Final results
16 August 2018
Fusion Antibodies plc (AIM: FAB), a contract research organisation providing a range of antibody engineering services for the development of antibodies for both therapeutic drug and diagnostic applications, announces its final results for the year ending 31 March 2018.
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Highlights
- Revenue growth of 41% to £2.7m; adj EBITDA broadly in-line with expectations
- Admitted to trading on AIM in December 2017
- Raised £5.5m before expenses
- Loss for the financial year of £699,941
- Adjusted* loss for the financial year of £2,309
- Adjusted* EBITDA of £132,018 (2017: £288,473)
- Cash and cash equivalents as at 31 March 2018 of £4.49m
* Adjusted to exclude accelerated share-based payment charges and IPO costs.
Post period end highlights
- Facilities and technical capacity expansion is underway and will be completed by September 2018, earlier than planned and under budget
- New affinity maturation service on schedule and expected to be introduced by December 2018
- Mammalian antibody library on track for delivery in 2020
Paul Kerr, CEO of Fusion Antibodies commented: "This year was a transformative year, securing new investment from our AIM listing, which has been applied towards expanding our facility and capacity of services to our clients.
We see the drug development sector strong and demand for seamless, high-quality, antibody engineering services integrated into expression and cell line development services. We continue to differentiate our service offering to give our clients access to our enhanced CDRx Humanisation platform, which has delivered two antibodies for clinical trials, rescued failed development projects and not only revived them but added enhanced performance allowing new IP to be sought.
We look forward to launching our antibody affinity maturation services and growing our cell line development capacities further to continue the development of our Company."
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 [email protected] |
| Anna Dunphy | Mob: +44 (0)7876 741 001 |
| Paul McManus | Mob: +44 (0)7980 541 893 |
Chairman's Statement
I am delighted to present the first Annual Report for the Company following our successful admission to AIM in December 2017. The year to 31 March 2018 was characterised by the delivery of strong revenue growth across the year, our successful admission to AIM and the raising of additional funds to support our on-site expansion plans, drive further organic sales growth, and to fund the development of new services.
Admission to AIM, a market operated by the London Stock Exchange
Fusion Antibodies was established in 2001 to develop monoclonal antibodies to be used as therapeutics in cancer treatment and over the years it built deep in-house expertise in antibody development, protein engineering and protein expression. From 2011, the Company ceased drug development activity and focused instead on the provision of services to third parties using its antibody and protein related expertise. In recent years revenues have grown significantly to the point where the Company needed to expand its laboratory facilities and to develop further services. The Board concluded that these developments would be optimally funded by seeking a quotation on AIM.
In December 2017, we announced the admission of our shares to trading on AIM and a successful placing with institutional investors, raising a total of £5.5m (before expenses) at a placing price of 82p (the "Placing"). We were pleased with the level of interest generated from new institutional investors and the funds raised are being used to support the expansion of our existing laboratory space, increase our sales and marketing efforts, and to develop new service lines.
Strategy & Progress
I am pleased to report that revenues in 2017/2018 grew by 41% over the previous financial year, despite the significant distraction in the second six months to the senior executive team caused by the AIM admission process and I thank them, and all our employees, for their hard work during the year. The year- on-year growth rate did slow in the second six months and trading has been slower than anticipated in the early part of the current year.
A large part of the revenue growth came from antibody humanisation and stable cell line development and we continue to believe that there is the potential for further significant organic growth in these areas as the use of antibodies and the outsourcing of specific R&D activities in the Pharmaceutical industry continues to grow. To ensure that we can meet this demand, we have undertaken a significant expansion of our laboratory and office space. The laboratory expansion has been completed, six months earlier than originally planned and within budget.
An additional key driver for revenue growth is expected to come from new products and service areas, and in particular our affinity maturation service and the production of a mammalian antibody library for human antibody discovery. Development continues on both and we are on schedule to launch the antibody affinity maturation service by the end of 2018, and the mammalian antibody library remains on track for 2020.
We are also investing in our sales and marketing capabilities to generate additional business and we believe that further geographical expansion of our customer base will be a key driver of revenue growth.
More details on financial performance are given in the Chief Executive Officer's report.
Board changes
At the time of the AIM admission, two of the Company's long-standing non-executive directors, Sir John Cadogan and David Moore, stepped down from the board and I would like to thank them both for their service to the Company. Immediately after the IPO, Tim Watts was appointed as a non-executive director and became Chair of the Audit Committee. I welcome Tim to the board.
Corporate governance
Good governance underpins the long term success of the business and supports the strategy for growth and the Company has adopted the Quoted Companies Alliance's Corporate Governance Code 2018.
