REG - Novacyt S.A. - Strategy and Full Year 2021 Trading Update

Novacyt SAAnnouncement

25/01/2022 07:05

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RNS Number : 4538Z  Novacyt S.A.  25 January 2022

Novacyt S.A.

("Novacyt", the "Company" or the "Group")

 

Strategy and Full Year 2021 Trading Update

 

Full year revenue and EBITDA in line with expectations

 

Committed to becoming a leading, global clinical diagnostics company

 

Paris, France and Camberley, UK - 25 January 2022 - Novacyt (EURONEXT GROWTH:
ALNOV; AIM: NCYT), an international specialist in clinical diagnostics,
announces an unaudited trading update for the year ended 31 December 2021,
together with a strategy update following Chief Executive Officer David
Allmond's first 100 days with the Company. Reported revenues and EBITDA for
the period are both expected to be in line with expectations. The Company
intends to announce its 2021 audited full year results in the week commencing
25 April 2022.

 

David Allmond, Group Chief Executive Officer of Novacyt, commented:

"In 2021, we delivered a financial performance in line with expectations,
excluding our ongoing dispute with the DHSC. This highlighted the agility of
the Company to rapidly respond to the changing marketplace for our products,
with a noticeable increase in demand from the private market for COVID-19
testing in travel, sport, film, media, and workplace settings.

 

"During my first 100 days as Chief Executive Officer of Novacyt I have
undertaken a holistic review of the business and I am pleased to deliver my
preliminary findings. We remain committed to becoming a leading, global
clinical diagnostics company in the fight against infectious diseases, which
will be enabled by strengthening the team, our core business and enhancing our
position as a "global first responder" to outbreaks of novel pathogens. We
will also endeavour to streamline our R&D programme to ensure we are
keenly focused on commercially attractive opportunities and bringing the right
solutions, to the right customers at the right time. We will also re-evaluate
how we leverage our products in each of our target global markets as we
continue on our path of international expansion.

 

"I am convinced, as I was when I joined Novacyt in October 2021, that the
Company has the key ingredients in place to build towards the next phase of
growth and will continue making a significant contribution to global health
while delivering value to our shareholders. As we invest in non-COVID-19
product development to tackle high unmet needs and bolster our business
development efforts, I am excited about the future for Novacyt as a
strengthened organisation with a clear strategic focus."

 

Financial highlights

·      Underlying revenue for FY2021 was £95.8m, compared to £277.2m
for FY2020, excluding £40.8m of DHSC revenues under contractual dispute, as
previously announced, in line with management guidance of approximately £100m

·      Revenue derived from COVID-19 products accounted for 86% in
FY2021, compared to 95% in FY2020

·      As announced in August 2021, the year saw a significant shift
away from large, centralised contracts towards independent testing, focused on
private laboratories and non-governmental organisations (NGOs)

o  Private laboratory revenues increased by 98% year-on-year from £28.3m to
£55.9m, which includes £10.5m of revenue from NGOs

o  Private testing accounted for 58% of FY2021 revenue at £55.9m, compared
to 10% in FY2020 at £28.2m

o  The UK represented 45% of total revenue in FY2021 at £42.7m versus 79% in
FY2020 at £219.4m

·      Group gross margin before exceptional items is expected to be in
the region of 70%

·      FY2021 EBITDA before exceptional items is expected to be above
£36.0m (FY2020: £176.1m), i.e. a margin greater than 37%, in line with
management guidance of approximately 40%

·      The Company's cash position at 31 December 2021 was £101.8m,
compared to £91.8m at 31 December 2020 and £77.2m at 30 June 2021

 

Operational highlights

·      Rapid development and launch of 15 new assays to support
laboratories, clinicians, and private testing of COVID-19 since the beginning
of 2021

·      Launch of VersaLab™ mobile processing laboratories and
VersaLab™ Portable to expand near-patient testing opportunities in private
sector testing

·      Inclusion in National Framework Agreement, resulting in a new
£4.7m contract with the DHSC for the supply of PROmate® COVID-19 tests to
the NHS

·      Secured new contracts with WHO and UNICEF for the supply of
COVID-19 products

·      Growth of new markets for private testing, including travel,
sport, film, media, and workplace settings

·      Focus on surveillance programme ensuring, to date, the Company's
PCR product portfolio remains able to detect all published strains of
SARS-CoV-2 with the same high level of accuracy

o  This includes the most recent variant of concern, Omicron, which is fast
becoming the global dominant strain

·    David Allmond appointed as Chief Executive Officer and strengthened
executive team and commercial operations to support future growth

 

Initial findings and conclusions from strategic review

Since joining on 18 October 2021, David Allmond has conducted an initial
strategic review of the business during his first 100 days as Chief Executive
Officer and provides the following key findings. Novacyt has already begun
implementing several of the findings from this initial review and intends to
expand further on the strategy at the time of its 2021 full year results.

 

The Company's refined vision is to become a leading, global clinical
diagnostics company in the fight against infectious diseases through the three
previously announced pillars of product portfolio expansion, geographic
expansion and business development. The Company aims to achieve this vision
by:

·      Strengthening the team and Company's core business to become a
sustainable foundation for growth and continuing to drive innovation

o  The core business will consist of COVID-19 and non-COVID-19 in-vitro
diagnostics (IVDs), life sciences/research-use-only (RUO) products, and
instrumentation

·      Maintaining Novacyt's position as a "global first responder" to
rapidly address significant disease outbreaks through testing and market
surveillance

o  Novacyt has a track record of speed and agility to deliver critical
products, as demonstrated in its response to the COVID-19 pandemic, and
previous outbreaks including Zika, H1N1 (swine flu), and Ebola

 

The Company will continue to invest in R&D to deliver new products in
respiratory and other areas of high unmet need, which has been a core pillar
of its ongoing strategy development since the start of the COVID-19 pandemic.
However, it will shift from being a "development led" to a "market led"
business, changing how success is measured at the Company from the number of
products developed to building a greater understanding of its customers' needs
and developing solutions to best meet them. As a consequence, plans have been
put in place to conduct more comprehensive upfront market opportunity
assessments prior to determining how best to invest to deliver value.

