cell line development and bioassay groups are expected to deliver a strong second half performance and the immunology business should see a pick up following concerted efforts to re-establish Abzena's scientific leadership position within this field.
Second half chemistry services revenue is expected to improve as a result of new ADC manufacturing contracts. Three customers have significant longer-term FTE-funding agreements in place that, along with further short-term projects, are contracted to provide GBP2.7 million of revenue during this current financial year. A further research funding agreement has recently been secured that has the potential to significantly expand during 2018. The process for a ThioBridge(TM) ADC development programme has recently transferred from the Group's UK chemistry group to the US group based in Bristol PA and is expected to lead to a GMP manufacturing contract for the ThioBridge(TM) reagent and the ADC product.
Following the investment into the stirred tank bioreactor platform for the Group's biomanufacturing business in San Diego, which integrates the cell line and early process development capabilities in Cambridge, there is significant interest in the Group's integrated biomanufacturing offering. The prospect of the new facility in San Diego and the larger bioreactor capacity will reinforce this further, with more significant revenue growth in the manufacturing business expected by the Board in the next financial year.
As evidenced by the recent significant ADC manufacturing contract and other customers utilising a range of the Group's integrated services, the Board strongly believes in the Group's business model of providing the full suite of biology, chemistry and manufacturing services and technologies.
Looking ahead, the Board expects that the Group's transition to profitability to be revenue-led, and, therefore, the focus will continue to be on increasing the Group's biomanufacturing capability and increased capacity, the establishment of the full suite of GMP capabilities for bulk manufacturing of ADCs and continued investment in service innovation within biology research services.
John Burt
Chief Executive Officer
Abzena plc
Financial review
Revenue
Group revenues for the six months to 30 September 2017 increased to GBP9.6 million (H1 2017: GBP9.0 million, FY 2017: GBP18.7 million) providing a gross profit of GBP4.0 million (H1 2017: GBP3.8 million, FY 2017: GBP8.1 million ). This modest increase is expected to be improved upon towards the end of the year as the new equipment which provides additional capacity is delivered and becomes available for customer projects. On a constant currency basis, H1 2018 revenue was GBP0.2 million (2%) up on the half year ended 30 September 2017, with gross margin increasing by 1%.
The Group's revenue is concentrated in USD with GBP5.8 million (60%) of total revenue for the half year (H1 2017: GBP5.3 million 59%). With the expansion of US manufacturing, this trend is expected to accelerate. A 10% movement in the GBP:USD exchange rate, would have had a revenue impact of +/- GBP0.6 million for the half year (H1 2017: GBP0.6 million).
The Group does not rely on a few large customers, working with 82 customers during the first half of FY 2018 (H1 2017: 92 and FY 2017: 121). Of these 82 customers, 65 are repeat customers representing GBP8.8 million revenue and 9 representing GBP2.5 million are working with, or have worked with, multiple groups within the Group. The top 10 customers represent 58% of the total revenue (H1 2017: 47% and FY 2017: 48%), reflecting the larger revenue generating manufacturing contracts. Of total service revenue GBP8.8 million (91%) was generated from repeat or ongoing contracts (H1 2017: GBP7.3 million and FY 2017: GBP14.6 million).
Gross profit
The Group generated gross profit of GBP4.0 million in the period (H1 2017: GBP3.8 million, FY 2017: GBP8.1 million) representing 42% of total sales (H1 2017: 42%). The constant gross margin percentage, resulting in a static gross margin, primarily reflects a proportionate increase in labour costs from 27% of service revenue in the first half of last year to 32% in this half year. This increase has arisen in the US operations primarily in the labour-intensive manufacturing contracts and inefficiencies in operations arising from contract slippage.
After adjusting for the revenue recognised from pass through reimbursement of manufacturing materials and the associated materials cost, the gross margin earned on the Group's service revenues was 44% during the period. Meaningful comparable data of pass through material costs from prior periods is not available as this analysis reflects in part a change in the structure of the customer contracts.
Administrative expenses change of analysis
In order to provide more meaningful comparison of costs as the Group has expanded, the definition of research and development costs and the Administrative costs - Other have been reanalysed as set out below.