Outlook
Although there was a slowdown in sales growth in the second half of 2017/2018 which has extended into the first quarter of 2018/2019, management has taken steps to address this, including the recruitment of more sales and marketing staff and focussing on the geographical expansion of our customer base. The company is experiencing increased competition and consequential price pressures in the current year but we continue to have a positive outlook for the underlying business drivers. We believe that further growth will come from our antibody humanisation and stable cell line development services, supported by our investments in expanding our facilities and capacity and in our sales and marketing team. The development of the new affinity maturation service is progressing well and should come on line by the end of 2018. Taking these factors together, the board considers that modest revenue growth will be achieved in 2018/2019.
I would like to extend my thanks to all staff at Fusion for their hard work and to our shareholders for their ongoing support.
Dr Simon Douglas
Chairman
15 August 2018
CEO's statement and operation review
Introduction & Company Overview
Fusion Antibodies is an established contract research organisation, providing a multi-service offering, from antibody discovery to clinical supply, to blue-chip global pharmaceutical, biotech and diagnostic companies looking to develop antibody based therapeutic drugs and diagnostics.
We provide services covering antibody identification and discovery, lead optimisation via antibody sequencing and engineering, and particularly focus on antibody humanisation, as well as offering scale up and manufacturing services. Our team has developed a proprietary technology platform called the CDRxTM antibody humanisation platform which can rapidly design and generate humanised antibody constructs using a data base of over 100,000 antibody sequences. We have completed over 100 antibody humanisation commercial projects and have a high success rate using this platform and, as can be seen below, we now have two client humanisation projects in clinical trials and we expect more to follow. In addition, we generate additional revenues from our high value expert witness and technical advisory services, having previously been appointed by the US court of Delaware as expert witnesses in multibillion dollar drug cases.
In May 2018, we were pleased to be informed that the antibody from our very first humanisation project, performed in 2012, has now entered into clinical trials. This will be our second client project to move into the clinical trial stage and we expect more to follow based on customer feedback. Whilst this project did not include any milestone payments, we consider that it is a strong indicator of the company's capabilities.
The Company is growing and derives its revenues primarily from fee-for-service payments. Where appropriate, milestone or success-based fees are included in certain contracts.
Business Review
Revenues for the year demonstrated strong organic growth, up by 41% to £2.69m (2017: £1.91m), continuing the growth seen in recent years.
The main driver of revenue growth came from antibody humanisation fees, substantially the largest contributor to overall sales. Sales from cell-line development services have also grown, albeit from a small base. We also continued to earn fees from providing expert witness services in the field of antibody development.
As announced in our trading update in March 2018, first half sales were particularly strong, with revenues up 70% compared to the comparable period in the previous year. Whilst trading in the second half was up against the previous comparable period, growth was affected by the significant management time required to complete our AIM admission and Placing in December 2017. Whilst this impacted revenues during the period, there was minimal impact on adjusted EBITDA due to the sales mix of higher margin services such as humanisation and cell-line development.
In terms of geographical split, revenues grew in all regions except for the UK, which reflects the expanding global reach of our new business development efforts and our targeting of the large North American market, as well as opportunities within Asia. UK sales were down 15.4% to £0.28m (2017: £0.31m), Europe grew 10.4% to £0.93m (2017: £0.85m) and the US saw sales growth of 9.6% to £0.82m (2017: £0.75m).
The biggest regional driver of growth was from sales to Rest of the World, up significantly from £12k in 2017 to £0.66m for the year ended March 2018. This growth has been achieved through the engagement of agents and distributors across Asia who are targeting a pharmaceutical market that is experiencing a big shift to monoclonal antibodies within therapeutic drug discovery. During the period, the Company secured agreements with new clients in Japan and South Korea to provide humanisation and antibody identification services.
Whilst not a large amount, we also received our first milestone payment during the period. Where appropriate, new contracts include a milestone or success-based fees and in selected cases the opportunity to share the risk in future opportunities through future royalties. The Directors believe that these have the potential to provide meaningful additional revenue streams from 2020.
Laboratory and office expansion update
Building work on the expansion of our facility in Belfast, Northern Ireland, has continued to progress according to our accelerated timetable. We remain on track to complete the expansion by the September 2018, within budget and earlier than originally planned.
Development of new services
Funds from our Placing are also being directed to the development of new service areas, namely our affinity maturation services and the creation of a mammalian antibody library for human antibody discovery. In addition, we have continued to invest in our CDRxTM humanisation platform to offer Antibody Developability by Design (ADDTM) service to differentiate further our technical ability to provide solutions to our clients' antibodies drug candidates by enhancing manufacturability performance.
Development progress on our new antibody affinity maturation service has been good and we are planning to launch this service before the end of the calendar year. Development of our mammalian antibody library remains on track to be available for customers in 2020.
