REG - LungLife AI, INC - Half-year Report
08/08/2023 07:00
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RNS Number : 5650I LungLife AI, INC 08 August 2023
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 2023.
Operational Highlights:
· Completed enrolment of the Company's 425-participant pivotal clinical
validation study in May, in line with expectations.
· Health economics study highlighting the cost-effectiveness of
LungLB® when added to the clinical care pathway for indeterminate lung nodule
management peer-reviewed and published in the Journal of Medical Economics.
· Peer-reviewed publication of LungLB® study in the Nature-Springer
journal BMC Pulmonary Medicine demonstrating high test performance,
successfully detecting lung cancer in its earliest stages when it is most
curable.
Financial Highlights:
· Cash as of 30 June 2023 of $5.36m (30 June 2022: $10.63m, 31 December
2022: $8.01m)
· Cash outflow from operating activities $2.70m (six months to 30 June
2022: $3.26m)
· Loss before tax of $2.81m (six months to 30 June 2022: $4.47m) and
EBITDA loss of $2.78m (six months to 30 June 2022: $4.31m)
Commenting Paul Pagano, Chief Executive Officer of LungLife, said: "This has
been an important six months for the Company as we continue to meet our
milestones. We have concluded participation in our clinical validation study
and published two important reports that will assist with the
commercialisation of LungLB®. Our present focus is the analysis of the
results of our clinical validation study which we continue to expect to report
on by the end of September."
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 & Joint Broker) Tel: +44 (0)20 7597 5970
Virginia Bull / Cameron MacRitchie / Lydia Zychowska
Goodbody (Joint Broker) Tel: +44 (0) 20 3841 6202 / +353 (1) 667 0420
Tom Nicholson / Stephen Kane
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
I am delighted to report on the Company's results for the six months ended 30
June 2023. We have continued to deliver on the Company's objectives and remain
committed to creating shareholder value as we proceed with the aim of being a
driving force in the early detection of lung cancer.
Our LungLB(®) test
According to the World Health Organization, over 2.2 million new cases of lung
cancer were diagnosed in 2020 and approximately 1.8 million deaths from lung
cancer were recorded in 2020 globally. Nearly 80% of all lung cancers in the
United States are diagnosed in later stages when survival rates are low
because the options for curative treatment are then limited. This is in part
due to the lack of effective early detection solutions and the fact that lung
cancer largely develops asymptomatically.
LungLB(®) is a blood-based test that uses circulating tumour cells ("CTC") to
stratify indeterminant lung nodules as either cancerous or benign following
their identification by CT scan. Biopsy is currently part of the standard care
pathway for lung nodules and the LungLB(®) test is designed to support the
physician's decision to biopsy only when necessary, or to monitor
non-invasively using additional imaging. There are estimated to be over 1.5
million indeterminant lung nodules identified each year in the United States
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
participant as well as unnecessary costly and often dangerous procedures.
Three important milestones achieved in the period
Our focus in this period was to conclude enrolment into our clinical
validation study and take further steps towards the commercialisation of our
test.
Clinical validation study
We completed enrolment of the 425 participants in our clinical validation
study in May. The Company is now focused on preparing the data for detailed
analysis, including working with each clinical site to finalise monitoring of
study data before it is unblinded. Monitoring ensures complete, accurate, and
high-quality information will be received for all participants in the study
prior to final analyses and results interpretation. We continue to expect this
to be concluded by end of September 2023.
Health economics study
We published two important documents in the period, both of which are
important components in establishing the ability of the Company to be paid for
its tests, known as "coverage".
The first publication was a cost-effectiveness analysis ("CEA") model on
LungLB® which provides evidence that the test can be utilised as a
cost-effective tool within the current diagnostic pathway.
The principal aim of the research was to explore the incremental
cost-effectiveness of LungLB® when added to the current clinical diagnostic
pathway for patients with lung nodules, as described in guidelines(1). The
greater cost savings in the model were demonstrated by a reduction in
unnecessary procedures and better patient outcomes from reduced delays in
treatment.