Hot Features
Premium
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------------ ---------
Administrative expenses - Other
(as previously classified) (9,726) (6,385) (14,611)
Intellectual property costs reclassification 489 252 618
Sales and marketing expenses reclassification 1,525 924 2,390
------ ------ ------
Administrative expenses - Other (7,712) (5,209) (11,603)
------ ------ ------
Research and Development costs
(as previously classified) (2,917) (1,950) (3,849)
Laboratory operating expenses
reclassification 1,105 805 1,592
Intellectual property costs reclassification (489) (252) (618)
------ ------ ------
Research and Development and Intellectual
Property costs (2,301) (1,397) (2,875)
------ ------ ------
Laboratory operating costs (previously - - -
included in R&D costs)
Laboratory operating expenses
reclassification (1,105) (805) (1,592)
------ ------ ------
Laboratory operating costs (1,105) (805) (1,592)
------ ------ ------
Sales and marketing expenses (previously - - -
included in Administrative)
Sales and marketing expenses reclassification (1,525) (924 (2,390)
------ ------ ------
(1,525) (924) (2,390)
------ ------ ------
Research and Development and Intellectual Property costs
Research & Development expenditure during the period has increased 65% to GBP2.3 million (H1 2017: GBP1.4 million, FY 2017: GBP2.9 million). This includes GBP0.4 million reflecting the continuation of the development and establishment of the GMP chemistry manufacturing capabilities in Bristol, PA, enhancement of the immunology and ThioBridge(TM) ADC technologies, and increased patent prosecution expenditure. In part, this increase has occurred with the reallocation of scientific staff to research and development work whilst not allocated to customer work caused in part by unforeseen delays in the customer projects rather than an increase in dedicated staff.
In prior years the laboratory operating costs were included in the Research and Development costs and the intellectual property costs were included in Other Administrative costs.
Laboratory operating costs
Laboratory operating costs of rent and associated real estate costs and general maintenance of facilities used for both customer and research and development work have increased slightly to GBP1.1 million for the half year (H1 2017 GBP0.8 million, FY 2017: GBP1.6 million). These costs are anticipated to increase from January 2018 as the Cambridge operations move into the new building.
Sales and marketing expenses
Sales and marketing expenses have increased 65% to GBP1.5 million (H1 2017: GBP0.9 million, FY 2017: GBP2.4 million) with the expansion of the global business development team to 14 full time employees at 30 September 2017 (H1 2017: 8 and FY 2017: 9), including the recruitment of a US-based Global Head of Marketing to drive the international profile of the Group within the biopharmaceutical contract services market.
Administrative expenses
Administrative expenses have increased significantly to GBP7.7 million (H1 2017: GBP5.2 million; FY 2017: GBP11.6 million), primarily reflecting the increased administrative support required across the Group, including administrative staff costs, consultancy, provision of IT services and expansion of non-laboratory facilities. Included within administrative expenses are increased depreciation expenses associated with increased capital expenditure and increased share based payment associated with the award of share options to employees across the Group.
Adjusted net earnings for the period
The adjusted EBITDA loss from the ongoing business at GBP7.0 million is GBP4.0 million higher than for the same period last year and GBP2.6 million higher than H2 2017, reflecting the increased cost base across both Research & Development and overhead support against a static gross margin.
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ---------
Loss for the period (8,029) (4,030) (9,118)
Adjustments:
Depreciation of property, plant
and equipment 794 655 1,157
Amortisation of intangible assets 361 374 723
Taxation (336) (242) (347)
Net finance income (149) (46) (277)
------ ------ ------
EBITDA (7,359) (3,289) (7,862)
Share based payments 374 193 412
------ ------ ------
Adjusted EBITDA (6,985) (3,096) (7,450)
------ ------ ------
Taxation
The taxation receivable reflects the estimate of the R&D tax credit repayable from HMRC of GBP0.2 million (H1 2017: GBP0.2 million, FY 2017: GBP0.2 million)
Reported loss for the period
The reported loss of GBP8.0 million for the half year (H1 2017: GBP4.0 million, FY 2017: GBP9.1 million) results from an operating loss for the period of GBP8.5 million (H1 2017: GBP4.3 million, FY 2017: GBP9.7 million).
