Ergomed plc Interim Results (9653Q)

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Ergomed Plc	LSE:ERGO	London	Ordinary Share	GB00BN7ZCY67	ORD 1P

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Ergomed (LSE:ERGO)
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TIDMERGO

RNS Number : 9653Q

Ergomed plc

18 September 2017

PRESS RELEASE

Unaudited Interim results for the six months ended 30 June 2017

Strong first half financial performance - net service revenues up 53% and gross profit up 42%

Haemostatix programmes significantly advanced, PeproStat(TM) Phase IIb study ahead of schedule

London, UK - 18 September 2017: Ergomed plc, ("Ergomed", the "Company", AIM: ERGO) a company dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs, today announces its interim results for the six months ended 30 June 2017.

Commenting on the results, Dr Dan Weng, Chief Executive Officer of Ergomed plc, said:

"It has been a solid first half for Ergomed and we are pleased with both top-line growth and EBITDA for the period. We also had important data read-outs from our co-development partners in the half year and data from our own proprietary product PeproStat(TM) is expected in the next few weeks. I am confident that Ergomed is well positioned for further growth, both organic and through acquisition, and of the benefits this will bring to our customers, partners, employees and shareholders."

Financial highlights (unaudited)

   --      Net service revenues(1) up 53% to GBP19.5 million (H1 2016: GBP12.7 million) 
   --      Total revenues up 31% to GBP22.9 million (H1 2016: GBP17.6 million) 
   --      Gross profit up 42% to GBP7.5 million (H1 2016: GBP5.3 million) 
   --      EBITDA GBP1.5 million (H1 2016: GBP1.2 million) (note 10)

-- Adjusted EBITDA (including adjustments for share-based payment charge and acquisition costs) GBP1.8 million, the same as H1 2016 after an additional GBP1.0 million R&D spend in the half year (note 10)

   --      Operating profit GBP0.7 million (H1 2016: GBP0.8 million)

-- Contribution in kind to co-development projects decreased to GBP1.7 million in H1 2017 (H1 2016: GBP2.1 million)

Operational highlights

-- Service contracts with a value of GBP23 million (net of co-development discounts) signed through 31 July 2017

-- Strong backlog of signed contracts of over GBP70 million at 31 July 2017 (31 July 2016: GBP60 million)

-- Peter George, former CEO of Clinigen Group plc and non-executive director of Ergomed, appointed Chairman

-- Positive data from the Phase II trial of lorediplon in insomnia of co-development partner, Ferrer

-- Co-development partner Aeterna Zentaris announced negative results from the Phase III trial of Zoptrex in endometrial cancer

Post period-end highlights

-- Dr Dan Weng appointed Chief Executive Officer, with Dr Miroslav Reljanovic, founder and former CEO, becoming Executive Vice Chairman

-- FDA lifted clinical hold on co-development partner CEL-SCI's Phase III trial of Multikine(R) in head and neck cancer

-- PeproStat(TM) Phase IIb trial patient recruitment completed in July, six months ahead of schedule. Data are expected around the end of October 2017

(1) To align with industry practice, Ergomed is disclosing reimbursement revenue and reimbursable expenses as part of total revenues and separately from cost of sales, respectively. Net service revenues exclude reimbursement revenues.

Enquiries:

 
 Ergomed plc                                           Tel: +44 (0) 
                                                        1483 503205 
 Dan Weng (Chief Executive Officer) 
 Stephen Stamp (Chief Financial 
  Officer) 
 
 Numis Securities Limited                              Tel: +44 (0) 
                                                       20 7260 1000 
 Michael Meade / Freddie Barnfield 
  (Nominated Adviser) 
 James Black (Joint Broker) 
 
 N+1 Singer                                            Tel: +44 (0) 
                                                       20 7496 3000 
 Alex Price (Joint Broker) 
 
 Consilium Strategic Communications                    Tel: +44 (0) 
  - for UK enquiries                                   20 3709 5700 
 Chris Gardner / Mary-Jane              ergomed@consilium-comms.com 
  Elliott 
  Ivar Milligan / Philippa Gardner 
 
 MC Services - for Continental                         Tel: +49 211 
  European enquiries                                      5292 5222 
 Anne Hennecke

About Ergomed

Ergomed provides specialist services to the pharmaceutical industry and develops drugs both wholly-owned and through partnerships. Ergomed's fast-growing, profitable service offering spans all phases of clinical development and post-approval pharmacovigilance and medical information. Drawing on more than 20 years of expertise in drug development, Ergomed is also building a growing portfolio of drug development partnerships and programmes, including wholly-owned proprietary products for the treatment of surgical bleeding. For further information, visit: http://ergomedplc.com

Forward Looking Statements

Certain statements contained within the announcement are forward looking statements and are based on current expectations, estimates and projections about the potential returns of Ergomed plc ("Ergomed") and industry and markets in which Ergomed operates, the Directors' beliefs and assumptions made by the Directors. Words such as "expects", "anticipates", "should", "intends", "plans", "believes", "seeks", "estimates", "projects", "pipeline" and variations of such words and similar expressions are intended to identify such forward looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward looking statements or expectations. Among the factors that could cause actual results to differ materially are: the general economic climate, competition, interest rate levels, loss of key personnel, the result of legal and commercial due diligence, the availability of financing on acceptable terms and changes in the legal or regulatory environment.