Incremental Cost-Effectiveness Ratio (ICER) is a key metric used in the
publication to demonstrate cost effectiveness. Integration of LungLB® leads
to improvement in outcomes and results in an ICER that was 25% below the
willingness to pay (WTP) threshold commonly considered by US commercial
payors, suggesting overall savings when LungLB® is priced at $2,300 per test.
ICERs remain below WTP thresholds at prices up to $3,647 per test.
(1)Evaluation of individuals with pulmonary nodules: when is it lung cancer?
Diagnosis and Management of lung cancer, 3(rd) ed: American College of Chest
Physicians evidence-based clinical practice guidelines.
Peer reviewed publication of our test
We also announced the peer-reviewed publication of the successful performance
results for the Company's LungLB® test from a multi-site prospective study in
patients with indeterminate pulmonary nodules. The pilot study was performed
in collaboration with MD Anderson Cancer Center (Houston, TX) and Icahn School
of Medicine at Mount Sinai (New York, NY) and appears in the journal BMC
Pulmonary Medicine. The primary objective of the study was to compare the
LungLB® test result with a lung biopsy diagnosis and assess performance in a
patient cohort where commonly used nodule evaluation tools were not
informative.
Key points from the study include:
· 151 study participants scheduled for CT-guided lung biopsy, 70% of
whom were found to have "intermediate risk" nodules that represent the most
challenging diagnostic subtype
· The LungLB® test outperformed commonly used evaluation tools,
including the Mayo Clinic risk model and PET scan
· The test demonstrated robust performance in smaller nodules (<2 cm
in diameter) and in early-stage cancer
· The LungLB® biomarker was found to be the strongest independent
predictor of cancer in this study, exceeding commonly known strong predictors
such as nodule size and smoking status
· The LungLB® test performed equally well in current, former, and
never smokers
· The data support potential clinical utility of LungLB® in reducing
delays in treatment, in which positive LungLB® test results were available
months ahead of lung cancer diagnosis in three highlighted cases
We are delighted to have been able to achieve these important milestones in
this six-month period.
Outlook
Our immediate focus is determining the results of our test in the clinical
validation study. Alongside this we continue to prepare the necessary
documentation and applications to support the commercialisation of our test.
This is a pivotal moment for the Company. On behalf of the Board, I would like
to thank our employees, clinical partners, study participants, professional
advisors, suppliers and shareholders for their continuing support, and we look
forward to providing further updates on progress throughout the current year.
Roy Davis
Chairman
FINANCIAL REVIEW
In the six months to 30 June 2023 our cash outflow from operating activities
was $2.70m (six months to 30 June 2022: $3.26m), resulting in a period end
total cash balance of $5.36m, compared to the total cash balance at the start
of the period of $8.01m. We continue to hold monies on notice deposit, with
the longest notice period being 95 days, which is shown as our short-term
deposit balance on the balance sheet. At 30 June 2023 this represented $2.77m
of our total cash balance, and $4.92m at 31 December 2022.
Minimal capital expenditure in the period, and a total of $0.13m spent on the
repayment of lease liabilities (six months to 30 June 2022: $0.11m), being a
combination of the payments on our financing of two microscopes and the rent
on our premises in Thousand Oaks California, being the right of use asset.
Revenues of $23k (six months to 30 June 2022: $10k) related to royalties
earned under our arrangement with our partner in China. The EBITDA loss for
the period was $2.78m (six months to 30 June 2022: $4.31m), which includes the
share-based payment charge of $0.12m (six months to 30 June 2022: $0.39m). The
biggest contributors to the EBITDA loss were employment costs of $1.34m (six
months to 30 June 2022: $1.29m) and research and development of $0.81m (six
months to 30 June 2022: $1.31m). The lower research and development costs
reflect mainly the completion of work on our AI algorithm in the prior
period. In the current period we moved one of our part time employees to
full time, and as such we now have 15 full time employees in the business.
