REG - Fusion Antibodies - Half-year Report
05/12/2022 07:00
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RNS Number : 5130I Fusion Antibodies PLC 05 December 2022
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information for the purposes of
Article 7 under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With
the publication of this announcement, this information is now considered to be
in the public domain.
5 December2022
Fusion Antibodies plc
("Fusion" or the "Company")
Half year Report
Fusion Antibodies plc (AIM: FAB), an Early Discovery Contract Research
Organisation ("CRO") specialising in pre-clinical antibody discovery,
engineering and supply for both therapeutic drug and diagnostic applications,
announces its unaudited interim results for the six months ended 30 September
2022 ("H1 FY2023") and provides an update on R&D projects as well as the
development of an Integrated Therapeutic Antibody Services offering.
Operational highlights
· New approach introduced for selling combined services: Integrated
Therapeutic Antibody Services
· Appointment of Adrian Kinkaid as CEO in August 2022
· Continued successful progress in development of the OptiMAL(TM)
library
· Small number of projects delayed by clients as they seek further
investment
Financial highlights
· Revenues of £1.9 million (H1 FY2022: £2.4 million)
· Expenditure on R&D increased by 7% to £0.45 million (H1 FY2022:
£0.42 million)
· Loss of £1.1 million (H1 FY2022: £0.6 million loss)
· Cash position at 30 September 2022 was £1.2 million (31 March 2022:
£2.0 million)
Commenting on the interim results, Adrian Kinkaid, CEO of Fusion Antibodies
plc, said: "We are re-positioning the Company's service offering to best serve
our clients in therapeutic antibody drug discovery. Following the
restructuring of our commercial team and once again attending in-person
conferences this is the right time to re-align our services with client needs.
By integrating our current Discovery, Engineering and Supply services into one
integrated end-to-end service we aim to enhance the client journey with the
development of high performing antibodies to their targets. The integrated
approach has been trialed with an existing client with exceptionally good
results and will be augmented by the new OptiMAL(TM) mammalian display
technology in due course. While this has been a challenging period, the Board
believes that we can deliver the H2 performance necessary to continue to build
shareholder value in the Company."
Fusion will host a presentation on the results open to all investors via the
Investor Meet Company platform at 10.00am on Friday, 9 December 2022,
delivered by Dr Adrian Kinkaid, CEO and James Fair, 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.
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)
Enquiries:
Fusion Antibodies plc www.fusionantibodies.com (http://www.fusionantibodies.com)
Adrian Kinkaid PhD, Chief Executive Officer Via Walbrook PR
James Fair, Chief Financial Officer
Allenby Capital Limited Tel: +44 (0)20 3328 5656
James Reeve, Vivek Bhardwaj (Corporate Finance)
Tony Quirke (Sales)
Walbrook PR Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com
Anna Dunphy Mob: +44 (0)7876 741 001
Paul McManus Mob: +44 (0)7980 541 893
About Fusion Antibodies plc
Fusion is a Belfast-based Collaborative Research Organisation ("CRO") company,
listed on AIM, providing an integrated end-to-end range of antibody
engineering services for the development of antibodies for both therapeutic
drug and diagnostic applications.
Fusion provides a broad range of services in antibody generation, development,
characterisation, optimisation, and small-scale production. These services
include antigen expression, purification and sequencing, antibody humanisation
using Fusion's proprietary CDRx(TM) platform and cell line development,
producing antibody generating stable cell lines optimised for use downstream
by the customer to produce material for clinical trials. Since 2012, the
Company has successfully sequenced and expressed over 250 antibodies and
successfully completed over 200 humanisation projects for its international
customer base, which has included eight of the top 10 global pharmaceutical
companies by revenue.
At every stage, our client's vision is central to how we work in combining the
latest technological advances with cutting edge science. In this work our
world-class humanization and antibody optimization platforms harness the power
of natural somatic hypermutation (SHM) to ensure the best molecule goes to the
clinic. Fusion Antibodies' growth strategy is based on enabling Pharma and
Biotech companies get to the clinic more effectively, using molecules with
optimized therapeutic profile and enhanced potential for successful
development and approval and, ultimately, on speeding up the drug discovery
and development process. The announced Integrated Therapeutic Antibody
Services ("ITA") offering will enhance the efficiency of this process by
providing a continuous service offering from target nomination to stable cell
line. Fusion's use of SHM to create a fully human antibody library to capture
the human antibody repertoire will address a continuing market need in
antibody discovery.
