REG - LungLife AI, INC - Half-year Report
26/09/2022 07:00
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RNS Number : 5390A LungLife AI, INC 26 September 2022
LungLife AI, Inc.
(the "Company" or "LungLife")
Half-year Report
LungLife AI (AIM: LLAI), a developer of clinical diagnostic solutions for the
early detection of lung cancer announces its unaudited half-year report for
the six months ended 30 June 2022.
Summary and Highlights (including post-period end):
· Cash as of 30 June 2022 of $10.63m
· Loss before tax of $4.47m and EBITDA loss of $4.31m
· Six sites participating in the Company's LungLB® validation study,
up from three at time of preliminary results in March, with more in the
pipeline
· New York Clinical Laboratory Evaluation Programme ("CLEP") permit
awarded
· CPT® Proprietary Laboratory Analyses (PLA code), a key component
towards reimbursement in the US market, awarded and became effective on 1
April 2022
· Appointment of Dr Drew Moghanaki, an internationally recognised lung
cancer specialist, to the Company's Scientific Advisory Board
· With the existing sites participating in the validation study and the
additional sites already in the pipeline, there is a continued expectation
that we will complete enrolment of our validation study by end of March 2023
and initial commercialisation with nominal revenues of LungLB® later in 2023
Commenting on outlook, Paul Pagano, Chief Executive Officer of LungLife, said:
"I am proud of the progress that the team has made over this six-month period.
Our validation study is well underway, having enrolled our first participant
in February, and we are where we expected to be at this time point to be able
to complete enrolment by the end of Q1 2023.
"Beyond the continued enrolment of participants into the LungLB® validation
study, over the remainder of the year we are focused on progressing towards
commercial reimbursement. Following the grant of a CPT® PLA code in January,
we now look ahead to the processes of pricing and coverage for the LungLB®
test."
For further information please contact:
LungLife AI, Inc. www.lunglifeai.com (https://www.lunglifeai.com/)
Paul Pagano, CEO Via Walbrook PR
David Anderson, CFO
Investec Bank plc (Nominated Adviser & Broker) Tel: +44 (0)20 7597 5970
Daniel Adams / Virginia Bull / Cameron MacRitchie
Walbrook PR Limited Tel: +44 (0)20 7933 8780 or LungLifeAI@walbrookpr.com
(mailto:LungLifeAI@walbrookpr.com)
Paul McManus / Alice Woodings / Phillip Marriage Mob: 07980 541 893 / 07407 804 654 / 07867 984 082
About LungLife
LungLife AI is a developer of clinical diagnostic solutions designed to make a
significant impact in the early detection of lung cancer, the deadliest cancer
globally. Using a minimally invasive blood draw, the Company's LungLB® test
is designed to deliver additional information to clinicians who are evaluating
indeterminate lung nodules. For more information visit www.lunglifeai.com
(http://www.lunglifeai.com)
CHAIRMAN'S STATEMENT
The six months ended 30 June 2022 was a period of good progress for LungLife,
as we achieved several milestones to keep us on track with our mission to make
a significant impact in the early detection of lung cancer through our
LungLB® test.
Our LungLB® test
LungLB® is a blood-based test that uses circulating tumour cells to stratify
indeterminant lung nodules as either cancerous or benign following their
identification by CT scan. Biopsy is currently part of the standard of care
pathway for lung nodules, but it has significant drawbacks. Approximately 40%
of biopsies result in a benign nodule, and an adverse event rate of
approximately 20% means that many patients are unnecessarily put at risk. The
LungLB® test is designed to support the physician's decision to biopsy only
when necessary, or to monitor non-invasively using additional imaging.
In 2021, we completed a 149-participant pilot study in which we observed a
well-balanced performance and a Positive Predictive Value ("PPV") of 89% by
LungLB®. This PPV value means that in the case of a positive result from the
LungLB® test, the subject's indeterminate nodule was cancerous 89% of the
time. We have now embarked on our clinical validation study and hope those
results will mirror those found in our pilot study.