David Anderson
Chief Financial Officer
STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2023
Note 6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December
US$'000 US$'000 2022
Unaudited Unaudited US$'000
Audited
Revenue (3) 23 10 24
Cost of sales - - -
Gross profit 23 10 24
Administrative expenses (2,687) (3,924) (6,865)
Share-based payments (120) (398) (614)
Depreciation (125) (155) (285)
Operating loss (2,909) (4,467) (7,740)
Other operating income - - 102
Finance income 127 26 88
Finance charges (22) (27) (52)
Loss before taxation (2,804) (4,468) (7,602)
Taxation (3) (1) (4)
Loss for the period / year (2,807) (4,469) (7,606)
Other comprehensive income - - -
Total comprehensive loss for the period / year (2,807) (4,469) (7,606)
Loss per share from continuing activities attributable to the ordinary equity holders of the Company
Basic and diluted (US Dollars per share) (4) (0.11) (0.175) (0.298)
STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Note 30 June 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Assets
Current assets
Trade and other receivables (5) 484 526 613
Short term deposits 2,772 4,884 4,922
Cash and cash equivalents 2,589 5,749 3,088
Total non-current assets 5,845 11,159 8,623
Non-current assets
Property, plant and equipment 445 693 566
Intangible assets 5,818 5,818 5,818
Other receivables (5) 13 13 13
Total current assets 6,276 6,524 6,397
Total assets 12,121 17,683 15,020
Current liabilities
Trade and other payables (7) (970) (706) (1,055)
Lease liabilities (8) (290) (217) (255)
Discontinued operations (174) (174) (174)
Total current liabilities (1,434) (1,097) (1,484)
Non-current liabilities
Lease liabilities (8) (184) (477) (346)
Provisions (50) (50) (50)
Total liabilities (1,668) (1,624) (1,880)
Net assets 10,453 16,059 13,140
Issued share capital and reserves attributable to owners to the parent
Called up share capital 3 3 3
Share premium 91,266 91,264 91,266
Share based payment reserve 1,694 1,358 1,574
Accumulated losses (82,510) (76,566) (79,703)
Total equity 10,453 16,059 13,140
STATEMENT OF CHANGES IN EQUITY
As at 30 June 2023
Share based payment reserve
US$'000
Share capital Share premium US$'000 Accumulated losses Total equity
US$'000 US$'000 US$'000
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
Balance at 1 January 2023
3 91,264 1,358 (76,566) 16,059
Comprehensive income:
Loss for the period - - - (3,137) (3,137)
Transactions with owners:
Exercise of share options - 2 - - 2
Share based payments
- - 216 - 246
Balance at 31 December 2022
3 91,266 1,574 (79,703) 13,140
Balance at 1 January 2023
3 91,266 1,574 (79,703) 13,140
Comprehensive income:
Loss for the period - - - (2,807) (2,807)
Transactions with owners:
Share based payments - - 120 - 120
Balance at 30 June 2023
3 91,266 1,694 (82,510) 10,453
STATEMENT OF CASH FLOWS
For the period ended 30 June 2023
6 months ended 30 June 6 months ended 30 June Year ended 31 December 2022
2023 2022 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
Cash flows from operating activities
Loss for the period / year (2,807) (4,469) (7,606)
Adjustments for non-cash/non-operating items:
Depreciation
125 155 285
Gain on sale of tangible assets - - (43)
Foreign exchange (gain) / loss on short term deposits (100) 527 562
Finance income (127) (26) (88)
Finance expense 22 27 52
Taxation 3 1 4
Share based compensation 120 398 614
(2,764) (3,387) (6,220)
Changes in working capital
(Increase)/ decrease in trade and other receivables 150 221 128
(Decrease)/increase in trade and other payables
(83) (98) 251
Cash outflow from operations (2,697) (3,264) (5,841)
Taxation paid (3) (1) (4)
Net cash outflow from operating activities (2,700) (3,265) (5,845)
Cash inflow / (outflows) from investing activities
Proceeds from sale of tangible assets - - 43
Purchase of tangible assets (5) (82) (85)
Short term deposits 2,250 - (73)
Net cash flows from investing activities 2,245 (82) (115)
Cash flows from financing activities
Issue of common stock - - 2
Interest received 105 20 88
Interest paid (22) (27) (52)
Repayment of lease liabilities (127) (114) (207)
Net cash (outflow) / inflow from financing activities (44) (121) (169)
Net decrease in cash and cash equivalents (499) (3,468) (6,129)
Cash and cash equivalents brought forward 3,088 9,217 9,217
Cash and cash equivalents carried forward 2,589 5,749 3,088
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 2022. No new IFRS standards, amendments or interpretations became
effective in the six months to 30 June 2023.