Capital expenditure
The Group has continued to invest to enhance the capacity and to support further growth in terms of both costs directly expensed and GBP2.6 million (H1 2017: GBP1.5 million, FY 2017: GBP4.2 million) on additional capital equipment and leasehold improvements. Of this total GBP0.1 million was financed through vendor supported finance leases (H1 2017: GBP0.5 million, FY 2017: GBP0.8 million) taking the benefit of the relatively favourable interest rates currently achievable for capital purchases. The Group had capital commitments of GBP1.8 million ($2.4 million) at the half year end (H1 2017: GBPnil million, FY 2017: GBP0.1million), relating to the expansion of the US manufacturing capabilities in San Diego and Bristol, PA.
Trade and other receivables
As at 30 September 2017, Group trade and other receivables were GBP7.8 million, up GBP2.8 million on FY 2017 and GBP2.0 million up on H1 2017. Payments to secure fixed assets of GBP1.1 million have been classified as prepayments and trade receivables are GBP1.1 million up on FY 2017.
Cash and Cash equivalents
Cash and cash equivalents at 30 September 2017 were GBP16.9 million, up from GBP4.1 million at the start of the period, following the share placement in April 2017, raising GBP23.8 million after costs and GBP9.4 million at the end of September 2016.
The Group is pursuing options for the provision of a debt facility with an asset based finance provider to increase the Group's cash headroom in a time of investment in leasehold improvements and equipment purchases.
Julian Smith
Chief Financial Officer
Abzena plc
Independent review report to Abzena plc
Introduction
We have reviewed the accompanying consolidated balance sheet of Abzena plc as at 30 September 2017 and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the six-month period then ended. Management is responsible for the preparation and presentation of this interim financial information in accordance with International Financial Reporting Standards adopted in the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of the Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with International Financial Reporting Standards adopted in the European Union.
James Cowper Kreston
2 Chawley Park
Cumnor Hill
Oxford
OX2 9GG
11 December 2017
Consolidated Income Statement
For the six month period to 30 September 2017 - unaudited
Restated Restated
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
----------------------------- ---- ------------ ------------ ---------
Revenue 3 9,637 8,960 18,654
Cost of sales (5,634) (5,179) (10,547)
------ ------ ------
Gross profit 4,003 3,781 8,107
Other operating income 126 236 611
Research and development
costs (2,301) (1,397) (2,875)
Laboratory operating costs (1,105) (805) (1,592)
Sales and marketing expenses (1,525) (924) (2,390)
Administrative expenses (7,712) (5,209) (11,603)
------ ------ ------
Operating loss (8,514) (4,318) (9,742)
Finance income 4 177 108 330
Finance expense 4 (28) (62) (53)
------ ------ ------
Loss before income tax (8,365) (4,272) (9,465)
Income tax 5 336 242 347
------ ------ ------
Loss for the period (8,029) (4,030) (9,118)
------ ------ ------
Basic and diluted losses
per Ordinary Share 6 (4p) (3p) (7p)
Consolidated Statement of Comprehensive Income
For the six month period to 30 September 2017 - unaudited
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ---------
Loss for the period (8,029) (4,030) (9,118)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (1,433) 2,094 3,650
------ ------ ------
Other comprehensive (loss) /
profit for the period net of
tax (1,433) 2,094 3,650
------ ------ ------
Total comprehensive loss for
the period (9,462) (1,936) (5,468)
------ ------ ------
The accompanying notes are an integral part of these interim financial statements.
Consolidated Balance Sheet
As at 30 September 2017 Unaudited Unaudited Audited
as at as at as at
30 September 30 September 31 March
2017 2016 2017
Note GBP'000 GBP'000 GBP'000
------------------------------- ---- ------------ ------------ --------
Assets
Non-Current Assets
Goodwill 16,913 17,112 18,017
Other intangible assets 7,303 7,939 7,865
Property, plant and equipment 8,122 5,033 7,612
------ ------ ------
Total Non-Current Assets 32,338 30,084 33,494
Current Assets
Inventories 1,830 1,579 1,876
Trade and other receivables 7,798 5,758 4,982
Current income tax assets 594 1,130 274
Cash and cash equivalents 16,926 9,379 4,135
------ ------ ------
Total Current Assets 27,148 17,846 11,267
------ ------ ------
Total Assets 59,486 47,930 44,761
------ ------ ------
Equity and Liabilities
Equity
Issued share capital 427 274 276
Share premium 65,469 41,307 41,822
Retained earnings (18,204) (5,114) (10,175)
Share based payment reserve 941 389 567
Contingent consideration
reserve 10 608 10
Foreign exchange reserve 2,001 1,878 3,434
------ ------ ------
Total Equity 50,644 39,342 35,934
------ ------ ------
Liabilities
Non-current Liabilities
Finance lease liabilities 555 414 494
Deferred tax 5 1,850 2,006 2,014
------ ------ ------
Total Non- Current Liabilities 2,405 2,420 2,508
------ ------ ------
Current Liabilities
Trade and other payables 6,120 5,870 6,032
Finance lease liabilities 207 - 169
Provisions 110 298 118
------ ------ ------
Total Current Liabilities 6,437 6,168 6,319
Total Liabilities 8,842 8,588 8,827
------ ------ ------
Total Equity and Liabilities 59,486 47,930 44,761
------ ------ ------
------------------------------- ---- ------------ ------------ --------
The accompanying notes are an integral part of these interim financial statements.
