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TRX Tissue Regenix Group Plc

62.50
-0.50 (-0.79%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Tissue Regenix Group Plc LSE:TRX London Ordinary Share GB00BNTXR104 ORD 0.1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.50 -0.79% 62.50 62.00 63.00 62.50 62.50 62.50 2,827 08:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Pharmaceutical Preparations 24.48M -2.7M -0.0382 -16.36 44.11M

Tissue Regenix Group PLC Annual results for period ended 31 December 2017 (8422I)

26/03/2018 7:00am

UK Regulatory


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TIDMTRX

RNS Number : 8422I

Tissue Regenix Group PLC

26 March 2018

Tissue Regenix Group plc

Annual results for period ended 31 December 2017

Group Revenues increase to GBP5.2m

Acquisition of CellRight Technologies completed

Significant commercial agreements signed

Leeds, 26 March 2018 - Tissue Regenix Group (AIM:TRX) ("Tissue Regenix" or "The Group") the regenerative medical devices company, today announces its results for the 12 months ended 31 December 2017.

Corporate and Recent Highlights

   --   Completed acquisition of CellRight Technologies, August 2017 
   --   Delivered GBP40m equity fundraise, August 2017 
   --   Appointed Steve Couldwell as CEO, November 2017 

-- Signed significant strategic distribution partnerships with Arthrex, Inc. and ARMS medical, Q1 2018

   --   Gained complete Medicare coverage for DermaPure in the US, Q1 2018 

Operational Highlights

-- Launched additional product lines, addressing surgical reconstructive procedures and dental applications

   --   Began processing of SurgiPure XD at the UK facility for US market 
   --   Recognised distribution synergies following the CellRight Acquisition 
   --   Transfer of DermaPure manufacturing on schedule 

Financial Highlights

(Note: 2016 comparatives are for the 11 months ended 31 December 2016)

   --   Revenues increased more than three-fold to GBP5.2m (2016: GBP1.4m) 

o Dermapure - sales increased by 46% to GBP1.9m (2016: GBP1.3m)

o Controlled joint venture - sales increased more than 8-fold to GBP1.1m (2016: GBP0.1k)

o CellRight - sales momentum maintained - five months post-acquisition were GBP2.2m

   --   Gross profit increased to GBP2.6m (2016: GBP0.7m) 
   --   Operating loss before exceptional items of GBP9.7m (2016: GBP11.1m) 
   --   Operating loss GBP10.8m (2016: GBP11.1m) 
   --   Cash at 31 December 2017 of GBP16.4m 
   --   Equity issued during the year of GBP40.0m raised cash of GBP37.7m net of costs 

-- Cash of GBP19.9m was used for investment in CellRight Technologies (towards total consideration at fair value of up to GBP22.7m) together with GBP1.0m used to pay costs

Steve Couldwell, CEO, Tissue Regenix Group, commented: "2017 was a transformative year for the Tissue Regenix Group with the completion of the acquisition of CellRight Technologies providing a complementary regenerative platform technology, state-of-the-art manufacturing facility in San Antonio, TX, and a vastly experienced team of research, regulatory and manufacturing personnel.

This has brought a step- change in the strategic vision of the Company, as we enter a new phase of commercialisation, highlighted by the post-period announcements of strategic partnerships with ARMS Medical for DermaPure, and Arthrex, Inc. for the distribution of CellRight's innovative 'BioRinse' portfolio. Moving forward strategic partnerships of this nature will be of increasing importance to the Company, as we look for ways to increase our market penetration and maximise our research and manufacturing capabilities to deliver differentiated products, and a long term return on investment.

The underlying dCELL(R) business in the US continued to perform well. With a realigned strategy focusing on the inpatient setting where the clinical benefits of DermaPure are pertinent, and where the advantages of our 'Innovative Technology' awards with the Premier and Vizient Group Purchasing Organisations can be recognised. The expansion of DermaPure's use into surgical applications; primarily in the orthopaedics and urogynaecology space, has allowed us to access new clinical areas. Recognising this expanded potential, we rebranded our wound care division 'TRX BioSurgery' in February 2018.

In Europe, the CE mark approval for OrthoPure XT is ongoing, and we continue to undertake pre-approval marketing activities as we position ourselves for launch. We remain optimistic that this approval will be received to allow a roll out during 2018. Controlled joint venture GBM-V also continues to progress through the regulatory body for the approval of the CardioPure heart valves, and in tandem has initiated a revenue stream through the processing of allograft corneas.

The performance of CellRight in the five months since the acquisition had a material effect on the Group's revenue figure, and we continue to look at synergistic opportunities to maximise the cross selling potential of the enlarged Group. CellRight has a successful OEM and distributor commercial model, and continues to establish strategic partnerships. We are developing a blended commercial model combining the historic branded, direct sales model of Tissue Regenix Group with the CellRight white label, indirect sales approach and expect that this will provide significant growth opportunities moving forward.

We now have two complementary platform technologies which allows us to offer a broader portfolio to our customers and bring further clinical benefits to patients

With the initial integration of the Companies now complete we are optimistic around the Group's potential for 2018 and beyond."

For more Information:

 
 Tissue Regenix Group plc                   Tel: 0330 430 3073 / 07920272 
  Caitlin Pearson, Head of Communications    441 
-----------------------------------------  ------------------------------ 
 
 Jefferies International Ltd                Tel: 020 7029 8000 
  Simon Hardy / Christopher Binks 
-----------------------------------------  ------------------------------ 
 
 FTI Consulting                             Tel: 0203 727 1000 
  Brett Pollard / Mo Noonan 
-----------------------------------------  ------------------------------ 
 

About Tissue Regenix

Tissue Regenix is a leading medical devices company in the field of regenerative medicine. Tissue Regenix was formed in 2006 when it was spun-out from the University of Leeds, UK. The company's patented decellularisation ('dCELL(R) ') technology removes DNA and other cellular material from animal and human soft tissue leaving an acellular tissue scaffold which is not rejected by the patient's body and can then be used to repair diseased or worn out body parts. Current applications address many critical clinical needs such as sports medicine, heart valve replacement and wound care.