These forward-looking statements speak only as of the date of this announcement. Ergomed expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Ergomed's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.

Interim Management Report

Introduction

The Company's profitable services business includes the provision of pre-approval and post-approval services to the pharmaceutical and biotech industry. Services include all phases of clinical research as well as post-marketing drug safety surveillance and medical information through its subsidiaries PrimeVigilance and PharmInvent.

Ergomed is also building a portfolio of development products by providing in-kind clinical research services in return for minority carried interests in its partners' development products. Ergomed will receive a share of any future proceeds generated from the commercialisation of the partnered drug asset. The Company's product portfolio was enhanced with the acquisition of Haemostatix in May 2016 which included two lead proprietary products for the treatment of surgical bleeding.

Ergomed has continued to show progress in the first half of 2017 in both key components. The four acquisitions made in 2016 have been successfully integrated and the Company expects a major value inflexion point with the publication of data in the next few weeks from the Phase IIb proof of concept trial of PeproStat(TM) in the treatment of surgical bleeding. The Board remains confident about opportunities for further growth, both organic and through acquisition.

Services

Consolidated net service revenues for H1 2017 increased by 53% to GBP19.5 million (H1 2016: GBP12.7 million). Consolidated net service revenue includes GBP8.7 million from pre-approval clinical research services (H1 2016: GBP7.2 million) and GBP10.7 million from drug safety monitoring and medical information services (H1 2016: GBP5.5 million). Included in drug safety monitoring and medical information services is PharmInvent revenues of GBP2.2 million (H1 2016: GBP nil). Organic growth of net service revenue in H1 2017 compared with H1 2016 was 36%.

Revenues from clinical research services were impacted in H1 2017 by lower reimbursement revenue due to the stage of the projects in progress.

A strong first half in drug safety monitoring and medical information has seen PharmInvent, acquired in November 2016, collaborating closely with PrimeVigilance and together, the two companies have already won new business. Now under the common leadership of Dr Jan Petracek, PrimeVigilance and PharmInvent are expected to be fully integrated under a single brand in 2018.

O+P and GASD, acquired together in June 2016, have been merged and co-located in Cologne, Germany. The merged company has been re-named Ergomed Centre for Data management and Statistics (Ergomed CDS) GmbH.

Overall demand for services remains robust with contracts with a value of GBP23 million (net of co-development discounts) signed through 31 July 2017. Backlog of signed contracts at 31 July 2017 was over GBP70 million.

With a track record of successful identification and integration of acquisitions, the Company continues to pursue opportunities to acquire services businesses which fulfil the criteria set out at IPO; namely to become the global leader in pharmacovigilance services, the leading CRO in orphan drug development and strengthen its CRO network by filling in geographies and / or service offerings.

Product development

Co-development

Ergomed shares in the upside potential of promising products by contributing to the cost of clinical trials through significantly reduced fees in return for a carried interest in any future revenues of the product, including any out-licensing milestones and product sales. The status of Ergomed's current partnerships is:

CEL-SCI (NYSE: CVM):

CEL-SCI's lead product Multikine(R) is an immunotherapeutic agent (a mixture of cytokines including interleukins, interferons, chemokines, and colony stimulating factors) being developed as a potential first-line head and neck cancer therapy and has the potential to be a first in class immunotherapy. Following a number of discussions with the FDA, the clinical hold for Multikine(R) has been lifted and the study is continuing as initially planned. The study is now fully recruited and patients are being monitored in the follow-up phase to look for the effect of the treatment on overall patient survival.

Aeterna Zentaris Inc. (NASDAQ: AEZS; TSX: AEZ):

Zoptrex(TM) (zoptarelin doxorubicin) did not show a treatment benefit over doxorubicin and the project has been terminated.

Ferrer:

Lorediplon is a novel, longer-acting non-benzodiazepine hypnotic drug that modulates the GABAa receptor for the treatment of insomnia. In February 2017, the Company announced the successful outcome of the Phase II study which met the primary end-point and many of the secondary end-points. Ferrer is now seeking partnerships with other companies to continue the development of the product.

Modus Therapeutics:

Sevuparin is an innovative, proprietary polysaccharide drug which has potential to restore blood flow and prevent further microvascular obstruction in patients with sickle-cell disease. The study is recruiting well and has passed several data safety monitoring committee reviews.