Post-period end events
Also in May, we announced the receipt of additional grants from Invest Northern Ireland ("Invest NI") to support our growth with grants potentially totalling up to £213,000 which can be used to create up to 28 additional jobs and support additional business development over the next 24 months. £168,000 of the grants cover payments for each employee as they are taken on over the next 24 months. The additional 28 jobs, if they are all filled, are expected to take our total workforce to more than 50 people and this is part of our investment programme to deliver future growth. The remaining £45,000 will support additional business development activity to grow our international customer base. This announcement also followed on from confirmation on 1 March 2018 of other grants from Invest NI. We are very grateful for the support provided by Invest NI as we expand the business and these grants are an important part of our strategy of investing for growth.
In June 2018, we announced the notice of termination of our existing collaboration agreement with MAB Discovery GmBH ("MAB"). The agreement specified the terms of engagement regarding our high throughput humanisation of antibodies being developed by MAB, using our CDRxTM platform. We are currently in discussions to develop a revised collaboration agreement. No reduction in revenues is expected as a result.
Financial Results
The year to 2018 was a period of strong organic revenue growth with total sales increasing by 41% to £2.69m (2017: £1.91m). Growth came from customer projects in all geographic regions other than the UK. The fastest growth was seen in the first six months of the financial year as H2 revenue growth was impacted by the demands of the AIM admission process.
The EBITDA loss of £641k (2017 profit: £160k) and adjusted EBITDA profit (adjusted for accelerated share-based payment charges and IPO costs) £132k (2017: £288k) was broadly in-line with expectations. A reconciliation of adjusted profit to adjusted EBITDA is set out in Note 28 to the financial statements. Performance at the EBITDA level reflects the investment that the Company has made in future growth, with investment into employees, facilities and research which are expected to deliver further significant revenue growth. The Company produced a loss before tax of £711k (2017: profit £126k) and adjusted profit before tax of £62k (2017: £255k). The Company generated cash of £77k from operating activities during the year (2017: £37k cash used in operations). Cash and cash equivalents as at 31 March 2018 totaled £4.5m (2017: £0.3m) reflecting the funds raised in our Placing. The Company's full results are set out in the financial statements included with this report.
Key Performance Indicators
The key performance indicators (KPIs) regularly reviewed by the board are:
| KPI | 2018 | 2017 |
| Revenue growth year on year | 41% | 29% |
| EBITDA | (£641k) | £160k |
| Adjusted EBITDA | £132k 5% of revenues |
£288k 15% of revenues |
| Cash generated/(used in) operations | £77k | (£37k) |
Outlook
Although there was a slowdown in sales growth in the second half of 2017/2018 which has extended into the first quarter of 2018/2019, management has taken steps to address this, including the recruitment of more sales and marketing staff and focussing on the geographical expansion of our customer base. The company is experiencing increased competition and consequential price pressures in the current year bit we continue to have a positive outlook for the underlying business drivers. We believe that further growth will come from our antibody humanisation and stable cell line development services, supported by our investments in expanding our facilities and capacity and in our sales and marketing team. The development of the new affinity maturation service is progressing well and should come on line by the end of 2018. Taking these factors together, the board considers that modest revenue growth will be achieved in 2018/2019.
Paul Kerr
Chief Executive Officer
15 August 2018
Statement of Comprehensive Income
| 2018 | 2017 | |||||||
| Notes | Before non- recurring items |
Non- recurring items (note 28) |
After non- recurring items |
Before non- recurring items |
Non- recurring items (note 28) |
After non- recurring items |
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| £ | £ | £ | £ | £ | £ | |||
| Revenue | 4 | 2,690,744 | - | 2,690,744 | 1,913,956 | - | 1,913,956 | |
| Cost of sales | (1,207,331) | - | (1,207,331) | (952,459) | - | (952,459) | ||
| Gross profit | 1,483,413 | - | 1,483,413 | 961,497 | - | 961,497 | ||
| Other operating income | 54,626 | - | 54,626 | 45,674 | - | 45,674 | ||
| Administrative expenses | (1,475,646) | (772,936) | (2,248,582) | (751,688) | (128,953) | (880,641) | ||
| Operating (loss)/profit | 5 | 62,393 | (772,936) | (710,543) | 255,483 | (128,953) | 126,530 | |
| Finance income | 8 | 4,043 | - | 4,043 | - | - | - | |
| Finance costs | 8 | (4,862) | - | (4,862) | (615) | - | (615) | |
| (Loss)/profit before tax | 61,574 | (772,936) | (711,362) | 254,868 | (128,953) | 125,915 | ||
| Income tax credit/(expense) | 10 | (63,883) | 75,304 | 11,421 | (66,360) | 60,399 | (5,961) | |
| (Loss)/profit for the financial year | (2,309) | (697,632) | (699,941) | 188,508 | (68,554) | 119,954 | ||
| Total comprehensive (expense)/income for the year | (2,309) | (697,632) | (699,941) | 188,508 | (68,554) | 119,954 | ||
| Pence | Pence | |||||||
| (Loss)/earnings per share | ||||||||
| Basic | 11 | (4.3) | 0.9 | |||||
| Diluted | 11 | (4.2) | 0.8 | |||||
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The accompanying notes form an integral part of the financial statements.