In November 2012 Tissue Regenix Group plc set up a subsidiary company in the United States - 'Tissue Regenix Wound Care Inc.', rebranded TRX BioSurgery in February 2018. January 2016 saw the establishment of joint venture GBM-V, a multi- tissue bank based in Rostock, Germany.

In August 2017 Tissue Regenix acquired CellRight Technologies(R) , a biotech company that specializes in regenerative medicine and is dedicated to the development of innovative osteoinductive and wound care scaffolds that enhance healing opportunities of defects created by trauma and disease. CellRight's human osteobiologics may be used in spine, trauma, general orthopedic, foot & ankle, dental, and sports medicine surgical procedures.

Chairman Introduction and Highlights

"I am very pleased with the progress the Group has made, delivering against our strategic objectives for the year. We have completed a transformative acquisition, delivered 46% growth in DermaPure sales and expanded the clinical applications of our products to access new healthcare professionals whilst successfully progressing integration activities. We now have a more differentiated and diverse product portfolio, robust pipeline and the route to market from which to drive sustainable long-term growth."

Our Business

The Group has performed well against our strategic milestones for the year. The acquisition of CellRight Technologies is a transformative opportunity for the Group, combining two innovative, regenerative platforms with large addressable markets and synergistic growth opportunities. With the appointment of Steve Couldwell as CEO, the Board is confident that it has the leadership in place to take the company to the next stage and a comprehensive review of the development pipeline is ongoing. With our augmented, established product portfolio generating a growing level of sales, we have identified key development assets to focus our commercial resources behind, and we are confident that following final product validation and transfer of manufacturing in-house, the newly focused strategy will drive significant shareholder returns.

Financial Performance

Overall Group performance

The Group delivered revenues of GBP5,233K in the 12 months to 31 December 2017 a 263% increase when compared to the 11 month period to December 2016.

Organic DermaPure sales grew 46% in the US to GBP1,932K, and the commercial traction of the European controlled joint venture continued with increased revenues to GBP1,135K.

Following the equity fundraise undertaken in August 2017, the Group has a robust cash position to fund the near term future of the enlarged Group and we maintain our expectation that the Group will be cash break even during 2020.

Leadership

In November 2017, we announced the appointment of Steve Couldwell as CEO of the Group. Steve succeeds Antony Odell who stepped down in October 2017 after nine years leading the Group. We would like to thank Antony for his leadership during the Group's early years.

Steve has experience spanning over 25 years in the Medical Device space and a proven track record of delivering revenue and profit growth. He has had an extensive career including Smith & Nephew and more recently, Sanofi BioSurgery based in Boston, Massachusetts. Having held senior commercial positions in both the US and Europe, Steve has the necessary skill set to drive the next stages of the Group's commercial strategy required to deliver shareholder returns.

Following the resignation of Paul Devlin on 30 November, we have appointed an interim CFO and initiated a search for a permanent candidate.

Our people

The Board and I would like to extend our thanks to our employees and partners, especially throughout this year of significant change. With the integration of CellRight Technologies, we welcomed a new team in the US, led by CEO Jesus Hernandez, and the addition of their experience and the ongoing commitment of all our employees remain fundamental to our success.

CEO Operational Review

2017 was a transformational year for the Tissue Regenix Group.

The acquisition of CellRight Technologies and successful equity fundraise augments our commercial opportunity, financial position and distribution outreach of the Group; combining two complementary platform technologies across key clinical markets in an expanding number of territories.

Growth in our dCELL(R) Technology product portfolio was underpinned by a 46% increase in DermaPure sales. With its first full year of sales, controlled joint venture GBM-V increased revenue by 8 fold to GBP1.1m. The contribution of CellRight Technologies, acquired on 9 August 2017, included in the year end figure means we have increased overall Group revenue to over GBP5m.

Alongside the acquisition of CellRight Technologies we have commenced a review of the enlarged Group's product pipeline and opportunities to establish the best strategy to drive the Group forward.

Business developments and product pipelines

TRX BioSurgery (previous Tissue Regenix Wound Care, Inc)

DermaPure has proven successful in a number of clinical applications outside of the traditional advanced wound care settings. With adoption by the acute surgical and wound reconstruction markets, due to its impressive clinical outcomes with a single application, DermaPure has seen significant uptake in the orthopaedic trauma and urogynaecology arenas where treatment innovation has been in high demand.

Having identified an opportunity in this market, we have signed an exclusive distributor agreement with ARMS Medical, a specialist urogynaecology distributor in the United States to maximise this opportunity, leveraging their strong relationships with Key Opinion Leaders and surgeons. The partnership allows our direct sales force to remain focussed on the in-patient woundcare, plastics, orthopaedics and general surgery sales channels.

Alongside this, the addition of CellRight's advanced wound care products give the Group a wide product portfolio in this field, offering physicians access to DermaPure, a room temperature stable decellularised single application allograft, Matrix IQ, a frozen or freeze dried decellularised allograft, and AmnioWorks, derived from amniotic tissue.

Following the end of the period, Tissue Regenix Wound Care Inc. was rebranded as TRX BioSurgery.

dCELL(R) Orthopaedics

Changes to Medical Device Regulations have extended the timeline to receive CE marking for OrthoPure XT (xenograft tendon) within the EU. However, this has resulted in the opportunity to submit an extension to this application to include other ligament indications accelerating the broadening of the commercial opportunity. Subject to approval, this would allow OrthoPure XT to be utilised not only in primary and revision ACL reconstruction, but also procedures in small ligaments in the knee, expanding utilisation and broadening our label claims. We have commenced pre-launch activities and have engaged European distributors in selective key markets to facilitate a timely roll out once country registrations have been received.