 

In addition, an international scientific advisory board, and in-country and
therapeutic area advisory boards, are being established to assist with market
surveillance and direction of future innovation. This is crucial as clinical
development, regulatory hurdles, associated costs, and timelines have
increased meaning it is important the Company is confident in future value
creation before embarking on significant investment in development programmes.
In the interim, Novacyt continues to build a strong pipeline of business
development opportunities for partnership, licensing, and M&A to
strengthen the business and accelerate growth.

 

Another key pillar of Novacyt's strategic development to date has been
geographic expansion, with a focus on building direct sales, marketing, and
distribution channels. This focus remains, with the Company now leveraging
adjacent markets across Europe with CE marked products, and obtaining targeted
registrations to enable sales in additional territories. Beyond its key target
markets, the Company will also continue to strengthen and work with its
international distributor network to support growth and ensure enhanced global
reach for its IVD, RUO and instrumentation portfolios.

 

As the strategic review of the business continues, the Company is also
reviewing the Lab21 and Microgen businesses and considering the merits of
maintaining multiple company entities/names under the Novacyt Group umbrella
versus a simplified business model and brand, which the Directors believe
could be more impactful.

 

Changes to the Executive Leadership Team to support next phase of growth

Paul Oladimeji has assumed the newly created position of Group Head of
Research and Development (R&D), effective from 1 January 2022. Paul is a
specialist in nucleic-acid amplification technologies and a neuroscientist by
training.

 

Bryan Close has been appointed Chief Operations Officer, effective from 17
January 2022. Bryan is a Chartered Engineer and brings significant experience
within operations, supply chain, and project management gained over a 35-year
long career.

 

Paul Eros, Chief Business Officer, retired at the end of 2021 after four years
with the Company. Paul will continue to work with Novacyt on a consultancy
basis, focused on business development.

 

Ongoing dispute with the DHSC

As previously disclosed, the business remains in dispute with the DHSC in
relation to a supply contract entered into in Q4 2020. During the course of
2021, the Company endeavoured to show the underlying performance of the
business by excluding any financial impact of the disputed revenue. At this
time, the Company continues to engage with the DHSC to resolve the dispute and
continues to believe it has strong grounds to assert its contractual rights.

 

2022 outlook

As observed over the last two years, and highlighted in the last two months,
the course of this pandemic is unpredictable and so, therefore, is the
predictability of testing demand. Currently, the Board expects COVID-19
reported sales could be reduced by around 50% in 2022, versus 2021, which will
be partially offset by new non-COVID-19 products which will start to come
onstream in Q4 2022.

 

In the UK, additional uncertainty around product availability has been caused
by the implementation of the UK Health Security Agency's Medical Devices
(Coronavirus Test Device Approvals) (Amendment) Regulations 2021 ("CTDA"), as
previously announced. Whilst Novacyt has so far been successful in receiving
approval for one product and having two added to the temporary protocol, eight
products remain under review. The Company continues to engage with the UK
Health Security Agency and will provide further updates on its tests still
under review as appropriate.

 

The Board believes the Company is well positioned to accelerate investing in
non-COVID-19 product development to tackle high unmet needs, expand
international reach and bolster its business development efforts.

 

This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) 596/2014.

 

Contacts

Novacyt SA

David Allmond, Chief Executive Officer

James McCarthy, Chief Financial Officer

+44 (0)1276 600081

 

SP Angel Corporate Finance LLP (Nominated Adviser and Broker)

Matthew Johnson / Charlie Bouverat (Corporate Finance)

Vadim Alexandre / Rob Rees (Corporate Broking)

+44 (0)20 3470 0470

 

Numis Securities Limited (Joint Broker)

Freddie Barnfield / James Black

+44 (0)20 7260 1000

 

Allegra Finance (French Listing Sponsor)

Rémi Durgetto / Yannick Petit

+33 (1) 42 22 10 10

r.durgetto@allegrafinance.com (mailto:r.durgetto@allegrafinance.com) /
y.petit@allegrafinance.com (mailto:y.petit@allegrafinance.com)

 

FTI Consulting (International)

Victoria Foster Mitchell / Alex Shaw

+44 (0)20 3727 1000

victoria.fostermitchell@fticonsulting.com
(mailto:victoria.fostermitchell@fticonsulting.com)  /
Alex.Shaw@fticonsulting.com (mailto:Alex.Shaw@fticonsulting.com)

 

FTI Consulting (France)

Arnaud de Cheffontaines

+33 (0)147 03 69 48

arnaud.decheffontaines@fticonsulting.com
(mailto:arnaud.decheffontaines@fticonsulting.com)

 

About Novacyt Group

The Novacyt Group is an international diagnostics business generating an
increasing portfolio of in vitro and molecular diagnostic tests. Its core
strengths lie in diagnostics product development, commercialisation, contract
design and manufacturing. The Company's lead business units comprise of
Primerdesign and Lab21 Products, supplying an extensive range of high-quality
assays and reagents worldwide. The Group directly serves microbiology,
haematology and serology markets as do its global partners, which include
major corporates.

 

For more information, please refer to the website: www.novacyt.com

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