There are estimated to be over 1.5 million indeterminant lung nodules
identified each year in the United States(1) by CT scan and LungLife's
estimated one week turnaround from receipt of the blood sample to results can
save a significant amount of stressful waiting time for the patient as well as
avoid unnecessary costly, and often dangerous, procedures.
Progress in the period
In February 2022, we enrolled the first participant into our multi-centre
clinical validation study for LungLB®. The validation study will enrol up to
425 participants across multiple US sites, including MD Anderson Cancer
Center, Mount Sinai Hospital in New York City and multiple medical centres of
the Veterans Affairs, taking participants who present with indeterminate lung
nodules.
Since my last report in March, we have added a further three sites to our
validation study, including a further two medical centres of the Veterans
Affairs ("VA") and most recently, University of California, Los Angeles
("UCLA"). There are a number of further sites currently in the pipeline and
which are expected to come onstream in the coming weeks and months.
The VA has the United States' largest integrated health care system, providing
care at nearly 1,300 facilities and serving nine million veterans each year.
Lung cancer is the leading cause of cancer-related deaths among US veterans,
and it is believed that veterans are at higher risk in part due to
environmental exposures during military service. An estimated 900,000 US
veterans are at-risk for lung cancer, and VA hospitals diagnose around 7,700
new lung cancer cases each year, making the three VA sites in our study
population an important addition.
Earlier this month we were delighted to be awarded the New York Clinical
Laboratory Evaluation Programme ("CLEP") permit following their audit. The
CLEP permit allows LungLife to perform clinical utility studies and offer the
LungLB® test commercially in New York state, in addition to the 46 other
states permitted by the Company's existing Clinical Laboratory Improvement
Amendments ("CLIA") certification. The audit was performed to ensure that the
premises, laboratory practice, equipment, personnel, and record-keeping
methods meet state requirements. Issuance of the CLEP permit follows a
rigorous, independent scientific review of both analytical and clinical data
for LungLB®, as well as evaluation of adherence to the Company's quality
management system.
This is an important step in LungLife's commercialisation plan, given our
relationship with the Icahn School of Medicine at Mount Sinai in New York, a
key site in the ongoing pivotal validation trial, and from which the Company
is now able to accept study participants in future utility studies.
In January 2022, we announced that we had been successfully granted a
Proprietary Laboratory Analyses (PLA) CPT® code by the American Medical
Association, marking the first step on the path for commercial reimbursement.
CPT® codes offer healthcare professionals a uniform language for coding
medical services and procedures and allows clinical laboratories to more
specifically identify their tests when billing Medicare and commercial
insurers. The Centers for Medicare & Medicaid Services ("CMS") recently
issued their Calendar Year 2023 Clinical Laboratory Fee Schedule (CLFS)
preliminary payment determination for the LungLB® as crosswalk. There is now
a public comment period for 30 days and the final determination will be
announced in November 2022. There is no guarantee the final payment
determination will be crosswalk.
As a reminder, crosswalk applies if the new test is comparable to an existing
test (that may use a similar technology but for a different indication, for
example), in which case it is assigned the market-based payment rate of that
comparable existing test. Gapfill applies if there are no comparable existing
tests, in which case the Medicare Administrative Contractor determines the
pricing.
People
In March, we announced the appointment of Dr Drew Moghanaki, MD, MPH, an
internationally recognised lung cancer specialist, to our Scientific Advisory
Board. Dr Moghanaki is Professor and Chief of Thoracic Oncology at the UCLA
Department of Radiation Oncology. He has brought extensive leadership to our
Scientific Advisory Board as the Director of the VA Partnership to increase
Access to Lung Cancer Screening programme (VA-PALS), and the co-chair of the
VA Lung Cancer Surgery or Stereotactic Radiotherapy (VALOR) Phase III study,
investigating treatment options for stage I lung cancer.
Outlook
Our key focus is meeting our enrolment target by end of March 2023. Once
enrolment is complete, we will then start the process of evaluating the
results which we expect to be concluded by June 2023. With our CLIA license
and CLEP permit, we expect to be able to begin commercialisation of LungLB®
in parallel with our preparation and submission to the FDA.
We continue to carefully manage our cash resources with an anticipated cash
runway to first half of 2024.