The OrthoPure XT clinical data collected at one year showed the implant to be comparable, and in some indications, preferable to the current gold standard treatment, an autograft harvested from the hamstring and without the additional rehabilitation of an autograft procedure.

This clinical data has also been used to validate the potential for a pre-clinical trial in the US. As reported previously we have been in discussions with the FDA and it is expected that this pre-clinical work will commence during 2018 with the support of our Orthopaedic Clinical Advisory Board.

The technology transfer for the production of OrthoPure HT (allograft ligament), at the CellRight facility continues according to plan and we expect the first product to be available in H2 2018. As this is a human tissue derived application, it can be approved under the HCT/P pathway for minimally manipulated tissue thus expediting the time to market. This would serve as a pathfinder validating the dCELL(R) Technology within the US Orthopaedic market.

Cardiac and GBM-V

The regulatory submission for CardioPure dCELL(R) allograft pulmonary and aortic heart valves, continues to progress through the German regulatory authorities. The clinical data generated by Dr Francisco da Costa, our clinician partner in Brazil, continues to demonstrate the clinical relevance and advantages of these transplants even after more than 10 years of follow up. Subject to the regulatory process we anticipate that approval will be received for launch during 2019.

In addition to the preparation and commercialisation of CardioPure, the controlled joint venture in Germany has captured a 12%([1]) market share in its first year of operations with processed corneas. We expect to release further cryo-preserved tissues throughout the year.

Orthopaedics and Dental - CellRight Technologies

CellRight Technologies officially became a part of the Tissue Regenix Group in August 2017.

Based around a proprietary processing technology 'BioRinse(R)', CellRight produces a portfolio of inductive, verified bone matrices in different physical forms to address clinical indications in the orthopaedic, spine, dental and general surgery procedures.

BioRinse(R) offers a complementary platform Technology to dCELL(R), allowing the Group to address regenerative solutions for both soft tissue and bone.

DentalFix(R) a portfolio of traditional as well as innovative, dental biologics validated as being osteoinductive, was launched. The dental market is an area in which we see a significant opportunity for the Group with both dCELL(R) and BioRinse(R) products, and currently comprises around 20% of CellRight sales.

CellRight has reached several milestones since the completion of the acquisition. In October they commenced the production of AmnioWorks(R), an advanced wound care product derived from human amniotic membrane. Alongside this, additional sizes of their frozen and freeze dried wound care product Matrix IQ were released to address larger surgical site procedures.

With no direct sales force, CellRight based their business model around establishing strategic partnerships for distribution of both their white label (OEM) as well as branded products. These partnerships have continued to gain traction and we expect to see further partnerships develop in the coming year.

CellRight delivered on their revenue expectations during 2017 and we continue to see increasing commercial traction and momentum. We expect to report positive advances with the CellRight portfolio during 2018.

Integration

The integration process has continued to progress according to plan and we expect the initial commercial and financial synergies to materialise in H1 2018.

The technology transfer for DermaPure production has been initiated. The completion of residual DNA testing returned positive results, demonstrating over 99% removal of DNA from the tissue. We expect that this process will complete ahead of schedule with our first CellRight-processed DermaPure becoming available during H1 2018. Having our own in-house source, of DermaPure manufactured in the US, for the US market, will support supply from our relationship with CTS, removing the risk of single sourcing and ensuring that our product inventory can align with customer demand.

In October, the Tissue Regenix Wound Care office, also based in San Antonio, TX, moved into the CellRight facility, allowing all US operations to be centralised in one location. A shared services infrastructure has been implemented and the advantages of a cross selling distribution and partnership network are beginning to be realised.

Post period developments

Following the reported period, the Group reached a number of regulatory and commercial milestones which will play an important part in the strategy and commercial success of the Group moving forward.

Fundamental to this was the announcement of a long-term, multi-year distribution agreement with Arthrex, Inc. for CellRight's osteobiologic products. Arthrex is one of the world's leading sports medicine businesses and a premier innovator of orthopaedic surgical solutions. This is the first agreement of this nature to be signed since completing the acquisition and paves the way for the Group to pursue relationships with other strategic partners.

In order to expedite a route to market in Europe for the CellRight products Tissue Regenix applied for a Human Tissue Authority licence and we expect this to be granted imminently, allowing for the import of CellRights osteobiologics to the manufacturing facility in Leeds for direct distribution. It is expected that the first sales under this approval will commence in H2 2018.

Further to this, initial manufacturing for commercial distribution of SurgiPure XD has begun at the Leeds facility for export to the US where it is approved under the 510(k) market clearance pathway. We are in discussions with potential partners to determine the optimal route to market.

Outlook

The Group has reached a significant inflection point in terms of its development as a commercial entity. Having successfully completed the acquisition and integration of CellRight Technologies we now have two complementary and highly valuable regenerative technology platforms and a comprehensive product portfolio. Looking forward, we have a diverse distribution network, a strengthened commercial management team and significant opportunities to increase our commercial footprint both in the US, and international markets.

The Group is well positioned for future growth with a clearly defined strategy, strong leadership and a robust product portfolio and pipeline. The CellRight acquisition allows for acceleration of our route to market; specifically, for the dCELL(R) business, and offers an enhanced product portfolio, which strengthens our ability to increase our market adoption and penetration. This was demonstrated during Q1 2018 where we announced strategic distribution agreements with ARMS Medical, a specialist urogynaecology distributor for DermaPure, and Arthrex, Inc. a world leader in orthopaedic sports medicine.

