REG - Fusion Antibodies - Final Results
05/09/2024 07:00
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RNS Number : 9564C Fusion Antibodies PLC 05 September 2024
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse (amendment)
(EU Exit) Regulations 2019/310 ("MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
5 September 2024
Fusion Antibodies plc
("Fusion" or the "Company")
Final results
Fusion Antibodies plc (AIM: FAB), specialists in pre-clinical antibody
discovery, engineering and supply for both therapeutic drug and diagnostic
applications, announces its final results for the year ended 31 March 2024.
Commercial and operational highlights
· Audited revenues for FY24 of £1.14m (FY23: £2.90m)
· Fundraise announced in February 2024, raising £1.37m (before
expenses) for general working capital and investment into commercial
activities
· Significant increase in sales pipeline opportunities during the
second half of FY24, with an orderbook at 31 March 2024 of £0.75m,
representing 65 per cent. of total FY24 audited revenues
· Cash position as at 31 March 2024 of £1.2m (31 March 2023: £0.2m)
Post period end highlights
· Increased activity in the second half of FY24, including:
o the entry into a collaboration agreement with the National Cancer
Institute for the use of OptiMAL®;
o a first purchase order received under a master services agreement ("MSA")
with a leading diagnostics company; and
o a follow-on project received with a US based biotechnology client.
Adrian Kinkaid, CEO of Fusion Antibodies commented: "We have had a largely
challenging FY24, with the industry experiencing significant headwinds
especially in the venture capital funded biotech sector. A number of clients
had consequently delayed initiating their projects with us as a result of
this. Having said that, we are starting to see an improvement and we did
complete a successful fundraise for further investment into the business in
February this year.
"Since the year end, we have increased commercial activity and had more
success, with a number of new agreements signed. The OptiMAL® programme is
continuing to go well, and we are seeing more traction in the field as the
year progresses.
"We remain positive about the future of the Company and are, as always,
thankful to our dedicated shareholders for their constant support. As we
continue to meet our objectives on our strategy toward breakeven and
profitability, we have no plans to raise cash through an equity placement."
Investor briefing
Fusion will host an online live presentation open to all investors on
Thursday, 12 September 2024 at 3pm BST, delivered by Dr Adrian Kinkaid, CEO
and Stephen Smyth, CFO. The Company is committed to providing an opportunity
for all existing and potential investors to hear directly from management on
its results whilst additionally providing an update on the business and
current trading.
The presentation will be hosted through the digital platform Investor Meet
Company.
Investors can sign up to Investor Meet Company for free and add to meet Fusion
Antibodies plc via the following
link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor
(https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor)
For those investors who have already registered and added to meet the Company,
they will automatically be invited. Questions can be submitted pre-event via
your IMC dashboard or in real time during the presentation, via the "Ask a
Question" function. Whilst the Company may not be in a position to answer
every question it receives, it will address the most prominent within the
confines of information already disclosed to the market through regulatory
notifications. A recording of the presentation, a PDF of the slides used, and
responses to the Q&A session will be available on the Investor Meet
Company platform afterwards.
Enquiries:
Fusion Antibodies plc www.fusionantibodies.com
Adrian Kinkaid, Chief Executive Officer Via Walbrook PR
Stephen Smyth, Chief Financial Officer
Fusion Antibodies interactive investor hub https://investorhub.fusionantibodies.com/
(https://investorhub.fusionantibodies.com/)
Allenby Capital Limited Tel: +44 (0) 20 3328 5656
James Reeve/Vivek Bhardwaj (Corporate Finance)
Tony Quirke/Joscelin Pinnington (Sales and Corporate Broking)
Shard Capital Partners LLP
Damon Heath (Joint Broker) Tel: +44 (0) 207 186 9952
Walbrook PR Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com
Anna Dunphy Mob: +44 (0)7876 741
001
About Fusion Antibodies plc
Fusion is a Belfast based contract research organisation ("CRO") providing a
range of antibody engineering services for the development of antibodies for
both therapeutic drug and diagnostic applications.
The Company's ordinary shares were admitted to trading on AIM on 18 December
2017. Fusion provides a broad range of services in antibody generation,
development, production, characterisation and optimisation. These services
include antigen expression, antibody production, purification and sequencing,
antibody humanisation using Fusion's proprietary CDRx (TM) platform and the
production of antibody generating stable cell lines to provide material for
use in clinical trials. Since 2012, the Company has successfully sequenced
and expressed over 250 antibodies and successfully completed over 200
humanisation projects and has an international, blue-chip client base, which
has included eight of the top 10 global pharmaceutical companies by revenue.
The Company was established in 2001 as a spin out from Queen's University
Belfast. The Company's mission is to enable pharmaceutical and diagnostic
companies to develop innovative products in a timely and cost-effective manner
for the benefit of the global healthcare industry. Fusion Antibodies provides
a broad range of services in antibody generation, development, production,
characterisation and optimisation.
Fusion Antibodies growth strategy is based on combining the latest
technological advances with cutting edge science to deliver new platforms that
will enable Pharma and Biotech companies get to the clinic faster, with the
optimal drug candidate and ultimately speed up the drug development process.
The global monoclonal antibody therapeutics market was valued at $186 billion
in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR
of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal
antibody therapies are approved and marketed globally as of June 2022 with the
top four antibody drugs each having sales of more than $3 bn in 2021.
Chairman's Statement
The financial year ended 31 March 2024 ("FY24") started the way the previous
financial year had ended, in that the markets in which we operate remained
muted, and it was commercially challenging for the Company. However, this
challenge was met head on by the board of directors of the Company (the
"Board" or the "Directors"), and in particular, through determination and a
belief that Fusion has world class skills and expertise to create value for
our shareholders, the turnaround process began. In FY24, costs were cut,
headcount reduced, Board salaries deferred and a new strategy was developed.
With venture capital and other investments for our customers' early-stage
human therapeutic pipelines still slow, creative solutions and antibody
related new market opportunities were explored. Fusion responded both by
introducing our existing services into new markets as well as introducing new
services into our current markets.
New markets
Antibodies play an important part in most of our lives at some point.
Obviously internally your immune system is there to combat disease and keep
you healthy. But antibodies are used in many different healthcare related
applications, and Fusion's skills and expertise are applicable to all of them.
Human antibody therapeutics was our sole focus and will still be the main
source of revenue in the near term but expanding into the smaller but growing
veterinary medicine (VetMed) therapeutics market is an exciting new
opportunity. The 30-year gap between the development of antibodies for
humans and those for animals is partly because while some other human
medications can be easily adopted to use in animals, antibody therapy is
species specific. However, the genetic differences between species is now
better understood and, in the same way as we gained a leading position in
humanisation, Fusion has the capability for producing dog and cat specific
antibodies, through processes known as caninisation and felinisation. There is
a growing need for these therapies in veterinary medicine. For example, in the
USA alone there are 6 million cases of cancer(1) diagnosed each year in dogs,
with a similar number in cats, and one in four American dogs is diagnosed with
some form of arthritis(1). In addition, allergies, dermatological conditions,
renal diseases, cardiac diseases, and cancer are five key disease categories
for research into new animal specific antibody therapies(2).
The global monoclonal antibodies in veterinary health market size was
estimated at USD 700m million in 2022 and is expected to grow at a compound
annual growth rate (CAGR) of 17.1% from 2023 to 2030(3). Amongst other
developments, in 2016, the USDA(3) approved a monoclonal antibody to treat
allergic dermatitis and atopic dermatitis in dogs and, in January 2022, the
FDA granted its first approval for an antibody for animals to control pain
associated with osteoarthritis in cats(2).
We believe that this new market represents a strong opportunity in a strongly
growing sector where most of our current services, such as OptiPhage(TM),
Rational Affinity Maturation Platform ("RAMP"), affinity maturation, transient
expression and cell line development ("CLD") are applicable.
(1) Antibody Therapeutics - PetMedix
(https://www.petmedix.com/antibody-therapeutics/)
(2) Monoclonal antibodies show promise as new therapy for veterinary patients
| American Veterinary Medical Association (avma.org)
(https://www.avma.org/news/monoclonal-antibodies-show-promise-new-therapy-veterinary-patients)
(3) The U.S. Department of Agriculture (USDA) approves antibodies that target
the immune system, while the FDA approves antibodies that have other targets
in VetMed
(4) Monoclonal Antibodies In Veterinary Health Market Report, 2030
(grandviewresearch.com)
(https://www.grandviewresearch.com/industry-analysis/monoclonal-antibodies-in-veterinary-health-market-report#:~:text=veterinary%20health%20market%3F-,The%20global%20monoclonal%20antibodies%20in%20veterinary%20health%20market%20size%20was,USD%20800%20million%20in%202023.)
