REG - Premaitha Health PLC - Half Year Results <Origin Href="QuoteRef">NIPT.L</Origin> - Part 2
29/12/2017 07:05
- Part 2: For the preceding part double click ID:nRSc5150Aa
Interim Report for the six months ended 30 September 2017 unless specifically requested by individual shareholders. The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and
postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to shareholders. News updates, Regulatory News and Financial statements can be viewed and downloaded from the Group's
website, www.premaitha.com. Copies can also be requested from; The Company Secretary, Premaitha Health PLC, Rutherford House, Manchester Science Park, Manchester M15 6SZ or by email: investors@premaitha.com.
2 Accounting policies
Basis of preparation
This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), including IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and in
accordance with the accounting policies which will be adopted in presenting the Group's Annual Report and Financial Statements for the year ending 31 March 2018. These are consistent with the accounting policies used in the Financial Statements for the
year ended 31 March 2017.
Going concern
The Group is making substantial financial
progress in its trading activities and is
diversifying its business geographically
to mitigate IP risks in specific
territories but it remains loss-making and
faces significant headwinds with its UK
legal defences against Illumina. In
reviewing the Group's financial plans, the
Directors have focused on the rate of
growth of revenue, decisions available to
them for improvement in gross margins and
in management of the Group's cost base,
the potential implications of the
litigation outcome and on the potential
for the Group to realise capital through
commercial exploitation of the Group's
unvalued intangible capabilities such as
its intellectual property, development
capabilities and customer relationships.
In the short term, existing funding routes
may be required to support any working
capital shortfalls. As described in the
Chairman and Chief Executive statements,
the Group has made significant progress
towards achieving positive cashflows
through growth in gross profitability. The
Group has reported an increased operating
loss due to additional litigation
provisions. Without this separately
disclosed item the Group's operating
losses in the reporting period were stable
with increased gross profits absorbed by
the inclusion of Yourgene's cost base.
Future growth in gross profitability
should therefore contribute to the drive
towards financial self-sufficiency. To
achieve this objective the Group's
forecasts include assumptions of further
growth in revenue arising from new
customers already secured since the
reporting date, and anticipated to arise
from the Group's sales pipeline. Product
improvements designed to improve margins
have been implemented from September 2017
and these are already contributing to
improved gross profitability post the
reporting date. There is also an ongoing
commitment to constrain costs and working
capital requirements to achieve positive
cashflows in the near future. The Group
has also recently launched a
diversification programme intended to
derive value from its development
capabilities and by offering additional
products to its existing sales channels.
The funding requirements of the Group are
reducing but the Group is still dependent
on its funders, until it can achieve the
self-sufficiency described above. The
Company has a proven track record of
securing funding through debt and equity
routes and the Directors believe it is
reasonable to assume that such funds will
remain available until self-sufficiency
can be achieved. However, the ongoing
patent litigation presents significant
headwinds and if events transpire
differently to these forecasts, for
example if revenues fail to grow at the
anticipated pace, or if further litigation
-related costs are required, then there
could be lower cash headroom or even a
cash shortfall. In this situation, the
Group will need to seek additional funding
through its existing funders, the London
capital markets or potentially through
Asian investors now that the Group is more
balanced to that region. The directors
have not yet sought to raise additional
funding therefore the availability of this
in the future is inherently uncertain. The
directors have concluded that the
combination of these circumstances
represent a material uncertainty that, if
they were to transpire adversely, may cast
significant doubt about the Group's
ability to continue as a going concern
and, therefore, that it may be unable to
realise its assets and discharge its
liabilities in the ordinary course of
business. Nevertheless, after making
enquiries, and considering the
uncertainties described above and
mitigation strategies in place, the
directors have a reasonable expectation
that the Group has, or can obtain,
adequate resources to continue in
operational existence for the foreseeable
future. For these reasons, they continue
to adopt the going concern basis in
preparing the interim financial
information. The interim financial
information does not include the
adjustments that would result if the Group
was unable to continue as a going concern.
Taxation
Taxes on income in the interim periods are
accrued using the rate of tax that would
be applicable to expected total annual
earnings.
3 Income tax (credit)/charge
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2017 2016 2017
£ £ £
Current tax
UK corporation tax on profits for the - - -
current period
Foreign corporation tax on profits for the 459 - 8,943
current period
459 - -
Deferred tax
Origination and reversal of temporary (17,205) - -
differences
Total tax (credit)/charge (16,746) - 8,943
The Research and development tax credit of
£405,687 (Mar-17: £806,301) is shown as a
deduction against general administrative
expenses. Deferred tax of £277,737 (Mar
-17: £294,942) is recognised in respect of
the intangible fixed assets acquired in a
business combination in March 2017.
4 Loss per share
BasicBasic loss per share is calculated by dividing the total comprehensive loss for the period of £5,020,633 (Mar-17: loss
£7,883,369) by the weighted average number of ordinary shares in issue during the period 321,218,709 (Mar-17: 236,277,783).
DilutedDiluted earnings per share dilute the basic earnings per share to take into account share options and warrants. The
calculation includes the weighted average number of ordinary shares that would have been issued on the conversion of all the
dilutive share operations and warrants into ordinary shares. 122,316,022 options and warrants (Mar-17: 76,463,906) have been
excluded from this calculation as the effect would be anti-dilutive.