Fusion Antibodies' emphasis on antibody therapeutics is based on the size and
growth rate in the sector, with the market valued at $135.4 billion in 2018
and forecast to surpass $300 billion by 2025, a CAGR of 14.26%. As of May
2021, there were 100 approved antibody therapies on the market and more than
570 antibody therapies in clinical development.
Operational Review
The Company has had a commercially challenging six months to 30 September
2022. In this backdrop, the Company is introducing a new integrated approach
in response to client needs and to ultimately increase revenues. The focus for
our R&D has continued on the OptiMAL(TM) library project, with investment
in R&D increased by 7% over the same period in the previous year.
Revenues for the six-months ended 30 September 2022 were lower than the same
period last year, due to a combination of factors. Notably a small number of
valuable projects have been suspended by clients due to delayed investment
into those businesses. Clients have suggested that we should expect these
projects to recommence once their funding is secured. We saw a return to some
face-to-face conferences and events in FY2022. However, the effect on new
orders from the reduction of contact and lead generation while the Covid-19
pandemic restrictions were in place continues. Alternative measures that were
implemented during the exceptional period of travel restrictions did not yield
as good as results in comparison to face-to-face meetings due to the highly
technical nature of the business.
Demand for our core Humanisation and RAMP(TM) services has continued to be
strong with modest growth in revenues compared with H1 FY2022. Transient gene
expression has also performed well. The geographic spread was similar to that
for full year FY2022 including business through our Asian-distributors.
In April 2022 a new Head of Commercial activities joined the Company and, as
previously announced, the new CEO, Adrian Kinkaid, joined in August this year.
They are working together to raise the profile of the Company in our market
and promote our services internationally, including Company attendance at
eight specialist conferences in Europe and North America between September and
December. There has also been a significant restructuring of the Company's
commercial team and a curation of the customer relationship management
database. We are pleased to note that customer visits to Fusion's laboratories
have also recommenced in recent weeks with customers from Japan and USA as
well as a team from our partner, Eurofins Discovery.
Integrated Therapeutic Antibody Service ("ITA")
At every stage, our client's vision is central to how we address their
project. ITA pulls together all our current services to enhance the efficiency
of this process and provide a continuous service from target discovery to a
final stable cell line ready for larger scale production and is consistent
with Fusion's established philosophy to "begin with the end in mind". This
approach is a natural evolution of the aim to be a research partner with our
customer, providing more services and with additional success milestones and
royalties arising from such projects. When the OptiMAL(TM) platform is
commercially ready it will be incorporated into the ITA.
Research and Development
Additional resources have been invested in R&D and development work on
OptiMAL(TM), the class leading Mammalian Antibody Library, has continued
throughout the period. Each stage of the programme has now been validated and
work is currently ongoing on extracting and evaluating antibodies to oncology
targets. We continue to build a body of data with a view to establishing
commercial relationships for further validation by the end of the financial
year.
To maintain our position at the forefront of the antibody sector we take
advantage of technological advances in the delivery of our existing services.
This involves in-house innovation, continuing professional development of our
scientific staff and periodic updating of our equipment.
Financial Review
Revenues for the six-month period ending 30 September 2022 were £1.86 million
(H1 FY2022: £2.44 million). Included in the H1 FY2022 revenues was the
one-off £150,000 milestone with no milestones received in H1 FY 2023. The
Company continues to retain an interest of a future success milestone or
royalty in 13 client projects. The revenues of £1.86 million represents a
reduction from the underlying £2.3 million revenues in H1 FY2022.
The 33% gross profit percentage on underlying revenues was lower than in the
same period last year due to an under-utilisation of available capacity for
fee generating projects (H1 FY2022: 46%), some of the spare capacity being
deployed to support the internal R&D efforts.
R&D expenditure in H1 FY2023 was £452,000, an increase of 7% over the
comparable period in FY2022 reflecting the continuing investment particularly
in in the OptiMAL(TM) Library project.
SG&A expenditure of £1,419,000 was £53,000 lower than in H1 FY2022 due
in part to professional fees incurred in the previous period.
Operating loss for the period resulting from the above was £1,256,000 (H1
FY2022: £650,000 loss).