At some point in our lives, most of us will have a blood or urine sample that
is sent off to a laboratory to be tested and the test will involve antibodies
in one form or another. Over the counter pregnancy tests are antibody based
and we are now all familiar with the lateral flow tests for Covid-19, with the
red coloured lines that appear being antibody driven. With the diagnostic
market becoming more competitive, the quality, specificity and reliability of
the antibody is key to the success of that test. Diagnostic companies from
small to large are starting to look at ways of improving their tests through
the manipulation of their antibodies to which the skills that Fusion have
developed throughout the years are applicable. In addition to improving the
antibody, diagnostic companies are also looking to improve continuity of
supply as many of the tests will be based on polyclonal antibodies (antibodies
taken directly from blood as opposed to a cell culture) which have a finite
supply. While not simple, the possibility to convert these polyclonal
antibodies to a secure cell structure-based supply exists, presenting Fusion
with a further market opportunity. Additionally, many antibodies used in
diagnostics and therapeutics start their life in pure research laboratories
and companies that supply these products globally represent a further adjacent
market for Fusion to sell into.
The Board of Fusion believe that this diversification strategy into the
adjacent markets of VetMed, diagnostics, and research, together with the
recovering economic climate, provides us with confidence for growth in the
current year and the prospects for the business in the future.
Business performance
The poor global market conditions seen at the end of the financial year ended
31 March 2023 ("FY23") continued into FY24. FY24 showed a significant downturn
in revenue from the previous year at £1.14m (FY23: £2.9m). The headwinds of
inflation, higher interest rates, weak global growth and continued global
political instability have kept the global markets relatively quiet throughout
2023 resulting in weak market investment conditions for new drug discovery and
development programs, particularly in SME's and small earlier stage companies,
which represented our primary customer type during the first half of the
financial year and directly impacted the Company's revenues for the year.
Most notably was a significant downturn in venture capital ("VC") investment
into biotechnology companies, including therapeutic antibody development
programmes. As an example, in the USA VC Life Healthcare and Life Sciences
secured US$15.2 billion in fund closures in 2023, down 52% from a high of
US$28.9 billion in 2021(5).
Recognising the economic challenges at the beginning of the financial year,
the Company took decisive action to re-structure the business and
significantly cut the cost base and implemented circa. £1.6m in restructuring
savings, including a significant reduction in headcount. Although business
conditions are improving, the Board will continue to closely monitor the
Company's cost base and seek to identify additional cost savings over time.
Alongside the restructuring, a new commercial strategy was implemented,
targeting the adjacent antibody-based Diagnostic, Veterinary Medicine and
Research Antibody markets, with this diversification opening up more sales
opportunities as well as making the sales pipeline more resilient with less
exposure to individual sectors.
Whilst controlling costs tightly, we still believe that to maintain our
scientific cutting edge and to compete in the global marketplace, we need to
stay at the front of technology. We continue to invest in R&D, and
particularly the OptiMAL(®) library project, with investment in R&D of
£0.3m for FY24 (FY23: £0.8m). The downturn in revenues, together with the
restructuring savings, generated a loss for FY24 of £2.3m (FY23: loss
£2.9m). It is worth noting that whilst the Company continues to retain an
interest of longer-term future success milestone or royalty payments in many
of our client projects, there were no such payments in FY24.
The Board would like to thank our shareholders for their continued support and
confidence in the Company and in the growth opportunity in front of us. In
particular in supporting us through two rounds of funding in FY24, the first
of which was to supply working capital to allow us to re-structure the Company
and develop a new more diversified strategy. During H1 FY24, the pipeline grew
significantly as we entered into the adjacent markets of Diagnostics, VetMed
and research antibodies with the second round supporting the further
implementation of the strategy and in particular the expansion of the
commercial team.
(5) Pitchbook's Healthcare Fund Performance Update, as reported by Tracy Alper
from Marks Sattin.
Specifically, in June 2023 the Company successfully completed a £1.67m
(before expenses) fundraise through the placing of new ordinary shares of 4p
each in the capital of the Company ("Ordinary Share") at a price of 5 pence
per new Ordinary Share (the "Issue Price"), to provide additional working
capital. £1.56 million was raised through a placing, £0.14m through a
subscription by certain of the directors of the Company and their closely
associated persons (as defined in UK MAR) and £0.11m through a Retail Offer
on the REX Platform, which resulted in the issue of a total of 33,438,768 new
Ordinary Shares. The Issue Price represented a discount of approximately 84
per cent. to the closing mid-market price of an Ordinary Share on 18 May 2023.
With a new commercial strategy in place, and a strengthened pipeline, the
Company successfully raised an additional £1,375,000 (before expenses) in
March 2024 through a placing of 34,375,000 new Ordinary shares at a price of 4
pence. In this regard, I would like to thank our shareholders, both new and
old, who supported this round, in what was a challenging economic environment.
2024 has so far been one of the quietest years for investment on AIM since
2002 and yet the issue price of the second placing was at only a small
discount (~ 5.88%) to the closing mid-market price of an Ordinary Share in the
Company on 13 February 2024.
Allenby Capital Limited ("Allenby Capital") acted as broker in connection with
the placing, with Shard Capital Partners LLP acting as sub-placing agent to
Allenby Capital and following the placing the Company appointed Shard as joint
broker to Fusion. We look forward to continuing to work with both brokers as
we continue our recovery journey.
New Services
The antibody drug discovery industry and indeed other markets are gradually
moving away from the use of antibodies, something that as a Company we
recognise and support. Whilst animals can still be used on occasions, our
R&D and new service offerings are very much aligned to the 'Three Rs'
principle: Replacement, Reduction and Refinement*. This is the one of the
competitive edges that we offer utilising our core discovery engines,
OptiMAL(®), OptiPhage(TM), and AI/ML-Ab(TM). The first two are cell-based
systems, while the latter is a method of designing panels of antibodies
in-silico, using software algorithms. These discovery engines all work as the
beginning of a customer's journey with Fusion, with the potential to move onto
the rest of our services all the way through to CLD, where the final antibody
of choice is ready to be transferred externally into the production stage.
* Three Rs principle
· Replacement refers to methods which avoid or replace the use of animals
· Reduction refers to any strategy that will result in fewer animals
being used
· Refinement refers to the modification of husbandry or procedures to
enhance the welfare of an animal used in science
OptiMAL(®) is our cell-based mammalian display technology screening library
in development for the direct identification of intact fully human antibodies
against biomarkers and other targets of interest. It will be very much
positioned as a discovery engine for human therapeutic antibodies and when
fully optimised should reduce the time required to identify a target specific
antibody or panel of antibodies and simplify the process of reaching that
goal. The Company signed a collaboration agreement with the National Cancer
Institute ("NCI") for access to OptiMAL(®) over a two-year period in the
discovery of novel antibodies against targets selected by NCI, which is the
first time the library has been in external hands for independent
validation.
Whereas OptiMAL(®) expresses whole antibodies, our new OptiPhage(TM) library
is a phage display based version where smaller antibody fragments, the
antibody's specific binding components, are expressed and can be screened, at
which point the DNA sequences of these fragments can be used to produce a full
antibody for downstream development and further optimisation. It may also be
the platform of choice for those wanting antibody fragments as their
end-product. As a new service available since March 2024, we believe that the
ability to provide OptiPhage(TM) at a lower price point allows the Company to
protect the premium pricing of the OptiMAL(®) programme and to open it up to
other markets who may have greater budgetary constraints. Our novel DNA
library of antibody sequences from OptiMAL(®) can be used as the input
design, as can other inputs for non-human applications.
In conjunction with our partners, the AI/ML-Ab(TM) platforms provide a method
of designing panels of antibodies in-silico, with the AI/ML-Ab(TM) algorithms
typically producing small libraries of sequences which are an excellent match
with our Mammalian Display platform, which can transform these designs into
real protein molecules for screening and final selection. While customer
uptake to date has been slow, we believe that this remains an important part
of our broad mix of discovery services that we offer which gives the client
the choice to select which one suits them the best from their timescales,
development plans and budgets.
Board and Employees
August 2023 saw the appointment of Stephen Smyth as our interim Chief
Financial Officer (CFO) and Company Secretary. Stephen has over 25 years'
experience working in audit & accounting, finance, and operations
management within both the public accounting and commercial sectors and we are
delighted that he could join us. In addition, we have outsourced some other
financial management accounting activities enabling the Company to streamline
its financial position, following which the Company intends to identify a more
permanent solution.
Prior to this we announced that Mr James Fair, our former CFO, was stepping
down from the Board and that we would like to thank Mr James Fair for his
significant contribution to the Company over the past 14 years and wish him
well in his future endeavours. We are also grateful to Ms Frances Johnston who
temporarily stepped in as the Company Secretary until Stephen Smyth's
appointment.
