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Interim Report for the six months ended
30 September 2018

26 November 2018

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Fusion Antibodies plc (AIM: FAB), a pharmaceutical contract research organisation specialising in antibody engineering services, announces its unaudited interim results for the six months ended 30 September 2018.


Highlights

Operational

  • Planned facilities and technical capacity expansion completed on time and within budget
  • Affinity maturation service on schedule to launch in December 2018
  • New contract signed with MAB Discovery GmbH ("MAB")
  • Orders and revenues in the six months to 30 September 2018 ("H1 2019") below expectations, as previously announced
  • Mammalian antibody library on track for delivery in 2020

Financial

  • Revenues of £658k (H1 2018: £1,414k)
  • Loss for the period of £742k (H1 2018: £166k)
  • Cash and cash equivalents at 30 September 2018 of £2,802k (31 March 2018: £4,490k)

Post-period end

  • Patent application covering affinity maturation filed in October 2018
  • Strong recovery in order levels seen in October and November 2018

Commenting on the interim results, Paul Kerr, CEO of Fusion Antibodies plc, said: "As we have previously announced, the first six months of the current financial year have been challenging due to increasing competition and consequential pricing pressures. However, order levels have started to accelerate in October and November and I am cautiously optimistic that we have turned a corner. I am pleased that the laboratory capacity expansion was completed on time and within budget, in August 2018, and the launch of the Rational Affinity Maturation Platform (RAMP™) is on schedule for completion in December 2018. These important developments will reinforce our market-leading offering and enable us to resume growth of the business."

 

Enquiries:

Fusion Antibodies plc www.fusionantibodies.com
Dr Paul Kerr, Chief Executive Officer Via Walbrook PR
James Fair, Chief Financial Officer  
   
Allenby Capital Limited Tel: +44 (0)20 3328 5656
Virginia Bull / James Reeve / Asha Chotai  
   
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 contract research organisation ("CRO") providing a range of antibody engineering services for the development of antibodies for both therapeutic drug and diagnostic applications. The Company's ordinary shares were admitted to trading on AIM on 18 December 2017. Fusion provides a broad range of services in antibody generation, development, production, characterisation and optimisation. These services include antigen expression, antibody production, purification and sequencing, antibody humanisation using Fusion's proprietary CDRx™ platform and the production of antibody generating stable cell lines to provide material for use in clinical trials. Since 2012, the Company has successfully sequenced over 250 antibodies and successfully completed over 100 humanisation projects for its international, blue-chip client base.

The Company was established in 2001 as a spin out from Queen's University Belfast. It was initially a drug development business but revised its operations to focus on CRO work in 2011. The Company has a highly experienced management team with a combined 47 years' experience in the biopharma industry. The global monoclonal antibody therapeutics market, which accounted for 43 per cent. of the global biologics market in 2016, was valued at between $85.4 billion and $86.7 billion in 2015 and is forecast to increase at a CAGR of between 8.2 per cent. and 12.2 per cent. for the period 2016 to 2024.

 

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Operational Review

As announced in August 2018, the Company's order levels and revenues in the second six months of the previous financial year and the first few months of the current financial year were substantially below original market expectations and previously achieved levels. The Directors believe that this market disruption has been caused by intense competition recently in the antibody engineering market. The Directors are firmly of the view that the fundamental market for Fusion's antibody engineering services remains attractive and that customers appreciate the high-quality services that Fusion provides. The Company has therefore continued to invest in the development of new and improved services and the expansion of its facilities, believing that these will be rewarded in due course.

The Company was therefore pleased to announce in August that the laboratory expansion was completed within budget. This will provide the Company with the capacity to grow revenues substantially over the next few years. 

The development of the new proprietary Rational Affinity Maturation Platform (RAMP™) is nearing completion and the Company has begun marketing the service to potential users. The Board believes RAMP™ is highly innovative, represents highly valuable intellectual property and will offer the Company a significant competitive advantage. The company filed a patent application covering the technology in October 2018. The Board is confident that this new service will support further long-term growth.

Progress on the new proprietary mammalian antibody library is also on schedule and is expected to be completed and available as a service offering to customers during 2020.

In June 2018, the Company announced that it was in discussions intended to lead to a revised agreement with MAB Discovery GmbH which would provide greater clarity around the nature of services that Fusion provides to MAB.  A new fee for service only contract has now been agreed and the Company and MAB are planning to commence a project under the new agreement.

The Company has recruited more staff for business development, delivery of services and for research and development. The cost of these recruits has been partially offset by grants from Invest Northern Ireland, as announced in May 2018. The Company is in the process of recruiting a Commercial Director.

Financial Review

Revenues for the six-month period to 30 September 2018 (H1 2019) were £658k compared with £1,414k in the six months to 30 September 2017 (H1 2018). As previously announced and as discussed in the Operational Review above, this performance was substantially below the Directors' expectations and has been caused by more intense competition. The bulk of the revenues came from antibody humanisation and mammalian expression projects for customers.