Cash used in operations was £754,000 compared with £505,000 used in H1
FY2022. The H1 FY2023 operational outflow includes the £452,000 investment in
R&D. The Company continues to hold elevated levels of consumable stocks to
mitigate against current supply chain risks caused by both the COVID-19
pandemic and Brexit. The total outflow was £851,000 and the closing cash
balance at 30 September 2022 was £1,198,000.
Key Performance Indicators
The key performance indicators (KPIs) regularly reviewed by the Board are:
KPI H1 2023 H1 2022
Underlying revenue growth (19)% 20%
EBITDA* (£1.008m) (£0.275m)
Cash used in operations (£0.754m) (£0.505m)
* Earnings before interest, tax, depreciation and amortisation
The investment in R&D and the impact on EBITDA is set out in Note 12 to
these statements. EBITDA for the period was a loss of £1,008,000 (H1 FY2022:
£275,000 loss) and adjusting for research and development expenditure shows
an EBITDA loss excluding R&D of £556,000 for the period (H1 FY2022:
£149,000 profit).
Outlook
In the Company's Annual Report 2022 we commented on the considerable
uncertainty arising from global macro conditions. Events since that date have
not eased concerns with political uncertainty and market volatility in the UK
along with other global factors, although predictions are suggesting less
volatility and reducing inflationary pressures ahead. Challenges remain for
our international customer base and we continue to meet these challenges and
capitalise on the opportunities presented.
Based on a current assessment of the sales pipeline and as a result of greater
lead generation from face-to-face meetings, the Board believe we can deliver
an improved performance in H2 and continue to build value in the Company.
Statement of Directors' Responsibilities
The Directors confirm, to the best of their knowledge:
· The condensed set of financial statements has been prepared in
accordance with IAS34 'Interim Financial Reporting';
· The interim management report includes a fair review of the
information required by DTR 4.2.7R of the Disclosure and Transparency Rules of
the of the United Kingdom's Financial Conduct Authority, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the remaining
six months of the year, and gives a true and fair view of the assets,
liabilities, financial positions and profit for the period of the Company; and
· The interim management report includes a fair review of the
information required by DTR 4.2.8R of the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority, being a disclosure of
related party transactions and changes therein since the previous annual
report.
On behalf of the Board
Dr Simon Douglas
Non-executive Chairman
5 December 2022
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2022
6 months to 30.09.22 6 months to 30.09.21 Unaudited Year to 31.03.22 Audited
Unaudited £'000 £'000
£'000
Notes
Revenue 1,863 2,441 4,799
Cost of sales (1,256) (1,240) (2,333)
Gross profit 607 1,201 2,466
Other operating income 1 8 46 30
Administrative expenses 3 (1,871) (1,896) (3,821)
Operating loss (1,256) (649) (1,325)
Finance income 4 1 1 1
Finance costs 4 ( 7) (3) (9)
Loss before tax (1,262) (651) (1,333)
Income tax credit 5 146 67 133
Loss for the period (1,116) (584) (1,200)
Total comprehensive expense for the period
(1,116) (584) (1,200)
Pence Pence Pence
Basic loss per share 6 (4.3) (2.3) (4.6)
Condensed Statement of Financial Position
As at 30 September 2022
As at As at 30.09.21 As at
30.09.22 Unaudited 31.03.22
Unaudited £'000 Audited
Notes
£'000 £'000
Assets
Non-current assets
Intangible assets - 1 -
Property, plant and equipment 7 743 941 633
743 942 633
Current assets
Inventories 552 562 585
Trade and other receivables 1,212 1,715 1,517
Current tax receivable 277 166 131
Cash and cash equivalents 1,198 1,987 2,049
3,329 4,430 4,282
Total assets 3,982 5,372 4,915
Liabilities
Current liabilities
Trade and other payables 1,057 954 1,142
Borrowings 8 83 128 66
1,140 1,082 1,208
Net current assets 2,100 3,348 3,074
Non-current liabilities
Borrowings 8 250 24 3
Provisions for other liabilities and charges
20 20 20
Total liabilities 1,410 44 23
Net assets 2,572 4,246 3,684
Equity
Called up share capital 12 1,040 1,037 1,040
Share premium reserve 7,647 7,611 7,647
(Accumulated losses)/retained earnings
(6,115) (4,402) (5,003)
Equity 2,572 4,426 3,684