One further change to the Board during the financial year was in relation to
Sonya Ferguson, who stepped down in September 2023 as a Non-executive Director
to move into another business opportunity. Sonya was with the Company for
seven years and was the Chair of the Company's Remuneration Committee. On
behalf of the Board, I would like to thank her for all that she had done for
the Company, for her valuable insights and contributions and her balanced
views. We wish her well in her new venture.
During the first half of FY24, the Executive team had to make some decisive
and tough decisions as part of the restructuring process, something for which
the Board is very grateful. In this respect, a big thank you to all the
staff who stuck with us through the turbulent times and worked in the
difficult transitionary environment with professionalism and integrity and
their strength and belief in the Company has allowed us to ride the storm and
to turn the Company around. With a significantly reduced headcount, staff have
received extensive cross training to ensure that the Company can still offer
its full range of services. A true team effort.
As part of their commitment and belief in the Company, in order to minimise
the outgoing costs until the Company had secured the funds from the second
fundraise in March 2024, the executive directors, Adrian Kinkaid and Richard
Buick, deferred 20% of their salary and then only took half as salary with the
remainder in new Ordinary Shares at the issue price of 4 pence. Likewise, the
Company's non-executive directors deferred their fees for 10 months and were
subsequently remunerated part in salary and part in new Ordinary Shares, a
structure that will continue until the end of FY25.
Corporate governance
The long-term success of the business and delivery on strategy depends on good
corporate governance. The Company complies with the Quoted Companies Alliance
Corporate Governance Code as explained more fully in the Governance Report.
Post year end and outlook
As reported, the full year results for FY24 are lower than anticipated, but
the restructuring, fundraising and market diversification strategy has given
the Company a new foundation on which to grow. Trading has improved throughout
the year with February and March 2024 being the Company's highest earning
months of FY24. There has been a significant increase in sales pipeline
opportunities, which are now around three times greater than they were at the
beginning of the financial year, and include new Diagnostic, VetMed and
Research potential customers. In addition to the increased sale pipeline our
R&D OptiMAL(®) library project hit a major milestone in H2 FY24 and
signed a collaboration agreement with the NCI for the use of OptiMAL® in the
discovery of novel antibodies against targets selected by NCI post year.
There was an increased commercial activity and momentum in the fourth quarter
of FY24 and into the beginning of FY25, including:
· receipt of a first purchase order under a master services agreement
("MSA") with a leading diagnostics company in FY24 - with further orders
having been received in FY25 under the MSA from the customer;
· securing an estimated $650,000 follow-on project under a
collaborative research and development agreement with a US based biotechnology
company that Fusion started working with in 2021; and
· A commercial contract to develop a bespoke OptiPhage(TM) library for
a non-human antibody species with a leading global provider of antibodies for
use in research and diagnostics.
In July 2024, we announced that our unaudited revenues for the first quarter
("Q1") of FY25 was c. £522k (Q1 FY24: £241k and FY24: £1.14m) with a strong
sales pipeline. The order book includes a number of multi-stage projects for
its clients and, subject to these projects progressing in line with
expectations, revenue is expected to be recognised for all projects in the
current order book in the current financial year.
The Company continues to carefully control its cash and, as set out at the
time of the fundraise in February 2024. Based on updated internal estimates
the Company now has a cash runway into the second half of FY26. The Company
continues to seek to achieve cash neutrality during that timeframe.
The Board of Fusion believe that this momentum and developments provide strong
evidence that the Company's diversification strategy, together with the
recovering economic climate, provide confidence for growth in FY25.
Simon Douglas
Chairman
4 September 2024
CEO's report and operations review
Fusion emerges from a difficult and challenging FY24 as a much improved, more
capable and more efficient business with great prospects for growth in
revenues and value creation courtesy of our proprietary technologies.
During FY24, the Company was presented with several commercial and financial
challenges which we met robustly and with determination. Most notable was a
continued downturn in the global market. Through 2023, many of our clients
experienced challenges in securing investment to support their research and
development activities. This was especially so for the smaller biotechnology
companies reliant on venture capital funding for novel therapeutic discovery
projects. This represented a significant proportion of our pre-existing client
base and, with their delayed plans for early-stage development projects had
significant knock-on effects on revenues for the Company. Remedial action
was speedily taken and effectively realised. A defined programme of cost
saving measures was put in place at the start of FY24 which included
significant restructuring, reducing various costs including a 38% reduction in
headcount. At the same time, plans to extend and diversify the client base
were implemented to address the adjacent and substantial Diagnostic,
Veterinary Medicine and Research Antibody markets. The positioning of the
Company's offerings were adjusted to improve efficiency and have more impact
with this diversification making the sales pipeline more resilient with less
exposure to individual sectors and increasing the overall addressable market
size.
In particular, we increased our efforts in targeting the diagnostics industry,
which has been enjoying an unprecedented level of awareness especially through
the Covid-19 related antibody enabled lateral flow devices and related cash
inflows. In the latter part of the year this resulted in several contract wins
for Fusion with both small and large diagnostics organizations, the latter
exemplified by the Master Service Agreement announced on 14(th) February 2024.
The process of discovering and developing antibodies for diagnostics
applications is very similar to that for therapeutics and fits well with our
preferred business model whereby we can take responsibility for the process
from as early as antigen design for the nominated target through to supply of
antibodies. As previously stated for therapeutics, this fully integrated
approach allows us to derive more revenue per project by assuming more
responsibility for more of the research programme. It also positions the
business to better exploit our emerging platforms for antibody discovery, our
"Discovery Engines", which we continue to develop making best use of the
different component technologies from the OptiMAL(®) research project.
Similarly for the Veterinary Medicine market, which has an estimated global
value of $46.5bn and a forecasted compound annual growth rate of 8.3% from
2024 to 2030 [Veterinary Medicine Market Size, Share, Growth Report 2030
(grandviewresearch.com)
(https://www.grandviewresearch.com/industry-analysis/veterinary-medicine-market)
], the Company identified several potential partners and projects. The
requirement for making antibodies suitable for use in companion animals such
as dogs and cats known as caninisation and felinisation respectively is very
similar in nature to the humanisation processes for which Fusion is an
established world leader. The Company is therefore continuing to exploit this
growth market and increasing its sales and marketing efforts in the area
building awareness with this specialist client base.
The initial objective for the research project was to create OptiMAL(®), a
groundbreaking and industry leading platform for the discovery of human
antibodies through a highly diverse library of DNA sequences expressed as
fully intact antibodies, or IgG molecules, expressed on the surface of
mammalian cells. This has now been largely achieved and whilst in beta-testing
stage we were delighted to announce in November 2023, a 2-year agreement with
the NCI, part of the National Institutes of Health in the USA, to validate
OptiMAL(®) screening against a small number of targets in the NCI's own
laboratories. This will validate not only the technology but also the ability
to transfer it to other organizations and so lay the path for potential
licensing agreements with, for example, big pharma and major biotechnology
companies. Furthermore, the significant prestige and kudos associated with NCI
make them an ideal partner for this process and an organization with which we
seek to strengthen our connections.
Two further discovery platforms: Optiphage(TM) and AI/ML-Ab(TM) have also been
launched off the back of the OptiMAL(®) research programme. Optiphage(TM)
utilises a library based on the same principles as OptiMAL(®), but in a more
industry standard phage-display format, whilst the Mammalian Display element
of OptiMAL(®) can be combined with algorithms for the de novo design of
novel antibodies from various artificial intelligence (AI) and Machine
Learning (ML) technologies which continue to generate interest and excitement
in the field. We were very pleased to launch AI/ML-Ab(TM) in August 2023 with
an almost immediate contract win. Optiphage(TM) also attracted significant
client attention even before launching in April 2024. This was achieved
through a contract with an early adopter seeking a non-animal-based solution
to generating non-human antibodies primarily for research and diagnostic
applications as announced on 15(th) April 2024. The availability of these
diverse and complementary proprietary "Discovery Engines", which can be
deployed individually or in concert, also enables us to provide a de-risked
approach to antibody discovery further benefiting our clients and
strengthening Fusion's position as the partner of choice.
A summary of the antibody "Discovery Engines" available to Fusion and its
clients.
At Fusion, our aim is to develop a range of services that gives our clients
choice and a range of solutions best suited to the biological needs of their
targets and applications. We understand that 'one size' does not fit all and
have therefore broadened our service menu to give the customer the best chance
of meeting their technical objectives with the least risk. We will continue to
develop further solutions to enhance the competitive advantages for Fusion and
for our clients.
The Company secured additional investment in June 2023, raising just under
£1.7 million (before expenses) and a further £1.37 million in March 2024
primarily to fund additional commercial activities addressing the additional
market sectors of diagnostics and veterinary medicine. Thanks to the continued
support of our shareholders, we can move forward with establishing our
presence in these adjacent markets and maintaining investment into our new
discovery services.