The interim financial statements were approved by the Board of Directors on 11 December 2017 and were signed on its behalf by John Burt (Chief Executive Officer) and Julian Smith (Chief Financial Officer).
Consolidated Cash Flow Statement
For the six month period to 30
September 2017 Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ---------
Cash flows from operating activities:
Loss before income tax (8,365) (4,272) (9,465)
Depreciation of property, plant
and equipment 794 655 1,157
Profit on disposal of fixed assets - - (9)
Amortisation of intangible assets 361 374 723
Share based payments 374 193 412
Decrease in provisions - (64) (294)
Adjustment for foreign exchange
loss/(gain) 128 (51) 119
Net finance (income) / expense (149) 2 (277)
------ ------ ------
(6,857) (3,163) (7,634)
Working capital adjustments:
(Increase) / Decrease in trade
and other receivables (1,868) (442) 267
Decrease / (Increase) in inventories 16 (202) (461)
Increase / (Decrease) in trade
and other payables 433 (284) 5
------ ------ ------
Net working capital movements (1,419) (928) (189)
------ ------ ------
Cash (used in) operations (8,276) (4,091) (7,823)
Taxation received (4) 701 1,665
------ ------ ------
Net cash (used in) operating
activities (8,280) (3,390) (6,158)
Cash flows from investing activities:
Purchase of intangible assets - - (8)
Purchase of property, plant and
equipment (2,606) (983) (3,312)
Cash proceeds from the sale of
fixed assets - - 4
Interest received 10 7 27
------ ------ ------
Net cash used in investing activities (2,596) (976) (3,289)
Cash flows from financing activities:
Cash proceeds from share issues 24,998 30 29
Issue costs (1,200) - -
Capital element of finance lease
payments (103) - (118)
Interest paid (28) (9) (53)
------ ------ ------
Net cash generated from / (used
in) financing activities 23,667 21 (142)
------ ------ ------
Net increase / (decrease) in
cash and cash equivalents 12,791 (4,345) (9,589)
Cash and cash equivalents at
beginning of the period 4,135 13,724 13,724
------ ------ ------
Cash and cash equivalents at
end of the period 16,926 9,379 4,135
------ ------ ------
The accompanying notes are an integral part of these interim financial statements.
Consolidated Statement of Changes in Equity
As at 30 September 2017 - unaudited
Share Contingent Foreign
based consideration exchange Issued
payment reserve reserve Share Share Retained
reserve Capital Premium Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- -------------- --------- -------- -------- --------- -------
Balance at 1
April 2017 567 10 3,434 276 41,822 (10,175) 35,934
Comprehensive
income
Loss for the
year - - - - - (8,029) (8,029)
Other comprehensive
loss - - (1,433) - - - (1,433)
Transactions
with owners
Share-based
payments 374 - - - - - 374
Share capital
issued (i) - - - 151 24,847 - 24,998
Issue costs - - - - (1,200) - (1,200)
------ ------ ------ ------ ------ ------ ------
Balance at 30
September 2017 941 10 2,001 427 65,469 (18,204) 50,644
------ ------ ------ ------ ------ ------ ------
(i) The Company issued 75,757,576 Ordinary shares of GBP0.002 each on 21 April 2017 raising GBP25 million, with associated issue costs of GBP1.2 million, charged against share premium reserve.