Cost of sales in H1 2019 were £545k, compared with £597k in H1 2018. The recruitment and training of additional scientists for the new laboratories has resulted in these costs not reducing in direct proportion to revenues.

Administrative expenses of £1,063k in H1 2019 were 7% higher than £995k in H1 2018. Administrative costs in H1 2018 included £241k of non-recurring costs, reflecting a 41% increase in like-for-like costs occurred. As part of the capacity expansion plans, the Company has leased additional premises and all related occupation costs have increased as a result of this. Depreciation charges have also increased significantly as laboratory capacity has been expanded.

The total cost base (cost of sales and administrative expenses) in H1 2019 was therefore £1,608k, £16k (1%) higher than £1,592k in H1 2018 (or an increase of 19% on the underlying costs).

Other operating income of £58k (H1 2018: £29k) includes revenue grants relating to employment costs, as announce in May 2018.

As a consequence of the lower revenues, operating loss for H1 2019 was £892k (H1 2018: £148k).

After adjusting the net loss for non-cash items such as depreciation, amortisation and share based payments, and for cash flow timing differences arising on working capital movements, cash used in operations was £446k compared with £51k in H1 2018. £1,232k was invested in H1 2019 (H1 2018: £137k), predominantly in the planned expansion of the facilities, so that together with other minor cash flows, the overall cash outflow for the six months to 30 September 2018 was £1,688k. The resulting cash balance at 30 September 2018 was £2,803k.

Having considered the current trading and expenditure forecasts in light of going concern, the Directors have satisfied themselves that the Company has adequate funds in place to continue to meet its obligations as they fall due.

The total expenditure on the investment in facilities in the last 12 months (i.e. H2 2018 and H1 2019) was £1,677k which is significantly below the £2,600k expected to be incurred at the time of the Company's admission to AIM in December 2017.  This underspend has been achieved by reconfiguring the expansion to achieve the same capacity expansion at a lower cost and less disruption to operations than originally expected.

Basic loss per share was 3.4 pence per share (H1 2018 loss per share: 30.4 pence). This includes the effect of the issue of new shares in H2 2018. For the six months ended 30 September 2017 the number of shares, and therefore the loss per share, has not been adjusted to take account of the subsequent division of each ordinary share of £1 each into 25 shares of 4 pence each.

The Board is not recommending the payment of a dividend in relation to the first half of the current financial year.

Key Performance Indicators

The key performance indicators (KPIs) regularly reviewed by the Board are:

KPI H1 2019 H1 2018
Revenue growth (53%) 70%
EBITDA* (£712k) (£116k)
Cash (used in)/generated from operations (£446k) £51k

* Earnings before interest, tax, depreciation and amortisation

Outlook

Although revenues for the first six months were below expectation, the board continues to believe that modest revenue growth can be achieved in 2018-19. This is based on the orders already in hand, our extensive pipeline of opportunities and the recent marked improvement is order intake.

RAMP™ is set to be introduced in December 2018 and is not expected to impact revenues in Q4 in the current financial year. However, the Board is optimistic that the launch of RAMPTM will have a positive impact on revenues for FY 2020.

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', as adopted by the European Union;
  • 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.

 

By order of the Board

Dr Simon Douglas
Chairman

26 November 2018

 

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Condensed Statement of Comprehensive Income
For the six months ended 30 September 2018

  Notes 6 months to
30.09.18

Unaudited
£
6 months to
30.09.17
Unaudited
£
Year to
31.03.18
Audited
£
Revenue   658,456 1,414,081 2,690,744
Cost of sales   (545,492) (596,863) (1,207,331)
         
Gross profit   112,964 817,218 1,483,413
         
Other operating income 11 57,969 29,481 54,626
Administrative expenses   (1,063,336) (994,851) (2,248,582)
Operating loss   (892,403) (148,152) (710,543)
         
Finance income 4 6,926 13 4,043
Finance costs 4 (1,894) (2,388) (4,862)
Loss before tax   (887,371) (150,527) (711,362)
         
Income tax credit/(expense) 5 145,273 (15,853) 11,421
         
Loss for the period   (742,098) (166,380) (699,941)
         
Total comprehensive (expense) for the period   (742,098) (166,380) (699,941)
         
         
    Pence Pence Pence
Basic loss per share 6 (3.4) (30.4) (4.3)
Diluted earnings per share 6 (3.3) (26.9) (4.2)

 

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Condensed Statement of Financial Position
As at 30 September 2018

  Notes As at
30.09.18
Unaudited
£
  As at
30.09.17
Unaudited
£
  As at
31.03.18
Audited
£
Assets            
Non-current assets            
Intangible assets 7 7,220   -   -
Property, plant and equipment 8 1,591,478   315,004   546,734
Deferred tax assets   1,276,988   1,156,831   1,156,047
    2,875,686   1,471,835   1,702,781
Current assets            
Inventories   95,880   103,477   81,815
Trade and other receivables   650,615   826,811   926,220
Current tax receivable   13,103   3,347   6,906
Cash and cash equivalents   2,802,630   188,977   4,490,931
    3,562,228   1,122,612   5,505,872
Total assets   6,437,914   2,594,447   7,208,653
             