Business Review
The Company's revenue in FY24 fell by 61% vs FY23 to £1.14m due to the
macroeconomic headwinds. By 30 June 2024, orders had been received amounting
to some £0.75m forming the basis for revenue recognisable in FY25 on which we
are pleased to have continued to build upon. This is a significant improvement
on the position of the prior year and provides positive indications that the
business is recovering.
The Directors believe that the addressable market for the Company's existing
'Fee for Service' revenue model is sufficiently large to enable the business
to achievable profitability, but that is not the limit to the potential value
creation the Company represents. We seek to enter into collaborative
agreements which enable Fusion to share in the downstream value of the
deliverables of our services and share in their commercial success through
milestone payments and royalties. This strategy will further enable the
Company to unlock the intrinsic value that our proprietary service platforms
provide to our clients and generate additional shareholder value.
AI/ML-Ab(TM), Optiphage(TM) and OptiMAL(®) represent key proprietary
differentiators and drivers of growth for the business which will enable the
Company to access a sizeable addressable market generating significant
shareholder value. Furthermore, they underpin our ability to secure value
generating milestone and royalty agreements.
The Company ended the year with £1.2m of cash and cash equivalents, having
used £2m of cash in operations during the year, invested £0.1m in property,
plant and equipment and £0.1m servicing asset-based borrowings. As previously
mentioned, in June 2023 and in March 2024 the Company issued equity for
combined net proceeds of £2.7m which places Fusion in a good position to
continue its sales and marketing activities and progress the development of
new discovery platforms and services. Despite FY24 having been a commercially
challenging year, the Company took the hard decisions, made the right choices
and has survived. As a result, the Company has emerged stronger, more capable
and more efficient with better developed proprietary technologies and improved
traction in a broader marketplace. We also have some further exciting and
enviable technologies in development and are now in a phase of growth from a
stronger more stable foundation with three new Discovery Engines: OptiMAL(®),
Optiphage(TM) and AI/Ml-Ab(TM) to power our transition toward breakeven and
profitability.
During FY24, Fusion was presented with several commercial challenges. Most
notably, a significant downturn in venture capital investment into
biotechnology companies, including therapeutic antibody development
programmes, impacted Fusion's primary customer type going into the financial
year. This directly impacted the Company's revenues for the financial year.
The Company took steps to meet the challenges presented by the increasing
headwinds in the first half of FY24 ("H1") through a significant restructuring
exercise, reducing various costs including a 38% reduction in headcount.
Furthermore, a new commercial strategy was implemented, additionally targeting
the adjacent Diagnostic, Veterinary Medicine and Research Antibody markets.
This diversification has made the sales pipeline more resilient with less
exposure to individual sectors.
During H2 FY24, the adverse investment conditions, although improving,
continued to impede certain clients placing orders, with some pipeline
projects yet to convert and some being received later than anticipated. In
several cases this was due to limited availability of client provided
materials. This resulted in revenue for H2 FY24 being lower than was
anticipated at the time of announcement of the H1 FY24 interim results.
Despite the effects of the headwinds described above, Fusion's client
conversion rate nevertheless improved throughout FY24, with February and March
of 2024 being the Company's highest earning months of FY24. This contributed
to revenues in the fourth quarter of FY24 being approximately 47% higher than
the first quarter of FY24.
This increase in activity towards the end of the financial year has resulted
in a marked increase in the Company's sales opportunity pipeline. The
Company's order book as at 31 March 2024 was approximately £0.75m,
representing approximately 65% of the total FY24 audited revenues.
This increase in activity and the order book provides a foundation for revenue
growth in the current financial year ("FY25").
The Company achieved a number of exciting developments in H2 FY24, including:
· signing a collaboration agreement with the NCI for the use of
OptiMAL® in the discovery of novel antibodies against targets selected by
NCI post year end;
· securing an estimated $650,000 follow-on project under a
collaborative research and development agreement with a US based biotechnology
company that Fusion started working with in 2021;
· receipt of a first purchase order under a new MSA with a leading
diagnostics company - with further orders having been received under the MSA
by the customer subsequently; and
· securing its first OptiPhage(TM) contract whereby Fusion will design
a phage display library using the diversity principles behind the OptiMAL®
library.
The Board believes that these developments provide strong evidence that the
Company's diversification strategy, together with the recovering economic
climate, provide confidence for growth in FY25.
The Company's cash balance as at 31 March 2024 was £1.2m, positioning the
Company well for the current economic environment.
The 2023 calendar year was very challenging for our clients and therefore also
for us. We responded by taking difficult but necessary action whilst also
extending our traction with adjacent markets (notably diagnostics, research
antibodies and veterinary medicine). As a result, we have secured some
excellent new clients, including global leaders in their respective fields,
who are now engaging with the Company for multiple projects, several of which
are being run in parallel. Achieving this diversification in client base,
combined with a recovery in our core human therapeutic sector, provides a very
welcomed improvement in market conditions going forward. We remain optimistic
for our prospects and look forward to updating the market further. We continue
to be thankful to our shareholders for all their support.
Outlook
The economic environment in which the Company is now operating has
significantly improved in recent months with revenues now increasing and
prospects being converted into orders at a significantly improved rate. We
continue to attract clients from around the world including securing initial
and follow on work from a new client, the life sciences division of a
well-known Japanese conglomerate amongst others. The Company also continues to
further exploit its technologies to create additional value: our Mammalian
Display platform, which was designed initially for antibodies, has recently
been trialled with other proteins. One client found a 10-30 fold increase in
yield over there current established production method.
Having made a specific effort to complement the core therapeutics market by
targeting adjacent sectors, the push for more diagnostics business is proving
fruitful with revenues from this sector currently accounting for around 20% of
current year to date earned income.
It remains our goal to reach cash flow breakeven by the second half of
calendar year 2025, and as we continue to meet our objectives on that path, we
have no plans to raise cash through an equity placement.
Adrian Kinkaid
Chief Executive Officer
4 September 2024
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 March 2024
Note 2024 2023
£'000 £'000
Revenue 4 1,136 2,901
Cost of sales (1,181) (2,327)
Gross profit (45) 574
Other operating income 5 11
Administrative expenses (2,247) (3,443)
Operating loss 5 (2,288) (2,858)
Finance income 8 3 3
Finance expense 8 (5) (4)
Loss before tax (2,289) (2,859)
Income tax credit 10 63 263
Loss for the financial year (2,226) (2,596)
Total comprehensive expense for the year (2,226) (2,596)
Pence Pence
Loss per share
Basic 11 (3.9) (10.0)
Statement of Financial Position
As at 31 March 2024
Notes 2024 2023
£'000 £'000
Assets
Non-current assets
Intangible assets 12 - -
Property, plant and equipment 13 158 375
158 375
Current assets
Inventories 15 460 539
Trade and other receivables 16 557 690
Current tax receivable 46 263
Cash and cash equivalents 1,199 195
2,262 1,687
Total assets 2,420 2,062
Liabilities
Current liabilities
Trade and other payables 17 564 844
Borrowings 18 20 35
584 879
Net current assets 1,678 808
Non-current liabilities
Borrowings 18 23 40
Provisions for other liabilities and charges 19 20 20
43 60
Total liabilities 627 939
Net assets 1,793 1,123
Equity
Called up share capital 21 3,815 1,040
Share premium reserve 7,743 7,647
Accumulated losses (9,765) (7,564)
Total equity 1,793 1,123
Simon
Douglas
Adrian Kinkaid
Director
Director
Statement of Changes in Equity
For the year ended 31 March 2024
Notes Called up share capital Share premium reserve Accumulated losses Total
£'000 £'000 £'000 equity
£'000
At 1 April 2022 1,040 7,647 (5,003) 3,684
Loss and total comprehensive expense for the year
- - (2,596) (2,596)
Share options - value of employee services
- - 35 35
Total transactions with owners, recognised directly in equity
- - 35 35
At 31 March 2023 21 1,040 7,647 (7,564) 1,123
At 1 April 2023 1,040 7,647 (7,564) 1,123
Loss and total comprehensive expense for the year
- - (2,226) (2,228)
Issue of share capital 2,775 96 - 2,871
Share options - value of employee services
- - 25 25
Total transactions with owners, recognised directly in equity
2,775 96 25 2,896
At 31 March 2024 21 3,815 7,743 (9,765) 1,793
Statement of Cash Flows
For the year ended 31 March 2024
Notes 2024 2023
£'000 £'000
Cash flows from operating activities
Loss for the year (2,226) (2,596)
Adjustments for:
Share based payment expense 86 35
Depreciation 220 372
Finance income (3) (3)
Finance costs 5 4
Income tax credit (63) (263)
Decrease/(Increase) in inventories 79 46
Decrease/(increase) in trade and other receivables 133 819
(Decrease)/increase in trade and other payables (280) (299)
Cash used in operations (2,049) (1,885)
Income tax received 280 131
Net cash used in operating activities (1,769) (1,754)
Cash flows from investing activities
Purchase of property, plant and equipment 13 (2) (114)
Finance income - interest received 8 3 3
Net cash used in investing activities 1 (111)
Cash flows from financing activities
Proceeds from new issue of share capital net of transaction costs 2,808 -
Proceeds from new borrowings 18 - 69
Repayment of borrowings 18 (33) (62)
Finance costs - interest paid 8 (5) (4)
Net cash generated/(used in) from financing activities 2,770 3
Net decrease in cash and cash equivalents 1,002 (1,862)
Cash and cash equivalents at the beginning of the year 195 2,049
Effects of exchange rate changes on cash and cash equivalents 2 8
Cash and cash equivalents at the end of the year 1,199 195
Notes to the Financial Statements
1 General information
Fusion Antibodies plc is a company incorporated and domiciled in the United
Kingdom and is registered in Northern Ireland having its registered office and
principal place of business at 1 Springbank Road, Springbank Industrial
Estate, Dunmurry, Belfast, BT17 0QL
The principal activity of the Company is the research, development and
manufacture of recombinant proteins and antibodies, particularly in the areas
of cancer and infectious diseases.