I would like to thank our shareholders, staff and partners for their support
over this period, and look ahead to the remainder of 2022 and beyond, which is
set to bring further progress for the Company.
Roy Davis
Non-Executive Chairman
26 September 2022
(1) Gould MK et al. Am J Respir Crit Care Med. 2015 PMID: 26214244.
FINANCIAL REVIEW
In the period total cash outflow was $4.0m (six months to 30 June 2021 -
$0.07m), of which $3.8m was consumed by operating activities (six month to 30
June 2021 - $1.6m) with the balance mainly being repayment of lease
liabilities, which includes the rent on our CLIA laboratory. The prior period
was before our IPO on 8 July 2021 whereupon the business was funded by the
issue of convertible loan notes, all of which, principal and interest, were
subsequently converted into new common shares.
Revenues of $10k related to royalties earned under our arrangement with our
partner in China. In the six months to 30 June 2021 revenue was $107k which
related wholly to the sale of consumable items to our partner in China. The
EBITDA loss for the period was $4.31m (six months to 30 June 2021 - $2.2m),
which includes the share-based payment charge of $0.4m (six months to 30 June
2021 - $0.16m). The biggest contributors to the EBITDA loss were employment
costs of $1.3m (six months to 30 June 2021 - $0.43m) and research and
development of $1.3m (six months to 30 June 2021 - $0.19m). The research and
development costs are those incurred on our clinical validation study and
continued development of the AI algorithm. In the period we increased our
headcount, and we now have 14 full time employees.
STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2022
Note 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December
US$'000 US$'000 2021
Unaudited Unaudited US$'000
Audited
Revenue (3) 10 107 195
Cost of sales - (92) (96)
Gross profit 10 15 99
Administrative expenses (4,322) (2,247) (5,904)
Exceptional costs - costs of listing - (2,084) (1,101)
Depreciation (155) (139) (323)
Operating loss (4,467) (4,455) (7,229)
Other operating income - 206 206
Finance income 26 - 12
Finance charges (27) (317) (417)
Loss before taxation (4,468) (4,566) (7,428)
Taxation (1) - (16)
Loss for the period / year (4,469) (4,566) (7,444)
Other comprehensive income - - -
Total comprehensive loss for the period / year (4,469) (4,566) (7,444)
Loss per share from continuing activities attributable to the ordinary equity holders of the Company
Basic and diluted (US Dollars per share) (4) (0.175) (0.960) (0.469)
STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note 30 June 30 June 31 December
2022 2021 2021
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 693 309 766
Intangible assets 5,818 - 5,818
Other receivables (5) 13 13 13
Total non-current assets 6,524 322 6,597
Current assets
Trade and other receivables (5) 526 137 741
Cash and cash equivalents 10,633 121 14,628
Total current assets 11,159 258 15,369
Total assets 17,683 580 21,966
Equity and liabilities
Equity
Called up share capital 3 9 3
Share premium 91,264 52,194 91,264
Other equity - 942 -
Share based payment reserve 1,358 714 960
Accumulated losses (76,566) (69,469) (72,097)
Total equity 16,059 (15,610) 20,130
Non-current liabilities
Lease liabilities 477 75 601
Provisions 50 50 50
527 125 651
Current liabilities
Trade and other payables (7) 706 3,810 804
Lease liabilities 217 172 207
Discontinued operations 174 174 174
Convertible notes - 11,909 -
Total current liabilities 1,097 16,065 1,185
Total liabilities 1,624 16,190 1,836
Total equity and liabilities 17,683 580 21,966
STATEMENT OF CHANGES IN EQUITY
As at 30 June 2022
Share based payment reserve
US$'000
Share capital Share premium US$'000 Other equity Accumulated losses Total equity
US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2021
9 52,194 843 551 (64,903) (11,306)
Comprehensive income:
Loss for the period - - - - (4,566) (4,566)
Transactions with owners:
Convertible debt - - 99 - - 99
Share based payments
- - - 163 - 163
Balance at 30 June 2021
9 52,194 942 714 (69,469) (15,610)
Balance at 30 June 2021
9 52,194 942 714 (69,469) (15,610)
Comprehensive income:
Loss for the period - - - - (2,878) (2,878)
Transactions with owners:
Reverse stock split (8) 8 - - - -
Issue of common stock 2 40,062 - - - 40,064
Conversion of Loan Notes - - (942) - 250 (692)