5 Trade and other receivables
On 11 December 2015, the Group entered into a loan agreement with Life Technologies Corporation ("LTC"), part of the Thermo
Fisher Scientific Group ("Thermo Fisher"), under the terms of which Thermo Fisher provided a loan facility of £5m to the Group,
which was subsequently extended on 22 September 2016 by a further £4m under an additional agreement. On 11 July 2017, the Group
has further extended this loan agreement to provide an additional secured loan facility of $5m, of which $4m was immediately
available for drawdown in the period and $1m will be drawn down against future performance milestones. Included in trade and
other receivables is an amount of £860,559 (Mar-17: £1,069,417) in respect of commitment fees for the undrawn increased facility
arising on issue of the 2016, 2017 and New 2017 Warrants. An amount of £833,879 (Mar-17: £785,317) has been provided for
doubtful receivables. The Group's Swiss customer, Genoma, and its parent company Esperite NV are experiencing financial
difficulties despite completing a significant fundraising at 8 March 2017, with Genoma placed in bankruptcy in May 2017. Another
customer, Medgenetix, based in Poland also has significant long-term balances owed to the Group of £46k and legal proceedings
are ongoing to recover the outstanding monies from both of these customers.
6 Provisions
Premaitha is defending two patent infringement litigation claims which claim that Premaitha's non-invasive pre-natal test infringes patents owned or licensed by the claimants. The first claim was filed in March 2015 by the claimants Illumina, Inc.,
Sequenom, Inc. and Stanford University. The second claim was filed in September 2015 by the claimants Illumina, Inc. and the Chinese University of Hong Kong. The cases were heard in the UK High Court in 2017, with the first instance judgment received in
November 2017 as described in the Directors' Report and in note 10. With respect to the litigation the Group recognised a provision in the financial statements to 31 March 2016 of £5,386,326 for expected litigation costs in respect of these claims.
Following an assessment of the litigation costs expected to be incurred in defending both claims, the provision has not been increased further in the current period. Costs of £ 2,975,457have been incurred against the provision in the period and with the
additional £1,245,000 provision for the 321 claim (see below), the provision as at 30 September 2017 totals £1,591,538. The likely appeal arising from the adverse November 2017 judgment, where the IONA test was deemed to have infringed some surviving
claims on each of the patents in question, has not been provisioned as there was no requirement or commitment for this process at the reporting date. Similarly, no provision is made for potential cost awards or damages claims which will be determined at
the Form of Order hearing scheduled for late January 2018. The potential working capital implications arising from the November judgment are discussed further in the going concern section of note 2. In September 2017, Illumina filed a third patent
infringement claim against the Company (the "321 claim"). In response the Company has filed an abuse of process claim which will be heard in March 2018 and which, if successful, would stop this claim. However, the success of this abuse of process claim
cannot be guaranteed and therefore a provision of £1,245,000 has been made to cover the expected costs of a full defence. The 321 claim overlaps with the likely appeal on the first two patent claims and, if the 321 claim survives the abuse of process
hearing, it is likely to be stayed pending the outcome of the appeal. Therefore, the timing of when these costs will arise and, indeed, if they ever will, remains uncertain at the time of these financial statements. The costs of the main appeal are
expected to be lower than this 321 provision, possibly significantly lower.
7 Warrants and derivative financial instruments
On 11 July 2017, the Group issued 28,938,797 warrants with a fair value of £820,848 and this amount has been accounted for as a commitment fee for the provision of increased loan facilities (see note 5). These warrants formed part of a $5m funding
agreement with LTC. As part of the same agreement warrants for $1m were committed on the same terms, subject to the Company accessing the final $1m of available loan finance. The number of these additional warrants has been estimated at 7,542,330 based
on an assumed forward share price and exchange rate. An independent valuation attributes a fair value of £233,329 to these future warrants.
8 Interest bearing loans and borrowings
A secured loan facility was provided by LTC in December 2015 and this was subsequently extended by additional facilities in September 2016. As at 31 March 2017, there was £3,559,564 remaining to be drawn down from this facility. During the period an
additional £1,867,124 was drawn down, with £1,692,440 remaining for drawdown against future milestones. On 11 July 2017, the Group entered into a loan facility extension agreement with LTC for a further facility of $4,000,000 which was drawn in full on 12
July 2017. There is also a potential additional facility of $1,000,000 which is dependent upon future performance. These loan facilities are secured by way of fixed and floating charges over intellectual property of the Group. The drawn-down portions of
these loans are accruing interest at 6% per annum and are repayable in more than 5 years.
9 Share capital
On 11 July 2017, at the same time as entering into the LTC loan facility extension, the Group simultaneously entered into a further warrant agreement with Thermo Fisher. Under this agreement Premaitha issued Thermo Fisher warrants over 28,938,797 new ordinary shares in the Company exercisable at 10.725 pence ("New 2017 Warrants"), being a premium of 10% over the closing share price on 10 July 2017 (the last business day prior to issue of the New 2017 Warrants).
10 Events after the reporting period
After the balance sheet date the patent litigation first instance judgment was delivered on 21 November 2017. Despite being successful on certain claims, the findings overall were adverse for the Company as described in note 6 (Provisions), with the financial implications discussed in the going concern section of note 2. Since the reporting date, and subsequent to the trial judgment, the Group has continued to make commercial progress announcing new customer laboratories in the Middle East, Europe, and a
first customer in East Asia.
This information is provided by RNS
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