2 Significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all years presented unless otherwise stated.
Basis of preparation
The financial statements have been prepared on the historical cost convention.
The financial statements are prepared in sterling, which is the functional
currency of the Company. Monetary amounts in these financial statements are
rounded to the nearest £1,000.
The financial statements of Fusion Antibodies plc have been prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
The preparation of financial statements in conformity with International
Financial Reporting Standards ("IFRS") requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in
the process of applying the Company's accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements are disclosed in note 3.
Going concern
The Company has returned a loss of £2.2m for the year ended 31 March 2024
(Year ended 31 March 2023: Loss of £2.6m) and at the year-end had net current
assets of £1.7m (31 March 2023: £0.8m) including £1.2m of cash and cash
equivalents (31 March 2023: £0.2m). During the year the Company has raised
net proceeds of £2.8m from the issue of ordinary shares and has undergone a
restructuring process to reduce annual costs. The Company continues to expend
cash in a planned manner to both grow the trading aspects of the business and
to develop new services through research and development projects. Revenues
for the year were £1.14m, significantly below market expectations and 60%
lower than revenues for the prior year. Uncertainty in levels of investment in
the sector has diminished but still persists. The impact of this has been
somewhat reduced through the Company's targeting of wider market sectors.
The financial statements have been prepared on the going concern basis, which
assumes that the company will continue to be able to meet its liabilities as
they fall due for at least twelve months from the date of signing these
financial statements. The directors have, at the time of approving the
financial statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence at least for 12 months from the
reporting date. Thus, they continue to adopt the going concern basis of
accounting in preparing the financial statements. To support the going concern
basis of preparation, cash flow forecasts have been prepared which incorporate
a number of assumptions upon which sensitivities have been performed to
reflect severe but plausible downside scenarios. These assumptions include
the rate at which revenue growth can be achieved.
The directors note that there is inherent uncertainty in any cash flow
forecast, however this is further exacerbated given the nature of the
company's trade and the industry in which it operates. Due to the risk that
revenues and the related conversion of revenue to cash inflows may not be
achieved as forecast over the going concern period, the Directors believe that
there exists a material uncertainty that may cast significant doubt on the
Company's ability to continue as a going concern and it may be unable to
realise its assets and discharge its liabilities in the normal course of
business.
The financial statements do not include the adjustments that would result if
the Company were unable to continue as a going concern.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the provision of services in the ordinary course of the Company's
activities. Revenue is shown net of value added tax and where a contractual
right to receive payment exists.
The Company's performance obligations for its revenue streams are deemed to be
the provision of specific services or materials to the customer. Performance
obligations are identified on the basis of distinct activities or stages
within a given contract that the customer can benefit from, independent of
other stages in the contract. The transaction price is allocated to the
various performance obligations, based on the relative fair value of those
obligations, and then revenue is recognised as follows:
· Revenue is recognised over the period that services are provided
using the percentage of completion method, based on the input method using
costs incurred to date relative to the expected total costs for each
performance obligation; and
· Where a contract includes a payment contingent upon the customer
subsequently achieving a pre-defined milestone with their development
programme, revenue in the amount of the total success payment due is
recognised when the pre-defined condition(s) have been met.
Contract assets arise on contracts with customers for which performance
obligations have been satisfied (or partially satisfied on an over time basis)
but for which the related amounts have not yet been invoiced or received.
Contract liabilities arise in respect of amounts invoiced during the year for
which the relevant performance obligations have not been met by the year-end.
The Company's contracts with customers are typically less than one year in
duration and any contract liabilities would be expected to be recognised as
revenue in the following year.
Grant income
Revenue grants received by the Company are recognised in a manner consistent
with the grant conditions. Once conditions have been met, grant income is
recognised in the Statement of Comprehensive Income as other operating income.
Research and development
Research expenditure is written off as incurred. Development expenditure is
recognised in the Statement of Comprehensive Income as an expense until it can
be demonstrated that the following conditions for capitalisation apply:
· it is technically feasible to complete the scientific
product so that it will be available for use;
· management intends to complete the product and use or
sell it;
· there is an ability to use or sell the product;
· it can be demonstrated how the product will generate
probable future economic benefits;
· adequate technical, financial and other resources to
complete the development and to use or sell the product are available; and
· the expenditure attributable to the product during its
development can be reliably measured.
Intangible assets
Software
Software developed for use in the business is initially recognised at
historical costs, net of amortisation and provision for impairment. Subsequent
development costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably.
Software is amortised over its expected useful economic life, which is
currently estimated to be 4 years. Amortisation expense is included within
administrative expenses in the Statement of Comprehensive Income.
Property, plant and equipment
Property, plant and equipment are initially recognised at historical cost, net
of depreciation and any impairment losses.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably. The carrying amount of the replaced
part is de-recognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial year in which they are
incurred.
Subsequently, property plant and equipment are measured at cost or valuation
net of depreciation and any impairment losses.
Costs associated with maintaining computer software programmes are recognised
as an expense as incurred. Software acquired with hardware is considered to be
integral to the operation of that hardware and is capitalised with that
equipment. Software acquired separately from hardware is recognised as an
intangible asset and amortised over its estimated useful life.
Depreciation is provided on all property, plant and equipment at rates
calculated to write off the cost less estimated residual value of each asset
on a straight line basis over its expected economic useful life as follows:
Right of use
assets The
remaining length of the lease
Leasehold
improvements
The lesser of the asset life or the remainder of the lease
Plant and machinery 4
years
Fixtures, fittings & equipment 4 years
Leases
Leases in which a significant portion of the risks and rewards of ownership
remain with the lessor are deemed to give the Company the right-of-use and
accordingly are recognised as property, plant and equipment in the statement
of financial position. Depreciation is calculated on the same basis as a
similar asset purchased outright and is charged to profit or loss over the
term of the lease. A corresponding liability is recognised as borrowings in
the statement of financial position and lease payments deducted from the
liability. The difference between remaining lease payments and the liability
is treated as a finance cost and taken to profit or loss in the appropriate
accounting period.
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash inflows (cash-generating
units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level.
All individual assets or cash-generating units
are tested whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount
by which the asset's or cash-generating unit's amount exceeds its recoverable
amount. The recoverable amount is the higher of fair value, reflecting market
conditions less costs to sell, and value in use. Value in use is based on
estimated future cash flows from each cash-generating unit or individual
asset, discounted at a suitable rate in order to calculate the present value
of those cash flows. The data used for impairment testing procedures is
directly linked to the Company's latest approved budgets, adjusted as
necessary to exclude any restructuring to which the Company is not yet
committed. Discount rates are determined individually for each cash-generating
unit or individual asset and reflect their respective risk profiles as
assessed by the directors. Impairment losses for cash-generating units are
charged pro rata to the assets in the cash-generating unit. Cash generating
units and individual assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer exist. Impairment
charges are included in administrative expenses in the Statement of
Comprehensive Income. An impairment charge that has been recognised is
reversed if the recoverable amount of the cash-generating unit or individual
asset exceeds the carrying amount.
Current tax and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is
recognised in the statement of comprehensive income, except to the extent that
it relates to items recognised directly in equity.
The current tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the reporting date in the UK, where the Company
operates and generates taxable income
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising between the
carrying amounts of assets and liabilities and their tax bases. Deferred tax
is determined using tax rates (and laws) that have been enacted, or
substantively enacted, by the reporting date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to offset current tax assets against
current tax liabilities.