Condensed Statement of Changes in Equity
For the six months ended 30 September 2022
6 months ended 30 September 2022 Called up share capital Share premium reserve
Unaudited £'000 £'000 Accumulated losses
£'000 Equity
£'000
At 1 April 2022 1,040 7,647 (5,003) 3,684
Loss for the period - - (1,116) (1,116)
Issue of share capital - - - -
Share options - value of employee services
- - 4 4
Total transactions with owners, recognised directly in equity
- - 4 4
At 30 September 2022 1,040 7,647 (6,115) 2,572
6 months ended 30 September 2021 Called up share capital Share premium reserve
Unaudited £'000 £'000 Retained earnings
£'000 Equity
£'000
At 1 April 2021 1,024 7,547 (3,824) 4,747
Loss for the period - - (584) (584)
Issue of share capital 13 64 - 77
Share options - value of employee services
- - 6 6
Total transactions with owners, recognised directly in equity
13 64 6 83
At 30 September 2021 1,037 7,611 (4,402) 4,246
Year ended 30 March 2022 (Accumulated losses)/
Audited Called up share capital Share premium reserve Retained earnings
£'000 £'000 £'000
Equity
£'000
At 1 April 2021 1,024 7,547 (3,824) 4,747
Loss for the year - - (1,200) (1,200)
Issue of share capital 16 100 - 116
Share options - value of employee services
- - 21 21
Total transactions with owners, recognised directly in equity
16 100 21 137
At 31 March 2022 1,040 7,647 (5,003) 3,684
Statement of Cash Flows
For the six months ended 30 September 2022
6 months to 6 months to 30.09.21 Year to 31.03.22
30.09.22 Unaudited Audited
Unaudited £'000 £'000
£'000
Cash flows from operating activities
Loss for the period (1,116) (584) (1,200)
Adjustments for:
Share based payment expense 4 7 21
Depreciation 248 373 749
Amortisation of intangible assets - 1 2
Finance income (1) (1) (1)
Finance costs 7 3 9
Income tax credit (146) (67) (133)
Decrease/(increase) in inventories 32 (82) (105)
Decrease/(increase) in trade and other receivables 304 (275) (77)
(Decrease)/increase in trade and other payables (86) 120 309
Cash used in operations (754) (505) (426)
Income tax received - - 101
Net cash used in operating activities (754) (505) (325)
Cash flows from investing activities
Purchase of property, plant and equipment (358) (191) (258)
Finance income - interest received 1 1 1
Net cash used in investing activities (357) (190) (257)
Cash flows from financing activities
Proceeds from issue of share capital - 77 116
Proceeds from new borrowings 323 - -
Repayments of borrowings (56) (78) (162)
Finance costs - interest paid (7) (3) (9)
Net cash generated (used in)/generated from financing activities 260 (4) (55)
Net decrease in cash and cash equivalents (851) (699) (637)
Cash and cash equivalents at the beginning of the period 2,049 2,686 2,686
Cash and cash equivalents at the end of the period 1,198 1,987 2,049
Notes to the Interim Results
For the six months ended 30 September 2022
1 Basis of Preparation
The condensed financial statements comprise the unaudited results for the six
months to 30 September 2022 and 30 September 2021 and the audited results for
the year ended 31 March 2022. The financial information for the year ended 31
March 2022 does not constitute the full statutory accounts for that period.
The Annual Report and Financial Statements for the year ended 31 March 2022
have been filed with the Registrar of Companies. The Independent Auditor's
Report on the Annual Report and Financial Statements for 2022 was unmodified
and did not contain a statement under s498(2) or s498(3) of the Companies Act
2006.
The condensed financial statements for the period ended 30 September 2022 have
been prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as
adopted by the UK. The information in these condensed financial statements
does not include all the information and disclosures made in the annual
financial statements.
Going concern
At 30 September 2022 the Company had a cash balance of £1.198 million. The
Directors have reviewed detailed projections for the Company. These
projections are based on estimates of future performance and have been
adjusted to reflect various scenarios and outcomes that could potentially
impact the forecast outturn. Based on these estimates, the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for 12 months from the reporting date. Accordingly, they
have prepared these condensed financial statements on the going concern basis.