We are grateful for the continued support of our shareholders throughout the year. Their commitment enables us to continue to advance the strategic vision of the Group which we are confident will create significant value as we accelerate the commercialisation of our product portfolio.

Sales in both CellRight and BioSurgery have had a strong start to the year, including shipments under two significant distributor agreements. With the recent launch of the CellRight DentalFix portfolio and AmnioWorks product, the approval of the OrthoPure XT CE mark and additional BioSurgery product line extensions expected to come onstream throughout the year, 2018 is set to be a year of significant newsflow, increasing commercial traction and revenue growth.

Trading for 2018 remains in line with Board expectations.

Financial Overview

Note: 2016 comparatives are for the 11 months ended 31 December 2016.

Sales

In the year ended 31 December 2017 revenue increased by 263% to GBP5,233K (2016: GBP1,443K). Revenue from existing businesses increased by 113% to GBP3,067K (2016: GBP1,443K). Revenue from CellRight was GBP2,166K (2016: GBPnil) since its acquisition on 09 August 2017.

Cost of sales and gross profit

Cost of sales includes cost of product of GBP2,039K (2016: GBP354K) and third party commissions of GBP588K (2016: GBP376K). Gross profit increased by 265% to GBP2,606K (2016: GBP713K).

Trading results

Administrative expenses increased by GBP1,649K from GBP11,773K to GBP13,422K. These included GBP1,098K of exceptional costs. Other costs increased by GBP551K. Overheads included staff costs (55%), sales and marketing (1%), research and development (11%), establishment and administration costs (33%). Operating loss was GBP10,816K (2016: GBP11,060K).

CellRight was acquired on 9 August 2017 and the operating profit of GBP277K for the period to 31 December 2017 is included within the consolidated result.

Exceptional items

Non-recurring costs include the costs of acquisition of CellRight of GBP996K and GBP102K of legal costs in relation to the LifeNet litigation which were written off in arriving at the operating loss. A further GBP2,258K was set off against the share premium account arising on the issue of new shares.

Finance income

Finance income of GBP47K (2016: GBP114K) represents interest earned on cash deposits.

Taxation

Net taxation was a credit of GBP1,348K (2016: credit GBP1,034K). The Group submits enhanced research and development tax claims and elects to exchange tax losses for a cash refund. The refund expected for the year ended 31 December 2017 is GBP799K. (2016: GBP875K), 2016 R&D tax credits were received in January 2018. Tax payable of GBP31K (2016: GBPNil) represents corporation tax payable in the US on the profits of CellRight since acquisition.

Gross tax losses carried forward in the UK were GBP35,819K (2016: GBP32,037K). The Group does not currently pay tax in the UK. A deferred tax asset has not been recognised as the timing and recoverable value of the tax losses is uncertain.

Loss for the year

Loss for the year was GBP9,421K (2016: Loss GBP9,912K). The number of shares in issue during the year was 1,170,990,924 (2016: 760,124,264) resulting in a basic loss per share of (1.00p) (2016: loss (1.29p))

Balance sheet

Cash absorbed by operations was GBP9,786K (2016: GBP10,811K)

The Company issued shares by way of a placing and subscription of shares which were admitted to AIM on 9 August 2017. This raised proceeds of GBP40,000K which, after expenses of GBP2,318K netted GBP37,682K.

On 9 August 2017 the Group acquired CellRight for a maximum consideration of GBP23,078K of which GBP19,945K was paid to the vendors on the acquisition date and GBP3,133K is payable contingent upon achieving performance criteria. The fair value of the contingent consideration is assessed at GBP2,718K. The fair value of the net assets acquired was assessed at GBP7,359K. This includes GBP4,374K attributed to intangible assets not previously recognised in the financial statements of CellRight. Goodwill on acquisition was GBP15,304K.

At 31 December 2017 the Group had net assets of GBP39,522K (2016: GBP11,536K) of which cash in hand totalled GBP16,423K (2016: GBP8,173K)

Going Concern

The Group's forecasts indicate it has sufficient resources until more than one year from the date of this report.

Current trading and prospects

There has been a strong start in sales of both CellRight and BioSurgery product, including shipments under two significant distributor agreements. The integration of CellRight is progressing well. 2018 promises to be a further year of revenue generation and product launch. Trading for 2018 remains in line with expectations.

Consolidated Statement of Comprehensive Income for the year ended 31 December 2017

 
                                                        Year to      11 Months 
                                                    31 December             to 
                                                           2017    31 December 
                                                                          2016 
                                           Notes         GBP000         GBP000 
----------------------------------------  ------  -------------  ------------- 
 REVENUE                                     2            5,233          1,443 
 Cost of sales                                          (2,627)          (730) 
----------------------------------------  ------  -------------  ------------- 
 GROSS PROFIT                                             2,606            713 
 Administrative expenses before 
  exceptional items                          2         (12,324)       (11,773) 
 Exceptional items                                      (1,098)              - 
----------------------------------------  ------  -------------  ------------- 
 Total administrative expenses                         (13,422)       (11,773) 
----------------------------------------  ------  -------------  ------------- 
 OPERATING LOSS                                        (10,816)       (11,060) 
 Finance income                                              47            114 
----------------------------------------  ------  -------------  ------------- 
 LOSS BEFORE TAXATION                                  (10,769)       (10,946) 
 Taxation                                    3            1,348          1,034 
----------------------------------------  ------  -------------  ------------- 
 LOSS FOR YEAR                                          (9,421)        (9,912) 
----------------------------------------  ------  -------------  ------------- 
 
 ATTRIBUTABLE TO: 
 Equity holders of the parent                           (9,221)        (9,786) 
 Non-controlling interests                                (200)          (126) 
----------------------------------------  ------  -------------  ------------- 
                                                        (9,421)        (9,912) 
----------------------------------------  ------  -------------  ------------- 
 
 OTHER COMPREHENSIVE INCOME: 
 Foreign currency translation 
  differences - foreign operations                        (614)            (1) 
 TOTAL COMPREHENSIVE EXPENSE FOR 
  THE YEAR                                             (10,035)        (9,913) 
----------------------------------------  ------  -------------  ------------- 
 
 ATTRIBUTABLE TO: 
 Equity holders of the parent                4          (9,835)        (9,787) 
 Non-controlling interests                                (200)          (126) 
----------------------------------------  ------  -------------  ------------- 
                                                       (10,035)        (9,913) 
----------------------------------------  ------  -------------  ------------- 
 
 LOSS PER SHARE 
 Basic and diluted on loss attributable 
  to equity holders of parent                4          (1.00)p        (1.29)p 
 

The loss for the period arises from the Group's continuing operations.