Share based employee compensation
The Company operates equity-settled share-based compensation plans for
remuneration of its directors and employees.
All employee services received in exchange for the grant of any share-based
compensation are measured at their fair values. The fair value is appraised at
the grant date and excludes the impact of any non-market vesting conditions
(e.g. profitability and remaining an employee of the Company over a specified
time period).
Share based compensation is recognised as an expense in the Statement of
Comprehensive Income with a corresponding credit to equity. If vesting periods
or other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options
expected to vest.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates.
The proceeds received net of any directly attributable transaction costs are
credited to share capital and share premium when the options are exercised.
Financial assets
Classification
The Company classifies its financial assets in the following measurement
categories:
§ Those to be measured at amortised costs; and
§ Those to be measured subsequently at fair value (either through Other
Comprehensive Income or through profit and loss).
The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows. The Company
reclassifies its financial assets when and only when its business model for
managing those assets changes.
Recognition and measurement
At initial recognition, the Company measures a financial asset at its fair
value plus transaction costs that are directly attributable to the acquisition
of the financial asset.
Subsequent measurement of financial assets depends on the Company's business
model for managing those financial assets and the cash flow characteristics of
those financial assets. The Company only has financial assets classified at
amortised cost. Cash and cash equivalents represent monies held in bank
current accounts and bank deposits. These assets are those held for
contractual collection of cash flows, where those cash flows represent solely
payments of principal and interest and are held at amortised cost. Any gains
or losses arising on derecognition is recognised directly in profit or loss.
Impairment losses are presented as a separate line in the profit and loss
account.
Impairment
The Company assesses on a forward-looking basis, the expected credit losses
associated with its debt instruments carried at amortised cost. For trade
receivables the Company applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from the initial
recognition of the receivables. For other receivables the Company applies
the three stage model to determine expected credit losses.
Inventories
Inventories comprise consumables. Consumables inventory is stated at the lower
of cost and net realisable value. Cost is determined using the first-in,
first-out (FIFO) method. Cost represents the amounts payable on the
acquisition of materials. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred
in selling and distribution.
Financial liabilities
Financial liabilities comprise Trade and other payables and borrowings due
within one year and after one year, which are recognised initially at fair
value and subsequently carried at amortised cost using the effective interest
method. The Company does not use derivative financial instruments or hedge
account for any transactions. Trade payables represent obligations to pay
for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are classified as current
liabilities if payment is due within one year. If not, they are presented as
non-current liabilities.
Provisions
A provision is recognised in the Statement of Financial Position when the
Company has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects risks specific to the liability. The increase in the provision
due to the passage of time is recognised as a finance cost. Provisions for
dilapidation charges that will crystallise at the end of the period of
occupancy are provided for in full.
Employee benefits - Defined contribution plan
The Company operates a defined contribution pension scheme which is open to
all employees and directors. The assets of the schemes are held by investment
managers separately from those of the Company. The contributions payable to
these schemes are recorded in the Statement of Comprehensive Income in the
accounting year to which they relate.
Foreign currency translation
The Company's functional currency is the pound
sterling. Transactions in foreign currencies are translated at the exchange
rate ruling at the date of transaction. Monetary assets and liabilities in
foreign currencies are translated at the rates of exchange ruling at the
reporting date. Exchange differences arising on the settlement or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in administrative expenses in the Statement
of Comprehensive Income in the year in which they arise.
Equity
Equity comprises the following:
Called up share capital
Share capital represents the nominal value of equity shares.
Share premium
Share premium represents the excess over nominal value of the fair value of
consideration received of equity shares, net of expenses of the share issue.
Accumulated losses
Accumulated losses represent retained profits
and losses.
Adoption of new and revised standards and changes in accounting policies
In the current year the following new and revised Standards and
Interpretations have been adopted by the company. The adoption has had no
impact on the current period however may have an effect on future periods.
IFRS 17 Insurance contracts 1 January 2023
IAS 1 and IFRS Practice Statement 2 Disclosure of accounting policies 1 January 2023
IAS 8 (Amendment) Definition of accounting estimates 1 January 2023
IAS 12 (Amendment) Deferred tax related to assets and liabilities arising from a single 1 January 2023
transaction
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the Company has
not applied the following new and revised IFRS Standards that have been in
issue but are not yet effective. The Directors do not expect that the adoption
of the other Standards listed below will have a material impact on the
financial statements of the Company aside from additional disclosures:
IAS 1 (Amendment) Classification of liabilities as current or non-current - deferral of 1 January 2024
effective date
IAS 1 (Amendment) Non-current liabilities with covenants 1 January 2024
IFRS 16 (Amendment) Liability in a Sale and Leaseback 1 January 2024
IAS 7 and IFRS 7 (Amendments) Statement of Cashflows and Supplier finance agreements 1 January 2024
IFRS S1 General requirements for disclosure of sustainability-related financial 1 January 2024
information
IFRS S2 Climate-related disclosures 1 January 2024
IAS 21 Clarification of currency exchanges 1 January 2025
3 Critical accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of
judgement and/or estimates. These judgements and estimates are based on
management's best knowledge of the relevant facts and circumstances, having
regard to prior experience, but actual results may differ from the amounts
included in the financial statements. Information about such judgements and
estimation is contained in the accounting policy and/or the notes to the
financial statements and the key areas are summarised below:
Critical judgements in applying accounting policies
· Revenue recognition. The Company typically enters into a contract
comprising one or more stages for each customer project. In the application of
IFRS 15 "Revenue from Contracts with Customers" and the accounting policy set
out in Note 2 to these financial statements, significant judgement is required
to identify the individual performance obligations contained within each
contract, particularly when a set-up charge is made relating to the initial
collaboration with the customer to formulate a programme of development work,
or when the pattern of sales invoices does not align with those stages
explicit in the contract.
Customer contracts may contain a non-refundable set up charge of up to 30% of
contract value which becomes payable upon commencement of the project. This
represents the value of the transfer of knowledge involved in design, planning
and preparation for the work to be done, and for the time and consumables
committed to commence work on the project. As this work is distinct and of
benefit to the customer independent of later stages within the contract, it is
therefore judged to be a separate performance obligation within the meaning of
IFRS 15 and is recognised as revenue in line with the accounting policy. The
remaining performance obligations are based on the stages with defined
deliverables which are explicitly outlined in the customer contracts.
During the process of delivering the contract, where delivery is part way
through a stage at the reporting date, an estimate is made of the amount of
revenue to recognise for that stage to reflect the work performed up to that
date. This amount is estimated on a percentage completion basis.
Critical accounting estimates and assumptions
Deferred Taxation. The Company has accumulated tax losses of £14,359k (2023:
£13,000k). In principle these losses would support a deferred tax asset of
approximately £3,590k (2023: £2,500k). IAS 12 requires that a deferred tax
asset relating to unused tax losses is carried forward to the extent that
future taxable profits will be available. The company is in an investment
phase, expecting to have increased expenditure on R&D and business
development over the next two years which will increase the tax losses. After
the investment period the Board expects the Company to generate healthy
profits but it is difficult at this stage to reliably estimate the period over
which profits may arise in the future. The Board has therefore determined to
not recognise the asset at the reporting date. This approach does not affect
the future availability of the tax losses for offset against future profits.
Share Options. The Company offers share options to employees in recognition of
their service. These share options are valued using the Black Scholes model
and accounted for under IFRS 2. Key estimates and judgements in the valuation
model are the probability of exercise, as well as the volatility of the share
price. For valuation, the Company has assumed that all outstanding options
will vest and become exercisable. The Company has estimated volatility of the
share price to be 24% which is based on historical movement in the Company's
share price.
Dilapidations. The company leases space under an operating lease. A condition
of the lease is to maintain the rented space and return the space in a
suitable condition at the end of the lease period. The company maintain a
dilapidation provision to account for any wear and tear during the lease
period and to return the property to its original condition. At the time of
leasing, the Company estimated future cost not to exceed £20k. This amount is
reviewed annually. No adjustment was considered necessary for the year ended
31 March 2024.
4 Revenue
All of the activities of the Company fall within one business segment, that of
research, development and manufacture of recombinant proteins and antibodies.
2024 2023
Geographic analysis £'000 £'000
UK 195 621
Rest of Europe 95 409
North America and Rest of World 846 1,871
1,136 2,901
In the year there were two customers (2023: three) to whom sales exceeded 10%
of revenues, those customers together accounted for £485k or 43% of revenues
(2023: £1,040k or 36% of revenues).