Accounting policies
The condensed financial statements have been prepared in a manner consistent
with the accounting policies set out in the financial statements for the year
ended 31 March 2022 and on the basis of the International Financial Reporting
Standards (IFRS) as adopted for use in the UK that the Company expects to be
applicable at 31 March 2023. IFRS are subject to amendment and interpretation
by the International Accounting Standards Board (IASB).
2 Segmental information
For all the financial periods included in these condensed financial
statements, all the revenues and costs relate to the single operating segment
of research, development and manufacture of recombinant proteins and
antibodies.
3 Administrative expenses
6 months to 30.09.22 6 months to 30.09.21 Year to 31.03.22
Unaudited Unaudited Audited
£'000 £'000 £'000
Research & development 452 424 699
Selling, general and administration 1,419 1,472 3,122
1,871 1,896 3,821
4 Finance income and costs
6 months to 30.09.22 6 months to 30.09.21 Year to 31.03.22
Unaudited Unaudited Audited
£'000 £'000 £'000
Income
Bank interest receivable 1 1 1
6 months to 30.09.22 6 months to 30.09.21 Year to 31.03.22
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
Interest expense on other borrowings 7 3 9
5 Income tax credit
6 months to 30.09.22 6 months to 30.09.21 Year to 31.03.22
Unaudited Unaudited Audited
£'000 £'000 £'000
Current tax (146) (67) (133)
6 Earnings per share
The calculation of earnings per share is based on loss after tax from
continuing operations for six months to 30 September 2022 of £1,116,000 (6
months to 30 September 2021: £584,000 loss, year to 31 March 2022:
£1,200,000 loss).
The weighted average number of shares used in the calculation of the basic
earnings per share are as follows:
6 months to 6 months to 30.09.21 Year to
30.09.22 Unaudited 31.03.22
Unaudited Number Audited
Number Number
Issued ordinary shares at the end of the period
26,014,946 25,918,280 26,014,946
Weighted average number of shares in issue during the period 26,014,946 25,821,959 25,945,780
Basic earnings per share is calculated by dividing the basic earnings for the
period by the weighted average number of shares in issue during the period.
7 Property, plant and equipment
Right of use assets Fixtures, fittings & equipment
£'000 Leasehold Plant & £'000
property machinery Total
£'000 £'000 £'000
Cost
At 1 April 2022 240 814 2,356 301 3,711
Additions 323 16 7 12 358
Disposals 226 - - - (226)
At 30 September 2022 337 830 2,363 313 3,843
Accumulated depreciation
At 1 April 2022 210 752 1,891 225 3,078
Disposals (226) - - - (226)
Depreciation charged in the period
33 42 154 19 248
At 30 September 2022 17 794 2,045 244 3,100
Net book value
At 30 September 2022 320 36 318 69 743
At 31 March 2022 30 62 465 76 633
8 Borrowings
At 30 At 30 September At 31
September 2021 March
2022 £'000 2022
£'000 £'000
At 1 April 69 230 230
Additions in period 323 - -
Interest 7 3 9
Repayments (66) (81) (170)
At period end 333 152 69
Amounts due in less than 1 year 83 128 66
Amounts due after more than 1 year 250 24 3
333 152 69
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.
9 Retirement benefits obligations
The Company operates a defined contribution scheme, the assets of which are
managed separately from the Company.
10 Transactions with related parties
The Company had the following transactions with related parties during the
period:
Invest Northern Ireland is a shareholder in the Company. The Company leases
its premises from Invest Northern Ireland and received invoices for rent and
estate services amounting to £42,000 (6 months ended 30 September 2021:
£41,000, year ended 31 March 2022: £78,000). A balance of £nil (30
September 2021: £nil, 31 March 2022: £nil) was due and payable to Invest NI
at the reporting date
11 Events after the reporting date
There have been no events from the reporting date to the date of approval
which need to be reported.
12 Reconciliation of loss to EBITDA and EBITDA excluding
R&D expenditure
6 months to 30.09.22 6 months to 30.09.21 Year to 31.03.22
Unaudited Unaudited Audited
£'000 £'000 £'000
Loss before tax (1,262) (651) (1,333)
Finance income/expense 6 2 8
Operating loss (1,256) (649) (1,325)
Depreciation and amortisation 248 374 751
EBITDA (1,008) (275) (574)
Expenditure on research and development 452 424 699
EBITDA excluding research and development
(556) 149 125
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