Asarina Pharma:

The launch of the collaboration with Asarina Pharma to develop sepranolone, a therapy for pre-menstrual dysphoric disorder, is underway with all the preparatory activities started to get the Phase II study actively recruiting as soon as possible. It is expected that the first patient will be dosed at the beginning of next year.

Haemostatix

Haemostatix, acquired in May 2016, has seen both products for the treatment of uncontrolled surgical bleeding progress in H1 2017. The CMC development of PeproStat(TM) and ReadyFlow(TM) has significantly advanced, while the 169 patient Phase IIb proof of concept trial of PeproStat(TM) in surgical bleeding completed recruitment in July 2017, approximately six months ahead of schedule. Results are expected at the end of October 2017. If successful, this study could open up significant opportunities for Ergomed, with a Phase III-ready asset which could reach the market by 2020.

The second product, ReadyFlow(TM), has a preclinical development programme agreed with the authorities and is proceeding in line with expected plans. Dosing of the first patient is expected by mid-2018.

Management

Upon Rolf Stahel's retirement from the Board on 31 March 2017, Peter George was elected Chairman. As of 1 July 2017, Dr Dan Weng was appointed Chief Executive Officer (CEO) of the Company and joined the Board. Dr Miroslav Reljanovic, founder and former CEO, assumed the role of Executive Vice Chairman. Neil Clark, former CEO of PrimeVigilance, resigned from the Board in April 2017 but remains a consultant and non-executive director of PrimeVigilance.

Financial summary

Total revenues for H1 2017 increased by 31% to GBP22.9 million (H1 2016: GBP17.6 million). Total revenues include revenue from reimbursed costs. To align with industry practice, Ergomed is disclosing reimbursement revenue and reimbursable expenses as part of total revenues and separately from cost of sales, respectively. Consolidated net service revenues, which exclude reimbursement revenue, for H1 2017 increased by 53% to GBP19.5 million (H1 2016: GBP12.7 million). Organic growth in net service revenue in H1 2017 compared with H1 2016 was 36%.

Gross profit increased by 42% to GBP7.5 million from GBP5.3 million in H1 2016. Gross margin, measured as gross profit as a percentage of net service revenue, decreased to 39% from 42% in H1 2016, largely driven by a change in mix of contracts.

Administrative expenses increased by 30% to GBP5.7 million from GBP4.4 million in H1 2016, driven by acquisitions in H2 2016, expanded operations and strengthened management and corporate infrastructure offset by lower M&A costs.

Research and development expenses were GBP1.1 million (H1 2016: GBP0.1 million) and related to chemistry, manufacturing and controls (CMC) costs for PeproStat(TM) and ReadyFlow(TM), external costs related to the Phase IIb clinical trial of PeproStat(TM) and the Haemostatix overhead. Haemostatix was acquired in May 2016.

EBITDA was GBP1.5 million (H1 2016: GBP1.2 million). Adjusted EBITDA, which is adjusted for GBP0.3 million share-based payment charge and non-recurring M&A costs was GBP1.8 million (H1 2016: GBP1.8 million). Both EBITDA and adjusted EBITDA are stated after research and development costs which increased by GBP1.0 million in H1 2017 compared with H1 2016.

Operating profit was GBP0.7 million (H1 2016: GBP0.8 million).

Cash in hand as of 30 June 2017 was GBP2.4 million (30 June 2016: GBP9.9 million). Net cash outflow from operations was GBP1.3 million (H1 2016: GBP0.9 million outflow). Net cash outflow included GBP2.5 million working capital outflows (H1 2016: GBP2.6 million outflow) including GBP2.0 million related to an increase in receivables, of which the receivable from CEL-SCI was the largest component. In August 2017, CEL-SCI issued 480,000 shares to Ergomed which may be sold with the net proceeds reducing the receivable. Investing activities included GBP0.3 million (H1 2016: GBP0.2 million) and GBP0.4 million (H1 2016: GBP0.2 million) investments in tangible assets and software respectively.

Current trading and outlook

Overall, the Company has performed in line with expectations. As experienced in H1 2017, clinical research services revenues for the full year 2017 are expected to be impacted mainly by lower reimbursement revenue due to the stage of projects in progress and deferment of two trials by sponsors. In contrast, drug safety monitoring and medical information services continues to exceed expectations and is on track to deliver another year of out-performance.

In line with strategy, the Company is actively evaluating potential service business acquisitions that would increase profitability and complement the current range of service offerings and/or expand Ergomed's geographical coverage. The Company also has a number of leads under discussion for additional co-development partnerships and looks forward to the results of the PeproStat(TM) trial in late October 2017.

In summary, the Board remains positive on the outlook for the Company.

INDEPENT REVIEW REPORT TO ERGOMED PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 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 inquiries, 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 (UK and Ireland) 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 condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with accounting policies the group intends to use in preparing its next annual financial statements and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Statutory Auditor

Cambridge, UK

18 September 2017

Condensed Consolidated Income Statement