For the six month period to 30 September 2016 - unaudited
Share Contingent Foreign
based consideration exchange Issued
payment reserve reserve Share Share Retained
reserve Capital Premium Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- -------------- --------- -------- -------- --------- -------
Balance at 1
April 2016 155 608 (216) 272 41,263 (1,026) 41,056
Comprehensive
income
Loss for the
year - - - - - (4,030) (4,030)
Other comprehensive
profit - - 2,094 - - - 2,094
Transactions
with owners
Share-based
payments 234 - - - 17 (58) 193
Share capital
issued - - - 2 27 - 29
------ ------ ------ ------ ------ ------ ------
Balance at 30
September 2016 389 608 1,878 274 41,307 (5,114) 39,342
------ ------ ------ ------ ------ ------ ------
Consolidated Statement of Changes in Equity continued:
For the year ended 31 March 2017 - audited
Share based Contingent Foreign Issued
payment consideration exchange share Share Retained
reserve reserve reserve capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------- -------------- --------- -------- -------- --------- -------
Balance at
1 April 2016 155 608 (216) 272 41,263 (1,026) 41,056
Comprehensive
income
Loss for the
year - - - - - (9,118) (9,118)
Other comprehensive
loss - - 3,650 - - - 3,650
Transactions
with owners
Share-based
payments 412 - - - - - 412
Share capital
issued (i) - (598) - 4 559 (31) (66)
------ ------ ------ ------ ------ ------ ------
Balance at
31 March 2017 567 10 3,434 276 41,822 (10,175) 35,934
------ ------ ------ ------ ------ ------ ------
The accompanying notes are an integral part of these interim financial statements.
Notes to the interim financial information
1. Basis of preparation
These unaudited condensed consolidated interim financial statements have been prepared in accordance with the AIM Rules and European Union endorsed International Financial Reporting Standards. These comprise the consolidated statement of comprehensive income, the consolidated interim balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related notes ("the condensed consolidated interim financial statements"). The Group has chosen not to adopt IAS 34, "Interim Financial Reporting", in the preparation of these condensed consolidated interim financial statements.
These condensed consolidated interim financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain financial assets at fair value, as required by IAS 39, "Financial instruments: Recognition and Measurement". The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2017.
These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for Abzena plc for the year ended 31 March 2017 were approved by the Board of Directors on 12 June 2017 and have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
These Group financial statements include the results for Abzena plc, its operating subsidiary companies PolyTherics Limited, Antitope Limited, Warwick Effect Polymers Limited, Denceptor Therapeutics Ltd, PacificGMP and The Chemistry Research Solution LLC; together with its intermediate holding companies as listed in full in note 1 of the 2017 annual report.
2. General information
Abzena plc is a public limited company incorporated and domiciled in England and Wales with registered number 08957107. The Company's registered office is Babraham Research Campus, Babraham, Cambridge, CB22 3AT.
The principal activity of the Group is that of life science research and development and the provision of services and technology licensing to the biopharmaceutical industry.
3. Segmental reporting
The Group has adopted IFRS 8, "Operating Segments". IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Chief Executive Officer.
The Directors are of the opinion that under IFRS 8 the Group has three operating segments; Biology research services, Chemistry research services and GMP manufacturing. However, the results of the segments are only reported and assessed to a "contribution level". The contribution analysis considered by the CEO represents cash generated by the laboratory based staff and direct management. The costs include the direct customer related and internal research and development material costs. Salary costs include total salary costs of the scientists carrying out customer related work or supporting research and development activity and directly attributable scientific management. Central costs are not allocated to segments.