Statement of Financial Position
| Notes | 2018 £ |
2017 £ |
|||
| Assets | |||||
| Non-current assets | |||||
| Property, plant and equipment | 12 | 546,734 | 107,253 | ||
| Deferred tax assets | 14 | 1,156,047 | 1,118,864 | ||
| 1,702,781 | 1,226,117 | ||||
| Current assets | |||||
| Inventories | 15 | 81,815 | 70,261 | ||
| Trade and other receivables | 16 | 926,220 | 571,998 | ||
| Current tax receivable | 6,906 | 2,078 | |||
| Cash and cash equivalents | 4,490,931 | 285,685 | |||
| 5,505,872 | 930,022 | ||||
| Total assets | 7,208,653 | 2,156,139 | |||
| Liabilities | |||||
| Current liabilities | |||||
| Trade and other payables | 17 | 536,299 | 430,217 | ||
| Borrowings | 18 | 33,758 | - | ||
| 570,057 | 430,217 | ||||
| Net current assets | 4,935,815 | 499,805 | |||
| Non-current liabilities | |||||
| Borrowings | 18 | 43,529 | - | ||
| Provisions for other liabilities and charges | 19 | 20,000 | 20,000 | ||
| Total liabilities | 633,586 | 450,217 | |||
| Net assets | 6,575,067 | 1,705,922 | |||
| Equity | |||||
| Called up share capital | 21 | 883,648 | 547,655 | ||
| Share premium reserve | 4,872,327 | 6,161,269 | |||
| Retained earnings/(accumulated losses) | 819,092 | (5,003,002) | |||
| Total equity | 6,575,067 | 1,705,922 |
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board on 15 August 2018, and signed on its behalf:
| Dr Paul Kerr Director |
James Fair Director |
Statement of Changes in Equity
| Called up share capital £ |
Share premium reserve £ |
(Accumulated losses)/Retained earnings £ |
Total equity £ |
|
| At 1 April 2017 | 547,655 | 6,161,269 | (5,003,002) | 1,705,922 |
| Loss for the year | - | - | (699,941) | (699,941) |
| 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 |
| At 1 April 2016 | 547,655 | 6,161,269 | (5,251,909) | 1,457,015 |
| Profit for the year | - | - | 119,954 | 119,954 |
| Share options - value of employee services | - | - | 128,953 | 128,953 |
| Total transactions with owners, recognised directly in equity | - | - | 128,953 | 128,953 |
| At 31 March 2017 | 547,655 | 6,161,269 | (5,003,002) | 1,705,922 |
The accompanying notes form an integral part of these financial statements.
Cash Flow Statement
| 2018 £ |
2017 £ |
|
| Cash flows from operating activities | ||
| (Loss)/profit for the year | (699,941) | 119,954 |
| Adjustments for: | ||
| Share based payment expense | 330,176 | 128,953 |
| Cost of raising capital | 609,836 | - |
| Depreciation | 69,625 | 32,990 |
| Finance income | (4,043) | - |
| Finance costs | 4,862 | 615 |
| Income tax (credit)/expense | (11,421) | 5,961 |
| Increase in inventories | (11,554) | (70,261) |
| Increase in trade and other receivables | (225,322) | (294,373) |
| Increase in trade and other payables | 14,974 | 38,787 |
| Cash generated from/(used in) operations | 77,192 | (37,374) |
| Income tax received | - | - |
| Net cash generated from/(used in) from operating activities | 77,192 | (37,374) |
| Cash flows from investing activities | ||
| Purchase of property, plant and equipment | (444,595) | (90,271) |
| Net cash used in investing activities | (444,595) | (90,271) |
| Cash flows from financing activities | ||
| Proceeds from issue of share capital | 4,598,650 | - |
| Repayment of borrowings | (25,182) | - |
| Finance income - interest received | 4,043 | - |
| Finance costs - interest paid | (4,862) | (615) |
| Net cash generated from/(used in) financing activities | 4,572,649 | (615) |
| Net increase/(decrease) in cash and cash equivalents | 4,205,246 | (128,260) |
| Cash and cash equivalents at the beginning of the year | 285,685 | 413,945 |
| Cash and cash equivalents at the end of the year | 4,490,931 | 285,685 |
The accompanying notes form an integral part of these financial statements.