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Financial Position for the year ended 31 December 2017

 
                                          31 December   31 December 
                                                 2017          2016 
                                  Notes        GBP000        GBP000 
-------------------------------  ------  ------------  ------------ 
 ASSETS 
 Non-current assets 
 Property, plant and equipment                  2,994         1,087 
 Intangible assets                             19,305           550 
 TOTAL NON-CURRENT ASSETS                      22,299         1,637 
-------------------------------  ------  ------------  ------------ 
 Current assets 
 Inventory                                      2,872           661 
 Trade and other receivables                    4,168         3,130 
 Cash and cash equivalents                     16,423         8,173 
-------------------------------  ------  ------------  ------------ 
 TOTAL CURRENT ASSETS                          23,463        11,964 
-------------------------------  ------  ------------  ------------ 
 TOTAL ASSETS                                  45,762        13,601 
-------------------------------  ------  ------------  ------------ 
 LIABILITIES 
 Non-current liabilities 
 Other payables                                 (635)             - 
-------------------------------  ------  ------------  ------------ 
 TOTAL NON-CURRENT LIABILITIES                  (635)             - 
-------------------------------  ------  ------------  ------------ 
 Current liabilities 
 Trade and other payables                     (4,781)       (2,065) 
-------------------------------  ------  ------------  ------------ 
 TOTAL CURRENT LIABILITIES                    (4,781)       (2,065) 
-------------------------------  ------  ------------  ------------ 
 Provisions 
  Deferred Tax                                  (824)             - 
-------------------------------  ------  ------------  ------------ 
 TOTAL PROVISION                                (824)             - 
-------------------------------  ------  ------------  ------------ 
 TOTAL LIABILITIES                            (6,240)       (2,065) 
-------------------------------  ------  ------------  ------------ 
 NET ASSETS                                    39,522        11,536 
-------------------------------  ------  ------------  ------------ 
 EQUITY 
 Share capital                      6           5,855         3,801 
 Share premium                      6          86,398        50,461 
 Merger reserve                     6          10,884        10,884 
 Reverse acquisition reserve        6         (7,148)       (7,148) 
 Reserve for own shares             7           (831)         (831) 
 Share based payment reserve                    1,186         1,156 
 Retained earnings deficit          7        (56,413)      (46,578) 
-------------------------------  ------  ------------  ------------ 
 EQUITY ATTRIBUTABLE TO EQUITY 
  HOLDERS OF PARENT                            39,931        11,745 
 Non-controlling interests                      (409)         (209) 
-------------------------------  ------  ------------  ------------ 
 TOTAL EQUITY                                  39,522        11,536 
-------------------------------  ------  ------------  ------------ 
 

Approved by the Board of Directors and authorised for issue on 26 March 2018.

Steven Couldwell

Chief Executive Officer

Consolidated Statement of Cash Flows for the year ended 31 December 2017

 
                                                                                      Year to   11 Months to 
                                                                                  31 December    31 December 
                                                                                         2017           2016 
                                                     Notes                             GBP000         GBP000 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 OPERATING ACTIVITIES 
 
 Operating loss                                                                      (10,816)       (11,060) 
 Adjustment for: 
 Depreciation of property, plant and equipment                                            482            301 
 Amortisation of intangible assets                                                        225              - 
 Share based payments                                                                      30            210 
 Research tax credit received                                                           1,541            319 
 Operating cash outflow                                                               (8,538)       (10,230) 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 
 (Increase) in inventory                                                                (503)          (597) 
 (Increase) in trade and other receivables                                              (783)           (90) 
 Increase in trade and other payables                                                      38            106 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 Net cash outflow from operations                                                     (9,786)       (10,811) 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 
 INVESTING ACTIVITIES 
 Interest received                                                                         47            114 
 Purchases of property, plant and equipment                                             (130)          (487) 
 Capitalised development expenditure                                                     (93)          (550) 
 Acquisition of subsidiary                             5                             (19,945)              - 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 Net cash (outflow) from investing activities                                        (20,121)          (923) 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 
 FINANCING ACTIVITIES 
 Proceeds from issue of share capital                  6                               37,682              - 
 Proceeds from exercised share options                                                    309              - 
 Net cash inflow from financing activities                                             37,991              - 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 
 Increase/(decrease) in cash and cash equivalents                                       8,084       (11,734) 
 Foreign exchange translation movement                                                    166              - 
 Cash and cash equivalents at start of period                                           8,173         19,907 
 CASH AND CASH EQUIVALENTS AT OF PERIOD                                            16,423          8,173 
--------------------------------------------------  ------  ---------------------------------  ------------- 
 

NOTES TO THE FINANCIAL STATEMENTS

GENERAL INFORMATION

The financial information set out above does not constitute the company's statutory accounts for the year ended 31 December 2017 or 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the registrar of companies, and those for 2017 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

1) BASIS OF PREPARATION

The financial statements of Tissue Regenix Group plc are audited consolidated financial statements for the year ended 31 December 2017. These include audited comparatives for the 11 months period ended to 31 December 2016.