5 Operating loss is stated after charging/(crediting):
2024 2023
£'000 £'000
Employee benefit costs
-wages and salaries 1,191 2,201
-social security costs 122 247
-other pension costs 61 110
-share based payments 86 35
1,460 2,595
Depreciation of property, plant and equipment (owned) 217 347
Depreciation of property, plant and equipment (leased) 2 25
Other operating expenses
Rates, utilities and property maintenance 155 168
IT costs 52 30
Fees payable to the Company's auditors
- for the audit of the financial statements 45 73
Raw materials and consumables used 296 1,129
Decrease/(increase) in inventories 81 47
Patent costs 31 30
Marketing costs 123 223
Loss/(gain) on foreign exchange 15 (36)
Other expenses 951 1,139
Total cost of sales and administrative expenses 3,429 5,770
Included in the costs above is expenditure on research and development
totalling £254k (2023: £806k). Non-audit fees of £173k (2023: £9k) were
paid in the year and are included in other expenses above, none of which were
paid to the Company's auditor Kreston Reeves LLP
6 Average staff numbers
2024 2023
Monthly Avg Number Monthly Avg Number
Employed in UK 27 50
(including executive directors)
Non-executive directors 4 4
31 54
7 Remuneration of directors and key senior management
Directors
2024 2023
£'000 £'000
Emoluments 349 470
Pension contributions 18 21
367 491
Highest paid director
The highest paid director received the following emoluments:
2024 2023
£'000 £'000
Emoluments 169 120
Pension contributions 10 7
179 127
The highest paid director did not exercise any share options in the year.
(2023: £nil).
Key senior management personnel
Key senior management is considered to comprise the directors of the Company
with total remuneration for the year of £367k (2023: £491k). Share based
payments for the year attributable to key senior management totalled £24k
(2023: £10k).
8 Finance income and expense
2024 2023
Income £'000 £'000
Bank interest receivable 3 3
2024 2023
Expense £'000 £'000
Interest expense on other borrowings 5 4
9 Share based payments
At the reporting date the Company had three share based reward schemes: two
schemes under which options were previously granted and are now closed to
future grants and a third scheme in place in which grants were made in the
current year:
· A United Kingdom tax authority approved scheme for executive
directors and senior staff;
· An unapproved scheme for awards to those, such as non-executive
directors, not qualifying for the approved scheme; and
· A United Kingdom tax authority approved scheme for executive
directors and senior staff which incorporates unapproved options for grants to
be made following listing of the Company shares, "2017 EMI and Unapproved
Employee Share Option Scheme".
Options awarded during the year under the 2017 EMI and Unapproved Employee
Share Option Scheme have no performance conditions other than the continued
employment within the Company. Options vest one, two and three years from the
date of grant, which may accelerate for a change of control. Options lapse if
not exercised within ten years of grant, or if the individual leaves the
Company, except under certain circumstances such as leaving by reason of
redundancy.
The total share-based remuneration recognised in the Statement of
Comprehensive Income was £86k (2023: £35k). The most recent options granted
in the year were valued using the Black-Scholes method. The share price on
grant used the share price of open market value, expected volatility of 24.0%
and a compound risk free rate assumed of 3.47% based on historical experience.
2024 2023
Weighted average exercise price £ Weighted average exercise price £
2024 2023
Number Number
Outstanding at beginning of the year 0.481 2,317,883 0.478 787,083
Granted during the year 0.043 3,760,700 0.483 1,745,800
Exercised during the year - - - -
Lapsed during the year 0.466 (1,548,433) 0.486 (215,000)
Surrendered during the year 0.515 (730,700) - -
Outstanding at the end of the year 0.047 3,799,450 0.481 2,317,883
The options outstanding at the end of each year were as follows:
Expiry Nominal share value Exercise price £ 2024 2023
Number Number
May 2027 £0.04 0.040 3,750 103,750
December 2028 £0.04 0.545 - 648,333
September 2032 £0.04 0.520 - 300,000
September 2032 £0.04 0.475 35,000 1,265,800
February 2034 £0.04 0.0425 3,760,700 -
Total 3,799,450 2,317,883
Of the total number of shares outstanding, 3,750 were exercisable at the
reporting date at a weighted average price of £0.04p/share (2023: 752,083 at
a weighted average price of £0.48p/share).
10 Income tax (credit)
2024 2023
£'000 £'000
Current tax - UK corporation tax (63) (263)
Income tax credit (63) (263)
The difference between loss before tax multiplied by the standard rate of 25%
(2023: 19%) and the income tax credit is explained in the reconciliation
below:
2024 2023
£'000 £'000
Factors affecting the tax credit for the year
Loss before tax (2,290) (2,859)
Loss before tax multiplied by standard rate of UK corporation tax of 25%
(2023: 19%)
(573) (545)
Deferred tax not recognised on current year losses 573 545
RDEC/R&D tax credit (46) (263)
RDEC/R&D tax credit - adjustment relating to prior year (17) -
Total income tax credit (63) (263)
Impact of future tax changes are not expected to materially impact the
position of the Company, and no corporate tax liability is expected in the
subsequent period.
11 Loss per share
2024 2023
£'000 £'000
Loss for the financial year (2,190) (2,596)
Loss per share pence pence
Basic (3.9) (10.0)
Number Number
Issued ordinary shares at the end of the year 95,365,564 26,014,946
Weighted average number of shares in issue during the year 55,556,020 26,014,946
Basic earnings per share is calculated by dividing the basic earnings for the
year by the weighted average number of shares in issue during the year.
Diluted earnings per share is calculated by dividing the basic earnings for
the year by the diluted weighted average number of shares in issue inclusive
of share options outstanding at year end. As the Company is loss making for
current and prior year, diluted earnings per share is not presented.
12 Intangible assets
2024/2023 2023/2022
Software Software
£'000 £'000
Cost
At 1 April 8 8
At 31 March 8 8
Accumulated amortisation
At 1 April 8 8
Amortisation charged in the year - -
At 31 March 8 8
Net book value
At 31 March - -
At 31 March - -
Amortisation is included in administrative expenses on the statement of
comprehensive income.
13 Property, plant and equipment
Fixtures, fittings & equipment
Right of use assets Leasehold Plant & £'000
£'000 improvements machinery Total
£'000 £'000 £'000
Cost
At 1 April 2023 14 844 2,396 277 3,531
Additions - - 2 - 2
Disposals - - - - -
At 31 March 2024 14 844 2,398 277 3,533
Accumulated depreciation
At 1 April 2023 9 812 2,112 223 3,156
Depreciation charged in the year
2 32 159 26 219
Disposals - - - - -
At 31 March 2024 11 844 2,271 249 3,375
Net book value
At 31 March 2024 3 - 127 28 158
At 31 March 2023 5 32 284 54 375
Fixtures, fittings & equipment
Right of use assets Leasehold Plant & £'000
£'000 improvements machinery Total
£'000 £'000 £'000
Cost
At 1 April 2022 240 814 2,356 301 3,711
Additions - 30 72 12 114
Disposals (226) - (32) (36) (294)
At 31 March 2023 14 844 2,396 277 3,531
Accumulated depreciation
At 1 April 2022 210 752 1,891 225 3,078
Depreciation charged in the year
25 60 253 34 372
Disposals (226) - (32) (36) (294)
At 31 March 2023 9 812 2,112 223 3,156
Net book value
At 31 March 2023 5 32 284 54 375
At 31 March 2022 30 62 465 76 633
Plant & machinery with a net book value of £49k is held under hire
purchase agreements or finance leases (2023: £49k).
The carrying value of right of use assets at the reporting date comprises
fixtures, fittings and equipment of £3k (2023: £5k).
The depreciation expense is included in administrative expenses in the
statement of comprehensive income in each of the financial years shown.
14 Investment in subsidiary
The Company has the following investment in a subsidiary:
2024 2023
£ £
Fusion Contract Services Limited 1 1
100% subsidiary
Dormant company
1 Springbank Road, Belfast, BT17 0QL
Under section 402, group financial statements are not prepared on the basis
that the subsidiary company is dormant and not material to the financial
statements for the purpose of giving a true and fair
view.
15 Inventories
2024 2023
£'000 £'000
Raw materials and consumables 460 539
The cost of inventories recognised as an expense for the year was £400k
(2023: £1,129k).
16 Trade and other receivables
2024 2023
£'000 £'000
Trade receivables 584 511
Loss allowance (147) (151)
Trade receivables - net 437 360
Other receivables 8 72
Prepayments and accrued income 112 258
557 690
The fair value of trade and other receivables approximates to their carrying
value.