Share issue costs - (1,000) - - - (1,000)
Share based payments
- - - 246 - 246
Balance at 31 December 2021
3 91,264 - 960 (72,097) 20,130
Balance at 1 January 2022
3 91,264 - 960 (72,097) 20,130
Comprehensive income:
Loss for the period - - - - (4,469) (4,469)
Transactions with owners:
Share based payments - - - 398 - 398
Balance at 30 June 2022
3 91,264 - 1,358 (76,566) 16,059
STATEMENT OF CASH FLOWS
For the period ended 30 June 2022
6 months ended 30 June 6 months ended 30 June Year ended 31 December 2021
2022 2021 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
Cash flows from operating activities
Loss for the period / year (4,469) (4,566) (7,444)
Adjustments for non-cash/non-operating items:
Depreciation
155 139 323
Gain on sale of tangible assets - (36) (36)
Other operating income - (206) (206)
Finance income (26) - (12)
Finance expense 27 317 417
Taxation 1 - 16
Share based compensation 398 163 409
(3,914) (4,189) (6,533)
Changes in working capital
(Increase)/ decrease in trade and other receivables 221 32 (569)
(Decrease)/increase in trade and other payables
(98) 2,585 (422)
Cash outflow from operations (3,791) (1,572) (7,524)
Taxation paid (1) - (16)
Net cash outflow from operating activities (3,792) (1,572) (7,540)
Cash inflow / (outflows) from investing activities
Proceeds from sale of tangible assets - 36 36
Purchase of tangible assets (82) - (47)
Landlord improvement contribution - 15 15
Purchase of intangible assets - - (1,800)
Net cash flows from investing activities (82) 51 (1,796)
Cash flows from financing activities
Issue of Convertible Notes - 1,612 1,612
Issue of common stock - - 23,444
Expenses of issue of common stock - - (1,000)
Interest received 20 - 10
Interest paid (27) - (107)
Repayment of lease liabilities (114) (98) (123)
Net cash inflow from financing activities (121) 1,514 23,836
Net increase/(decrease) in cash and cash equivalents (3,995) (7) 14,500
Cash and cash equivalents brought forward 14,628 128 128
Cash and cash equivalents carried forward
10,633 121 14,628
1. GENERAL INFORMATION
LungLife AI, Inc, (the "Company") is a company based in Thousand Oaks,
California which is developing a diagnostic test for the early detection
of lung cancer. The Company was incorporated under the laws of the state of
Delaware on 30 December 2009.
Basis of preparation
The accounting policies adopted in the preparation of the interim consolidated
financial information are consistent with those of the preparation of the
Group's annual consolidated financial statements for the period ended 31
December 2021. No new IFRS standards, amendments or interpretations became
effective in the six months to 30 June 2022.
Statement of compliance
This interim consolidated financial information for the six months ended 30
June 2022 has been prepared in accordance with UK adopted International
Accounting Standards (UK IFRS) IAS 34, 'Interim financial reporting' as
adopted by the European Union and the AIM Rules for UK Companies. This interim
consolidated financial information is not the Group's statutory financial
statements and should be read in conjunction with the annual financial
statements for the period ended 31 December 2021, which have been prepared in
accordance with UK IFRS and have been delivered to the Registrar of Companies.
The auditors have reported on those accounts; their report was unqualified,
did not include references to any matters to which the auditors drew attention
by way of emphasis of matter without qualifying their report and did not
contain any statements of emphasis or other matters.
The interim consolidated financial information for the six months ended 30
June 2022 is unaudited. In the opinion of the Directors, the interim
consolidated financial information presents fairly the financial position, and
results from operations and cash flows for the period. Comparative numbers for
the six months ended 30 June 2021 are unaudited.
Measurement convention
The financial information has been prepared under the historical cost
convention. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
The preparation of the financial information in compliance with UK IFRS
requires the use of certain critical accounting estimates and management
judgements in applying the accounting policies. The significant estimates
and judgements that have been made and their effect is disclosed in note 2.