The Group financial statements consolidate the financial statements of Tissue Regenix Group plc and the entities it controls, being its subsidiaries and its joint venture interest, and are presented in the Group's functional currency that is GBP Sterling.

Going Concern

As at 31 December 2017, the Group had GBP16.4m of cash and cash equivalents available to it. The Directors have considered their obligation, in relation to the assessment of the going concern of the Group and each statutory entity within it and have reviewed the current budget cash forecasts and assumptions as well as the main risk factors facing the Group.

After due enquiry, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. As is the nature of the business the Directors acknowledge there will be further funding requirements before revenues have grown to the point of self sufficiency

Change in Accounting Presentation

Cost of sales in the group's financial statements comprises cost of goods sold and external commissions payable. This is a change from previous years where external commissions were expensed as administration expenses. The change is because the Directors believe this presentation gives the users of the accounts a clearer view of the costs directly associated with generating revenue.

This change has increased Cost of sales by GBP376,000 from what was previously presented in the 11 months to December 2016 with a corresponding reduction in the administration expenses. The impact on the 2017 figure is an increase of GBP588,000 with a corresponding reduction in administration expenses. The loss before tax and earnings per share in both the current year and prior period are unaffected by this change.

2) SEGMENTAL REPORTING

The following table provides disclosure of the Group's revenue by geographical market based on location of the customer:

 
                       Year to   11 Months to 
                   31 December    31 December 
                          2017           2016 
                        GBP000         GBP000 
---------------  -------------  ------------- 
 USA                     4,098          1,322 
 Rest of world           1,135            121 
---------------  -------------  ------------- 
                         5,233          1,443 
 

Analysis of revenue by customer

During the year ending 31 December 2017 the Group had two customers who individually exceeded 10% of revenue. These customers generated 13% and 11% of revenue respectively (2016:12% and 10%).

Operating segments

The Group is organised into BioSurgery, Orthopaedics & Dental, Cardiac and Other divisions for internal management, reporting and decision-making, based on the nature of the products of the Group's businesses. Managers have been appointed within these divisions, who report to the Chief Executive Officer. These are the reportable operating segments in accordance with IFRS8 "Operating Segments". The Directors recognise that the operations of the Group are dynamic and therefore this position will be monitored as the Group develops.

In accordance with IFRS8, the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker. The Group has identified the Chief Executive Officer as the Chief Operating Decision Maker as he is responsible for the allocation of resources to the operating segments and assessing their performance.

Central overheads, which primarily relate to operations of the Group function, are not allocated to the business unit.

 
                      BioSurgery            Orthopaedics               Cardiac 
                                               & Dental 
                      Year        11      Year                      Year           11 
                        to    Months        to       11 Months        to       Months 
                        31        to        31              to        31           to 
                       Dec    31 Dec       Dec          31 Dec       Dec       31 Dec 
                      2017      2016      2017            2016      2017         2016 
                    GBP000    GBP000    GBP000          GBP000    GBP000       GBP000 
----------------  --------  --------  --------  --------------  --------  ----------- 
 Revenue             1,932     1,322     2,166               -         -            - 
 Cost of sales       (916)     (664)     (829)               -         -            - 
----------------  --------  --------  --------  --------------  --------  ----------- 
 Gross Profit        1,016       658     1,337               -         -            - 
 Administrative 
  costs            (4,737)   (5,124)   (3,297)         (2,738)     (481)        (462) 
 Exceptional             -         -         -               -         -            - 
  costs 
----------------  --------  --------  --------  --------------  --------  ----------- 
 Operating 
  loss             (3,721)   (4,466)   (1,960)         (2,738)     (481)        (462) 
 Finance income          -         -         3               -         -            - 
----------------  --------  --------  --------  --------------  --------  ----------- 
 Loss before 
  taxation         (3,721)   (4,466)   (1,957)         (2,738)     (481)        (462) 
 Taxation              372       323       722             600       254          111 
----------------  --------  --------  --------  --------------  --------  ----------- 
 Loss for 
  the year         (3,349)   (4,143)   (1,235)         (2,138)     (227)        (351) 
----------------  --------  --------  --------  --------------  --------  ----------- 
 
 
                                 Other               Central                  Total 
                      Year                  Year                   Year 
                        to   11 Months        to   11 Months         to   11 Months 
                        31          to        31          to         31          to 
                       Dec      31 Dec       Dec      31 Dec        Dec      31 Dec 
                      2017        2016      2017        2016       2017        2016 
                    GBP000      GBP000    GBP000      GBP000     GBP000      GBP000 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 Revenue             1,135         121         -           -      5,233       1,443 
 Cost of sales       (882)        (66)         -           -    (2,627)       (730) 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 Gross Profit          253          55         -           -      2,606         713 
 Administrative 
  costs              (484)       (308)   (3,325)     (3,141)   (12,324)    (11,773) 
 Exceptional 
  costs                  -           -   (1,098)           -    (1,098)           - 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 Operating 
  loss               (231)       (253)   (4,423)     (3,141)   (10,816)    (11,060) 
 Finance income          -           -        44         114         47         114 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 Loss before 
  taxation           (231)       (253)   (4,379)     (3,027)   (10,769)    (10,946) 
 Taxation                -           -         -           -      1,348       1,034 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 Loss for 
  the year           (231)       (253)   (4,379)     (3,027)    (9,421)     (9,912) 
----------------  --------  ----------  --------  ----------  ---------  ---------- 
 
 
 