Analysis of revenue by location of customer:
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ ---------
North America 6,436 7,039 14,251
Europe (excluding United Kingdom) 1,206 876 2,656
United Kingdom 954 443 787
Other 1,041 602 960
------ ------ ------
Total 9,637 8,960 18,654
------ ------ ------
Analysis of revenue by line of business:
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ ---------
Biology research services
Immunology 1,477 2,381 4,055
Protein engineering 754 774 1,548
Bioassay 73 - 16
------ ------ ------
2,304 3,155 5,719
Chemistry research services
Chemistry 3,277 3,501 6,846
Bio Analytical 259 - 115
Material re-imbursement (i) 176 - -
------ ------ ------
3,712 3,501 6,961
GMP manufacturing
Cell line development 500 569 1,204
Contract GMP manufacturing 1,721 1,428 4,112
Material re-imbursement (i) 972 - -
------ ------ ------
3,193 1,997 5,316
------ ------ ------
Total service revenue 9,209 8,653 17,996
Licence revenue 428 307 658
------ ------ ------
Total group revenue 9,637 8,960 18,654
------ ------ ------
(i) Separate Material reimbursement figures are not available for the comparative periods and are included within service revenue
Analysis of revenue, gross margin and contribution by segment:
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ---------
Service revenue
Biology research services 2,304 3,155 5,719
Chemistry research services 3,536 3,501 6,961
Material re-imbursement (i) 176 - -
Biomanufacturing services 2,221 1,997 5,316
Material re-imbursement (i) 972 - -
------ ------ ------
Total service revenue 9,209 8,653 17,966
------ ------ ------
Service gross margin
Biology 958 1,631 3,076
Chemistry 1,953 1,501 2,534
Biomanufacturing 664 342 1,840
Material re-imbursement (i) - - -
------ ------ ------
Total service gross margin 3,575 3,474 7,449
Licence revenue 428 307 658
------ ------ ------
Gross profit 4,003 3,781 8,107
------ ------ ------
(i) Material reimbursement figures are not available for the comparative periods and is included within service revenue
Analysis of contribution by segment:
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ ---------
Contribution
Biology research services 221 997 1,418
Chemistry research services 876 439 1,594
Biomanufacturing services (458) 95 654
------ ------ ------
Total contribution 639 1,531 3,666
------ ------ ------
Licence revenue 428 307 658
Other income 126 236 611
Overheads (8,552) (5,342) (12,777)
Depreciation and amortisation (1,155) (1,050) (1,900)
Finance income 149 46 277
------ ------ ------
Loss before income tax (8,365) (4,272) (9,465)
------ ------ ------
4. Finance income and expenses
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ---------
Finance income
Unrealised currency gains -
other - 101 -
Interest received 10 7 27
Net gains on financial instruments 167 - 303
------ ------ ------
Finance Income 177 108 330
------ ------ ------
Finance expenses
Bank interest & charges (7) (9) (33)
Net loss on financial instruments - (53) -
Interest expense on finance
lease liabilities (21) - (20)
------ ------ ------
Finance Expenses (28) (62) (53)
------ ------ ------
5. Taxation
Analysis of taxation (credit) in the period
The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure. The amount included in the financial information represents the credit receivable by the Group for the period.
Analysis of taxation credit in
the period: Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ---------
United Kingdom corporation tax (221) (138) (128)
Adjustment in respect of prior
period (5) - (14)
------ ------ ------
Total Current Tax (226) (138) (142)
Deferred Tax - (104) 18
Origination and reversal or
temporary differences (110) - (223)
------ ------ ------
Total Tax in the Consolidated
Statement of Comprehensive Income (336) (242) (347)
------ ------ ------
There is no current tax charge in the period as the Group has utilised losses brought forward and is entitled to a cash tax credit in the United Kingdom for certain research and development expenditure.
Deferred tax liability
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ ---------
Balance at 1 April 2,014 2,031 2,031
Deferred tax arising on intangible
fixed assets recognised in business
combination - - 374
Unwinding of deferred tax during
the year (106) (109) (206)
Movement in fixed asset temporary
differences 3 15 -
Movement in short term temporary
differences - (7) -
Foreign exchange translation
of deferred tax arising on intangible
fixed assets recognised in business
combination (61) 76 (185)
------ ------ ------
Total deferred tax liability 1,850 2,006 2,014
------ ------ ------
6. Losses per share
Basic losses per share is calculated by dividing the loss for the financial period by the weighted average number of Ordinary Shares in issue during the year. The losses and weighted average number of shares used in the calculations are set out below:
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
2017 2016 2017
----------------------------------------------- ------------ ---------
Losses per Ordinary Share
Loss for the financial year (GBP'000) (8,029) (4,030) (9,118)
Weighted average number of Ordinary
Shares (basic) (thousands) 204,940 136,977 137,177
Losses per Ordinary Share basic
(pence) (4p) (3p) (7p)
As net losses were recorded in the 6 months ended 30 September 2017, 30 September 2016 and the year ended 31 March 2017, the potentially dilutive share options are anti-dilutive for the purposes of the losses per share calculation and their effect is therefore not reflected.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGBDDGDBBGRD
(END) Dow Jones Newswires
December 12, 2017 02:00 ET (07:00 GMT)
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