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Company's historical financial information under UK
IFRS requires the directors to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities. Estimates and judgements are continually evaluated and
are based on historical experience and other factors including expectations of
future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The directors consider that the following estimates and judgements are likely
to have the most significant effect on the amounts recognised in the financial
information.
Carrying value of intangible assets, property, plant and equipment
In determining whether there are indicators of impairment of the Company's
intangible assets, the directors take into consideration various factors
including the economic viability and expected future financial performance of
the asset and when it relates to the intangible assets arising on a business
combination, the expected future performance of the business acquired.
3. SEGMENT ANALYSIS
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Company that are regularly reviewed by the
chief operating decision maker (which takes the form of the Board of
Directors) as defined in IFRS 8, in order to allocate resources to the segment
and to assess its performance.
The chief operating decision maker has determined that LungLife AI, Inc has
one operating segment, the development and commercialisation of its lung
cancer early detection test. Revenues are reviewed based on the products and
services provided.
The Company operates in the United States of America. Revenue by origin of
geographical segment is as follows:
Revenue 6 months ended 30 June 6 months ended 30 June 2021 Year ended 31 December 2021
2022 US$'000 US$'000
US$'000 Unaudited Audited
Unaudited
People's Republic of China 10 107 195
10 107 195
Non-current assets 30 June 30 June 31 December 2021
2022 2021 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
United States of America 6,524 322 6,597
6,524 322 6,597
Product and service revenue 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December
US$'000 US$'000 2021
Unaudited Unaudited US$'000
Audited
Consumable items - 107 107
Royalty income 10 - 88
10 107 195
4. LOSS PER SHARE
The basic loss per share from continuing activities is based on a loss for the
year attributable to equity holders of the Parent Company of $4,469,915 for
the 6 months ended 30 June 2022 (6 months ended 30 June 2021 loss $4,566,267;
year ended 31 December 2021: loss $7,444,188) and the weighted average number
of shares in issue for the 6 months to 30 June 2022 of 25,480,790 (6 months to
30 June 2021: 4,758,434 and year to 31 December 2021: 15,870,143).
The Company has one category of dilutive potential ordinary share, being share
options. The potential shares were not dilutive in the period as the Company
made a loss per share in line with IAS 33. Prior to the listing of its
shares, between 2 July 2021 and 7 July 2021 the Company implemented a
pre-Admission reorganisation of its capital which included the conversion of
Series A and B Preferred Shares into Common Shares and a reverse share split
by way of the issue of one new Common Share and Preferred Share for every 18
old Common Shares and Preferred Shares held.
As required by IAS33, the number of shares presented as the denominator in
calculating loss per share has been adjusted from 1 January 2021, the
beginning of the earliest period for which loss per share information is
presented in order to maintain comparability.
5. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year 30 June 30 June 31 December 2021
2022 2021 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
Trade receivables 69 67 -
Other receivables 99 - 49
Prepayments 358 70 692
526 137 741
Amounts falling due after one year
Rent deposit 13 13 13
13 13 13
All receivables are denominated in US dollars
6. SHARE BASED PAYMENTS
The following is an analysis of movement in options issued and outstanding to
purchase shares in the Company:
Total options Weighted average exercise price
Number US$
At 1 January 2021 14,499,482
Reverse share split (13,693,990)
Revised balance at 1 January 2021 805,492 0.74
Exercised or expired (13,913) 0.74
Granted 1,260,035 2.19
At 31 December 2021 - Exercisable 2,065,527 1.74
Granted 75,000 2.37
Expired (18,356) 1.80
At 30 June 2022 - Exercisable 2,122,171 1.76
7. TRADE AND OTHER PAYABLES
30 June 30 June 31 December
2022 2021 2021
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Trade payables 368 1,225 212
Other payables - tax and social security 2 - 21
Accruals and other payables 336 2,585 571
706 3,810 804
Trade and other payables comprise amounts outstanding for trade purchases and
on-going costs. All trade and other payables are due in less than a year.
8. SUBSEQUENT EVENTS
There have been no events which require disclosure in these unaudited interim
financial statements.
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