                            BioSurgery           Orthopaedics             Cardiac 
                                                    & Dental 
                           Year   11 Months      Year   11 Months      Year   11 Months 
                             to          to        to          to        to          to 
                             31      31 Dec     3 Dec      31(st)        31      31 Dec 
                            Dec        2016      2017         Dec       Dec        2016 
                           2017      GBP000    GBP000        2016      2017      GBP000 
                         GBP000                            GBP000    GBP000 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 Staff costs            (3,343)     (3,162)   (1,837)     (1,327)     (281)       (293) 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 Sales and 
  marketing 
  costs                    (64)        (79)      (17)        (12)       (4)         (3) 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 Research 
  and development         (277)       (388)     (894)     (1,221)     (147)        (70) 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 Establishment 
  and administration 
  costs                 (1,053)     (1,495)     (549)       (178)      (49)        (96) 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 Administrative 
  costs                 (4,737)     (5,124)   (3,297)     (2,738)     (481)       (462) 
---------------------  --------  ----------  --------  ----------  --------  ---------- 
 
 
                               Other                Central                 Total 
                           Year   11 Months      Year   11 Months       Year    11 Months 
                             to          to        to          to         to           to 
                             31      31 Dec        31      31 Dec         31       31 Dec 
                            Dec        2016       Dec        2016        Dec         2016 
                           2017      GBP000      2017      GBP000       2017       GBP000 
                         GBP000                GBP000                 GBP000 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 Staff costs              (181)       (157)   (1,135)     (2,087)    (6,777)      (7,026) 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 Sales and 
  marketing 
  costs                    (21)         (4)         -           -      (106)         (98) 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 Research 
  and development          (32)           -         -           -    (1,350)      (1,679) 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 Establishment 
  and administration 
  costs                   (250)       (147)   (2,190)     (1,054)    (4,091)      (2,970) 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 Administrative 
  costs                   (484)       (308)   (3,325)     (3,141)   (12,324)     (11,773) 
---------------------  --------  ----------  --------  ----------  ---------  ----------- 
 

3) TAXATION

Tax loss on ordinary activities

 
                                                                  Year to   11 Months to 
                                                              31 December    31 December 
                                                                     2017           2016 
                                                                   GBP000         GBP000 
----------------------------------------------------------  -------------  ------------- 
 Current tax: 
 UK corporation tax credit on losses of period                    (1,348)        (1,034) 
----------------------------------------------------------  -------------  ------------- 
                                                                  (1,348)        (1,034) 
 Deferred tax: 
 Origination and reversal of temporary timing differences               -              - 
----------------------------------------------------------  -------------  ------------- 
 Tax credit on loss on ordinary activities                        (1,348)        (1,034) 
----------------------------------------------------------  -------------  ------------- 
 

The charge for the year can be reconciled to the loss before tax per the Statement of Comprehensive Income as follows:

Factors affecting the current tax charges

The tax assessed for the year varies from the main rate of corporation tax as explained below:

 
                                                                                                Year to   11 Months to 
                                                                                            31 December    31 December 
                                                                                                   2017           2016 
                                                                                                 GBP000         GBP000 
----------------------------------------------------------------------------------------  -------------  ------------- 
 The tax assessed for the period varies from the small company rate of corporation tax 
 as explained 
 below: 
 Loss on ordinary activities before tax                                                        (10,776)       (10,946) 
 Tax at the standard rate of corporation tax 19.25% (FY16:20%)                                  (2,074)        (2,189) 
 
 Effects of: 
 Expenses not deductible for tax purposes                                                             -              - 
 Research and development tax credits received                                                    (799)          (875) 
 Surrender of research and development relief for repayable tax credit                            1,098          1,249 
 Research and development enhancement                                                             (621)          (706) 
 Prior period adjustment                                                                          (549)          (158) 
 Unutilised tax losses                                                                            1,597          1,645 
----------------------------------------------------------------------------------------  -------------  ------------- 
 Tax credit for the period                                                                      (1,348)        (1,034) 
----------------------------------------------------------------------------------------  -------------  ------------- 
 

Deferred Tax

 
                                                                          Year to   11 Months to 
                                                                      31 December    31 December 
                                                                             2017           2016 
                                                                           GBP000         GBP000 
------------------------------------------------------------------  -------------  ------------- 
 Tax losses 
 Losses available to carry forward against future trading profits          35,819         32,037 
 Deferred tax asset - unrecognised*                                         6,089          5,767 
------------------------------------------------------------------  -------------  ------------- 
 

*The Group has not recognised a deferred tax asset relating to these losses as their recoverability is uncertain.

4) LOSS PER SHARE (BASIC AND DILUTED)

Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period excluding own shares held jointly by the Tissue Regenix Employee Share Trust and certain employees. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares.

 
                                                                             Year to   11 Months to 
                                                                         31 December    31 December 
                                                                                2017           2016 
                                                                              GBP000         GBP000 
---------------------------------------------------------------------  -------------  ------------- 
 Total loss attributable to the equity holders of the parent                 (9,221)        (9,786) 
---------------------------------------------------------------------  -------------  ------------- 
 
                                                                                 No.            No. 
 Weighted average number of ordinary shares in issue during the year     920,506,514    760,124,264 
---------------------------------------------------------------------  -------------  ------------- 
 
 Loss per share 
 Basic and diluted on loss for the year                                      (1.00)p        (1.29)p 
---------------------------------------------------------------------  -------------  ------------- 
 

The Company has issued employee options over 243,105,607 ordinary shares and there are 16,112,800 jointly owned shares which are potentially dilutive. There is however, no dilutive effect of these issued options as there is a loss for each of the periods concerned.

5) BUSINESS COMBINATION

Acquisition of CellRight Technologies

On 09 August 2017, the Group acquired 100 per cent of the voting equity instruments of CellRight Technologies LLC. This acquisition was made as the first part of the expansion plan for the US group to process inhouse human tissue products in the US. The Group anticipated the close relationship between CellRight and Tissue Regenix businesses will be mutually beneficial including shared resources in manufacturing, sales, marketing and accounting.

Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

 
 Net assets             Book value   Adjustments   Fair value 
                           GBP'000       GBP'000      GBP'000 
---------------------  -----------  ------------  ----------- 
 Intangible assets               -         4,374        4,374 
 Inventory                   2,298         (598)        1,700 
 Property and 
  land                         643           237          880 
 Plant and equipment         1,574         (113)        1,461 
 Trade and other 
  receivables                  448             -          448 
 Trade and other 
  payables                   (551)             -        (551) 
 Deferred tax 
  liability                      -         (953)        (953) 
---------------------  -----------  ------------  ----------- 
 Total fair value            4,412         2,947        7,359 
---------------------  -----------  ------------  ----------- 
 Consideration              23,078         (415)       22,663 
 Goodwill                                              15,304 
---------------------  -----------  ------------  ----------- 
 
 

Deferred tax has been calculated on the value of the asset acquired at a US corporation tax rate of 21 per cent.

Fair value of consideration

 
                             GBP'000 
 Cash                         19,945 
 Contingent consideration      2,718 
--------------------------  -------- 
 Total consideration          22,663 
--------------------------  -------- 
 

Contingent consideration

The Group has agreed to pay the contingent consideration if Gross Revenue during the first year after acquisition equals or exceeds seven million dollars ($7,000,000), in an amount equal to $2,036,201.46.

The Group has agreed to a milestone advance payment of an amount equal to one million dollars ($1,000,000) in addition to the milestone payment earned, if Gross Revenue during the first milestone period equals or exceeds ten million dollars ($10,000,000),

The Group has agreed to pay a second milestone if Gross Revenue during the second annual period

equals or exceeds twelve million five hundred thousand dollars ($12,500,000) an amount equal to $2,036,201.46 less the amount of the milestone advance payment, if any.

Acquisition-related costs

Acquisition costs relating to this transaction amounted to GBP996,000 and have been disclosed within the exceptional costs in the statement of comprehensive income.

Since the acquisition date, CellRight has contributed GBP2,166,000 to Group revenues and a profit of GBP277,000 to Group income. If the acquisition had occurred on 1 January 2017, Group Revenue would have increased by GBP2,930,000 and Group income for the period would have increased by GBP702,000

Measurements of fair values

 
 The valuation techniques used for measuring the fair 
  value of material assets acquired were as follows. 
 Assets acquired     Valuation technique 
 Property, plant     Market comparison technique and cost 
  and equipment       technique: The valuation model considers 
                      market prices for similar items when 
                      they are available, and depreciated 
                      replacement cost when appropriate. 
                      Depreciated replacement cost reflects 
                      adjustments for physical deterioration 
                      as well as functional and economic 
                      obsolescence. 
------------------  ------------------------------------------------- 
 Intangible assets   Relief-from-royalty method and multi-period 
                      excess earnings method: The relief-from-royalty 
                      method considers the discounted estimated 
                      royalty payments that are expected 
                      to be avoided as a result of the patents 
                      or trademarks being owned. The multi-period 
                      excess earnings method considers the 
                      present value of net cash flows expected 
                      to be generated by the customer relationships, 
                      by excluding any cash flows related 
                      to contributory assets. 
------------------  ------------------------------------------------- 
 Inventories         Net realisable value: The fair value 
                      is determined based on the actual 
                      cost of the inventory items. 
 

The trade receivables comprise gross contractual amounts due of GBP713k, which was acquired with a provision of GBP265k which was expected to be uncollectible at the date of acquisition to give a net value of GBP448k.

6) SHARE CAPITAL

 
                                        Share capital   Share premium   Merger reserve    Reverse acquisition    Total 
                                                                                                      reserve 
                               Number          GBP000          GBP000           GBP000                 GBP000   GBP000 
---------------------  --------------  --------------  --------------  ---------------  ---------------------  ------- 
 Total Ordinary 
  shares of 0.5 p 
  each as at 31 
  January 2016            760,124,264           3,801          50,461           10,884                (7,148)   57,998 
---------------------  --------------  --------------  --------------  ---------------  ---------------------  ------- 
 Issue of shares                    -               -               -                -                      -        - 
 Share options 
 exercised 
---------------------  --------------  --------------  --------------  ---------------  ---------------------  ------- 
 Total Ordinary 
  shares of 0.5p each 
  as at 31 December 
  2016                    760,124,264           3,801          50,461           10,884                (7,148)   57,998 
 Issue of shares          400,000,000           2,000          35,682                -                      -   37,682 
 Share options 
  exercised                10,866,660              54             255                -                      -      309 
---------------------  --------------  --------------  --------------  ---------------  ---------------------  ------- 
 Total Ordinary 
  shares of 0.5p each 
  as at 31 December 
  2017                  1,170,990,924           5,855          86,398           10,884                (7,148)   95,989 
---------------------  --------------  --------------  --------------  ---------------  ---------------------  ------- 
 

As permitted by the provisions of the Companies Act 2006, the Company does not have an upper limit to its authorised share capital.

7) MOVEMENT IN RETAINED EARNINGS AND RESERVE FOR OWN SHARES

 
                                  Retained Earnings Deficit   Reserve For Own Shares 
                                                     GBP000                  GBP'000 
------------------------------   --------------------------  ----------------------- 
 At 31 December 2016                               (46,578)                    (831) 
-------------------------------  --------------------------  ----------------------- 
 Loss for the period                                (9,421)                        - 
 Foreign translation movement                         (614)                        - 
 Minority Interest                                      200                        - 
------------------------------   --------------------------  ----------------------- 
 
 At 31 December 2017                               (56,413)                    (831) 
-------------------------------  --------------------------  ----------------------- 
 

[1] Tissue Regenix Group estimates

This information is provided by RNS

The company news service from the London Stock Exchange

END

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