             
Liabilities            
Current liabilities            
Trade and other payables   521,541   670,129   536,299
Borrowings 9 34,655   32,812   33,758
    556,196   702,941   570,057
             
Net current assets   3,006,032   419,671   4,935,815
             
Non-current liabilities            
Borrowings 9 25,989   60,543   43,529
Provisions for other liabilities and charges   20,000   20,000   20,000
Total liabilities   602,185   783,484   633,586
             
Net assets   5,835,729   1,810,963   6,575,067
             
Equity            
Called up share capital   883,648   547,655   883,648
Share premium reserve   4,872,327   6,161,269   4,872,327
Retained earnings/(accumulated losses) 13 79,754   (4,897,961)   819,092
Equity   5,835,729   1,810,963   6,575,067

 

 

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Condensed Statement of Changes in Equity
For the six months ended 30 September 2018

6 months ended 30 September 2018
Unaudited
Called up
share
capital

£
Share
premium
reserve

£
Retained
earnings

£
Equity
£
At 1 April 2018 883,648 4,872,327 819,092 6,575,067
Restatement (see note 13) - - (23,632) (23,632)
At 1 April 2018 restated 883,648 4,872,327 795,460 6,551,435
Loss for the period - - (742,098) (742,098)
Share options - value of employee services - - 46,593 46,593
Tax credit relating to share option scheme - - (20,201) (20,201)
Total transactions with owners, recognised directly in equity - - 26,392 26,392
At 30 September 2018 883,648 4,872,327 79,754 5,835,729
         
6 months ended 30 September 2017
Unaudited
Called up
share
capital
£
Share
premium
reserve
£
Accumulated
losses
£
Equity
£
At 1 April 2017 547,655 6,161,269 (5,003,002) 1,705,922
Loss for the period - - (166,380) (166,380)
Share options - value of employee services - - 216,332 216,332
Tax credit relating to share option scheme - - 55,089 55,089
Total transactions with owners, recognised directly in equity - - 271,421 271,421
At 30 September 2017 547,655 6,161,269 (4,897,961) 1,810,963
         
Year ended 30 March 2018
Audited
Called up
share
capital
£
Share
premium
reserve
£
Retained
earnings
£
Equity
£
At 1 April 2017 547,655 6,161,269 (5,003,002) 1,705,922
Loss for the year - - (699,941) (699,641)
Capital reduction - (6,161,269) 6,161,269 -
Issue of share capital 335,993 5,270,359 - 5,606,352
Cost of issuing share capital - (398,032) - (398,032)
Share options - value of employee services - - 330,176 330,176
Tax credit relating to share option scheme - - 30,590 30,590
Total transactions with owners, recognised directly in equity 335,993 (1,288,942) 6,522,035 5,569,086
At 31 March 2018 883,648 4,872,327 819,092 6,575,067

 

 

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Cash Flow Statement
For the six months ended 30 September 2018

  6 months to
30.09.18
Unaudited
£
6 months to
30.09.17
Unaudited
£
Year to
31.03.18
Audited
£
Cash flows from operating activities      
Loss for the period (742,098) (166,380) (699,941)
Adjustments for:      
Share based payment expense 46,593 216,322 330,176
Cost of raising capital - - 609,836
Depreciation 178,800 31,232 69,625
Amortisation of intangible assets 824 - -
Finance income (6,926) (13) (4,043)
Finance costs 1,894 2,388 4,862
Income tax (credit)/expense (145,273) 15,853 (11,421)
Increase in inventories (14,065) (33,216) (11,554)
       
Decrease/(increase) in trade and other receivables 247,430 (254,803) (225,322)
(Decrease)/increase in trade and other payables (14,758) 239,912 14,974
Cash (used in)/generated from operations (447,579) 51,295 77,192
Income tax received 2,078 - -
Net cash (used in)/generated from operating activities (445,501) 51,295 77,192
       
Cash flows from investing activities      
Purchase of intangible assets (8,044) - -
Purchase of property, plant and equipment (1,223,544) (136,514) (444,595)
Net cash used in investing activities (1,231,588) (136,514) (444,595)
       
Cash flows from financing activities      
Proceeds from issue of share capital - - 4,598,650
Repayments of borrowings (16,643) (9,114) (25,182)
Finance income - interest received 7,325 13 4,043
Finance costs - interest paid (1,894) (2,388) (4,862)
Net cash (used in)/generated from financing activities (11,212) (11,489) 4,572,649
       
Net (decrease)/increase in cash and cash equivalents (1,688,301) (96,708) 4,205,246
Cash and cash equivalents at the beginning of the period 4,490,931 285,685 285,685
Cash and cash equivalents at the end of the period 2,802,630 188,977 4,490,931

 

Notes

Notes to the Financial Statements are available in the printable PDF version

 

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