Statement of compliance
This interim consolidated financial information for the six months ended 30
June 2023 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 2022, 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 2023 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 2022 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.
Classification of the Mount Sinai License as an intangible asset
On 18 June 2021, the Company entered into the Mount Sinai License Agreement,
pursuant to which Mount Sinai granted an option to the Company to obtain a
licence, on a non-exclusive basis, to use certain information held by Mount
Sinai. After considering the criteria in IAS38 the directors have judged that
the recognition criteria therein have been met and classified the Mount Sinai
license as an intangible asset.
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 2022 Year ended 31 December 2022
2023 US$'000 US$'000
US$'000 Unaudited Audited
Unaudited
People's Republic of China 23 10 24
23 10 24
Non-current assets 30 June 30 June 31 December 2022
2023 2022 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
United States of America 6,276 6,524 6,397
6,276 6,524 6,397
Product and service revenue 6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December
US$'000 US$'000 2022
Unaudited Unaudited US$'000
Audited
Royalty income 23 10 24
23 10 24
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 $2,807,760 for
the 6 months ended 30 June 2023 (6 months ended 30 June 2022 loss $4,469,915;
year ended 31 December 2022: loss $7,605,585) and the weighted average number
of shares in issue for the 6 months to 30 June 2023 of 25,485,982 (6 months to
30 June 2022: 25,480,790 and year to 31 December 2022: 25,481,800).
The Company has one category of dilutive potential ordinary share, being share
options. The potential shares were not dilutive in the period as the Company
made a loss per share in line with IAS 33. Prior to the listing of its
shares, between 2 July 2021 and 7 July 2021 the Company implemented a
pre-Admission reorganisation of its capital which included the conversion of
Series A and B Preferred Shares into Common Shares and a reverse share split
by way of the issue of one new Common Share and Preferred Share for every 18
old Common Shares and Preferred Shares held.
5. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year 30 June 30 June 31 December 2022
2023 2022 US$'000
US$'000 US$'000 Audited
Unaudited Unaudited
Trade receivables 20 69 -
Other receivables 194 99 150
Prepayments 270 358 463
484 526 613
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$
Outstanding at 1 January 2022 - audited 2,065,527 1.74
Granted 75,000 2.37
Exercised (5,192) 0.45
Expired (18,356) 1.80
Outstanding at 31 December 2022 - audited 2,116,979 1.76
No movements in the period
Outstanding at 30 June 2023 - unaudited 2,116,979 1.69
7. TRADE AND OTHER PAYABLES
30 June 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Trade payables 369 368 358
Other payables - tax and social security 15 2 13
Accruals and other payables 586 336 684
970 706 1,055
Trade and other payables comprise amounts outstanding for trade purchases and
on-going costs. All trade and other payables are due in less than a year.
8 LEASE LIABILITIES
Land and Plant and
buildings machinery Total
US$'000 US$'000 US$'000
At 1 January 2022 504 304 808
Interest expense 19 8 27
Repayments (79) (62) (153)
________ ________ ________
At 30 June 2022 - unaudited 444 250 694
Repayments (55) (63) (118)
Interest expense 18 7 25
________ ________ ________
At 31 December 2022 - audited 407 194 601
Repayments (82) (65) (147)
Interest expense 15 5 20
At 30 June 2023 - unaudited 340 134 474
9. SUBSEQUENT EVENTS
There have been no events which require disclosure in these unaudited interim
financial statements.
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