At the reporting date trade receivables loss allowance/impairment as follows:
2024 2023
£'000 £'000
Individually impaired 102 122
Expected credit loss allowance 45 29
147 151
The carrying amount of trade and other receivables are denominated in the
following currencies:
2024 2023
£'000 £'000
UK pound 282 273
Euros 30 -
US dollar 272 238
584 511
The expected credit loss allowance has been calculated as follows:
31 March 2024 More than 90 days past due
More than 30 days past due More than 60 days past due More than 120 days past due
Current Total
Expected loss rate 1.9% 2.1% 2.7% 4.9% 26.6%
Gross carrying amount (£'000)
280 97 74 - 133 584
Loss allowance (£'000)
5 2 2 - 36 45
31 March 2023 More than 90 days past due
More than 30 days past due More than 60 days past due More than 120 days past due
Current Total
Expected loss rate 1.9% 2.1% 2.7% 4.9% 26.6%
Gross carrying amount (£'000)
113 87 68 43 78 389
Loss allowance (£'000)
2 2 2 2 21 29
Movements on trade receivables loss allowance is as follows:
£'000 £'000
At 1 April 2023/2022 29 53
Movement in loss allowance 16 (24)
At 31 March 2024/2023 45 29
The creation and release of the loss allowance for trade receivables has been
included in administrative expenses in the Statement of Profit or Loss and
Other Comprehensive Income. Other receivables are considered to have low
credit risk and the loss allowance recognised during the year was therefore
limited to trade receivables.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivables mentioned above. The Company does not hold
any collateral as security.
17 Trade and other payables
2024 2023
£'000 £'000
Trade payables 283 480
Social security and other taxes 43 136
Other payables 11 51
Accruals and deferred income 208 177
546 844
The fair value of trade and other payables approximates to their carrying
value.
The Company hold an operating lease with Invest Northern Ireland (note 24). At
the reporting date a balance of £11k (2023: £45k) was due to Invest Northern
Ireland.
18 Borrowings
Lease liabilities Hire Purchase
£'000 Contracts Total
£'000 £'000
At 1 April 2023 6 69 75
Additions - - -
Interest charged in year - 5 5
Repayments (3) (34) (37)
At 31 March 2024 3 40 43
Amounts due in less than 1 year 3 20 23
Amounts due after more than 1 year - 20 20
3 40 43
Lease Hire Purchase
liabilities Contracts Total
£'000 £'000 £'000
At 1 April 2022 27 42 69
Additions - 69 69
Interest charged in year 3 1 4
Repayments (24) (43) (67)
At 31 March 2023 6 69 75
Amounts due in less than 1 year 5 30 35
Amounts due after more than 1 year 1 39 40
6 69 75
All borrowings are denominated in UK pounds. Using a discount rate of 8.5% per
annum the fair value of borrowings at the reporting date is £40k (2023: £69k
discounted at 8.5%).
Borrowings are secured by a fixed and floating charge over the whole
undertaking of the Company, its property, assets and rights in favour of
Northern Bank Ltd trading as Danske Bank.
19 Provisions for other liabilities and charges
2024 2023
£'000 £'000
Due after more than 1 year 20 20
Leasehold dilapidations relate to the estimated cost of returning a leasehold
property to its original state at the end of the lease in accordance with the
lease terms. The Company's premises are held under a lease which is renewed
annually. The costs of dilapidations would be incurred on vacating the
premises.
20 Financial instruments
The Company is exposed to risks that arise from its use of financial
instruments. This note describes the Company's objectives, policies, and
processes for managing those risks and methods used to measure them. There
have been no substantive changes in the Company's exposure to financial
instrument risks and the methods used to measure them from previous years
unless otherwise stated in this note.
The principal financial instruments used by the Company, from which the
financial instrument risk arises, are trade receivables, cash and cash
equivalents and trade and other payables. The fair values of all the Company's
financial instruments are the same as their carrying values.
Financial instruments by category
Financial instruments categories are as follows:
Financial assets at amortised cost As at March 2024 As at March 2023
£ '000 £ '000
Trade receivables 437 360
Other receivables 32 72
Accrued income 77 26
Cash and cash equivalents 1,199 195
Total 1,745 653
Financial Liabilities at amortised cost As at March 2024 As at March 2023
£ '000
£ '000
Trade payables 284 480
Other payables 180 100
Accruals 125 127
Borrowings 43 75
Total 607 782
Capital management
The Company's objectives when managing capital are to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may issue
new shares or sell assets to provide working capital.
Consistent with others in the industry at this stage of development, the
Company has relied on issuing new shares and cash generated from operations.
General objectives, policies and processes - risk management
The Company is exposed through its operations to the following financial
instrument risks: credit risk; liquidity risk and foreign currency risk. The
policy for managing these risks is set by the Board following recommendations
from the Chief Financial Officer. The overall objective of the Board is to set
policies that seek to reduce risk as far as possible without unduly affecting
the Company's competitiveness and flexibility. The policy for each of the
above risks is described in more detail below.
Credit risk
Credit risk arises from the Company's trade and other receivables, and from
cash at bank. It is the risk that the counterparty fails to discharge their
obligation in respect of the instrument.
The Company is mainly exposed to credit risk from credit sales. It is Company
policy to assess the credit risk of new customers before entering contracts.
Also, for certain new customers the Company will seek payment at each stage of
a project to reduce the amount of the receivable the Company has outstanding
for that customer.
At the year end the Company's bank balances were all held with Northern Bank
Ltd trading as Danske Bank (Moody's rating P-1).
Liquidity risk
Liquidity risk arises from the Company's management of working capital, and is
the risk that the Company will encounter difficulty in meeting its financial
obligations as they fall due.
At each Board meeting, and at the reporting date, the cash flow projections
are considered by the Board to confirm that the Company has sufficient funds
and available funding facilities to meet its obligations as they fall due.
The table below analyses the company's financial liabilities into relevant
maturity groupings based on their contractual maturities. The amounts
presented are the undiscounted cash flows:
Less than 6 months 6 to 12 months Between 1 and 2 years Between 2 and 5 years
£000 £000 £000 £000
31 March 2024
Trade and other payables 463 - - -
Accruals 125 - - -
Borrowings - 30 13 -
564 30 13 -
31 March 2023
Trade and other payables 716 - - -
Accruals 127 - - -
Borrowings - 35 40 -
843 35 40 -
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of
a financial instrument will fluctuate because of changes in foreign exchange
rates.
The Company seeks to transact the majority of its business in its reporting
currency (£Sterling). However, many customers and suppliers are outside the
UK and a proportion of these transact with the Company in US Dollars and
Euros. For that reason, the Company operates current bank accounts in US
Dollars and Euros as well as in its reporting currency. To the maximum extent
possible receipts and payments in a particular currency are made through the
bank account in that currency to reduce the amount of funds translated to or
from the reporting currency. Cash flow projections are used to plan for those
occasions when funds will need to be translated into different currencies so
that exchange rate risk is minimised.
If the exchange rate between Sterling and the Dollar or Euro had been 10%
higher/lower at the reporting date the effect on profit and equity would have
been approximately £34,000 (2023: £34,000) higher/lower and £4,000
higher/lower (2023: immaterial) respectively.
21 Called up share capital
2024 2023
£'000 £'000
Allotted, called up and fully paid
- 95,365,564 (2023: 26,014,946) Ordinary shares of £0.04 3,815 1,040
The company is authorised to issue 104,902,120 shares
No dividends were paid (2023: £nil). The directors do not recommend payment
of a final dividend (2023: £nil).
22 Capital commitments
At 31 March 2024 the Company had contracted for but not incurred capital
expenditure of £nil (2023: £nil).
23 Retirement benefits obligations
The Company operates a defined contribution scheme, the assets of which are
managed separately from the Company. During the year the Company charged
£61,000 to the Statement of Profit or Loss and Other Comprehensive Income
(2023: £96,000) in respect of Company contributions to the scheme. At the
reporting date there was £11,000 (2023: £19,000) payable to the scheme and
included in other payables.
24 Transactions with related parties
The Company had the following transactions with related parties during the
year:
Invest Northern Ireland ("Invest NI") is a shareholder in the Company. The
Company received invoices for rent and estate services amounting to £79,000
(2023: £79,000). A balance of £11,000 (2023: £45,000) was due and payable
to Invest NI at the reporting date.
Walsh Strategic Management Limited("Walsh") is a company wholly owned by Colin
Walsh, a director of the Company. The Company received strategic management
consultancy services from Walsh amounting to £27,000 (2023: £27,000). A
balance of £27,000 (2023: £nil) was accrued at year end and payable to Walsh
as at the reporting date.
25 Ultimate controlling party
There is no ultimate controlling party.
26 Post balance sheet events
There have been no significant events affecting the company since the year
end.
27 Reconciliation of loss to EBITDA
2024 2023
£'000 £'000
Loss before tax (2,289) (2,859)
Finance income (3) (3)
Finance expense 5 4
Depreciation and amortisation 219 372
EBITDA (2,068) (2,486)
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