Final results
02 July 2019
Fusion Antibodies plc (AIM: FAB), a pharmaceutical contract research organisation specialising in antibody engineering services, announces its final results for the year ended 31 March 2019.
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Highlights
- Significant increase in orders and revenues in H2 FY 2019
- Full year revenues fell by 19% to £2.2m due to weak H1
- £1.5m revenues in H2 FY 2019 was the Company's strongest-ever 6 month period
- Loss for the year of £1.3m (2018: £0.7m)
- New Rational Affinity Maturation Platform (RAMP™) introduced in December 2018
- Capacity expansion completed
- Business development team expanded and strengthened
- Cash position at the year-end £2.0m (2018: £4.5m)
Post year end
- Commercial roll out of RAMP™
- New senior recruitment in business development and in marketing
- Mammalian antibody library on track for delivery in 2020
Paul Kerr, CEO of Fusion Antibodies commented: "We have had a strong improvement during the second half of the year which has been due to a significant increase in orders and revenues. This has been achieved by a mix of factors including addressing the external competitive pressures seen during H2 FY 2018 and H1 FY 2019 and expanding and improving the quality of the Company's business development and marketing function. We are encouraged to see some good initial interest from potential customers in our new RAMP™ technology which will enable customers to improve the performance of many of their antibody based drugs. We are excited about the next 12 months and are grateful to our shareholders for their continued support."
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 |
| James Reeve / Asha Chotai | |
| Walbrook PR | Tel: +44 (0)20 7933 8780 or [email protected] |
| Paul McManus | Mob: +44 (0)7980 541 893 |
| Anna Dunphy | Mob: +44 (0)7876 741 001 |
Chairman's Statement
The year has been very significant for the Company, as we delivered our on-site expansion plans, introduced RAMP™ and responded to new competition which emerged towards the end of last year. In the first half of the financial year (H1) trading was difficult with pricing pressures and new competition significantly impacting revenues. However our response has been effective and in H2 we recorded the Company's highest revenues for a six month period. The combination of a weak H1, planned expenditure on research and investment for growth resulted in a loss for the year of £1.3m as is explained in the Chief Executive Officer's report.
Strategy and progress
As a result of difficult trading in H1, the full year revenues were 19% lower than in FY 2018. The Board recognised that trading was coming under pressure in the final quarter of FY 2018, both as a result of the impact on management of the AIM admission process and also from new competitive pressures in the market, in particular in relation to antibody humanisation. This resulted in a significant downturn in our revenues in H1.
Management and the Board responded strongly to these challenges. Prices were adjusted and operational improvements were made to improve our efficiency and maintain margin. We strategically realigned our broad technology base and enhanced antibody design with Antibody Developability by Design (ADD™) as a service providing further value to our customers. The business development team benefitted from a post IPO expansion with new team members recruited and trained in H1 and coinciding with the expansion and equipping of laboratories improving efficiency and throughput for our customer offering. As a result, the H2 revenues were more than double those for H1 demonstrating a marked turnaround and delivering the highest six months revenue on record. We believe that this can be sustained with the potential for further growth as the use of antibodies and the outsourcing of specific R&D activities in the Pharmaceutical industry continues to grow.
As part of our growth plans, over the past 12 months we have invested in the facilities and delivered a significant expansion of our laboratory and office space on time and well under budget. This gives us the capacity headroom required for future growth. Furthermore, we continue to expand the commercial team and to invest in the science behind the services to deliver ever improving techniques to a fast moving industry. I am pleased to report that the introduction of RAMP™, our advanced affinity maturation service to improve performance of antibody based drugs, was announced in December 2018 and will be commercially rolled out fully in the current year. Our scientific skills and creativity can also be seen in the progress of the Antibody Library currently under development for human antibody discovery and which remains on track for 2020.
Strategically we have aligned our business into three core services to meet our customer needs:
- Discovery: the creation, screening and sequencing of novel monoclonal antibodies for therapeutic and diagnostic applications;
- Engineering: maximising the performance of an antibody drug including CDRx™ humanisation, ADD™ and RAMP™; and
- Supply: the production of material for clinical production or further research, including cGMP ready stable cell line development and transient expression.
Corporate governance
The long-term success of the business and delivery on strategy depends on good governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code 2018 as explained more fully in the Governance Report in the annual report and accounts.
Current trading
The Company had a challenging first six months with disappointing revenues in H1 FY2019. Order levels picked up significantly from October 2018 onwards and revenues in H2 FY2019 exceeded all previous six-month periods. To complement the record H2 revenues, order intake also exceeded previous periods. The introduction of the new RAMP™ service towards the end of FY 2019 has been well received by potential customers and is expected to contribute to revenues in the coming year. As explained in the financial results section of the CEO's report, the Company returned a loss for the year and the combined use of cash in operations and invested in capital expenditure was £2.5m.
Post year end trading has been in line with expectation. Order acquisition has remained firm and revenue levels maintained incorporating initial contributions from RAMP™. The Company continues to innovate and develop its services, and in particular the development of the Mammalian Antibody Library will continue throughout the coming financial year.
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
01 July 2019
Chief Executive Officer's Statement
This year has been our first full year as a listed Company and has come with some early challenges as well as good reason for optimism. Weak H1 revenues required a strong management response while we also implemented the actions planned at the time of listing. As a result of the weak H1 and investment for growth, losses increased this year to £1.3m (2018: £0.7m loss). I am delighted to report a full recovery of revenues in H2 along with the expansion of laboratories, targeted recruitment and continued delivery from our research and development programme. This is an exciting time for the Company and I am pleased to work in a team of talented people well equipped to capture the full value of opportunities presented by the growing market in global drug research.
Business review
Revenue performance across the financial year to 31 March 2019 divides very clearly into two six month periods. In the second six months (H2) the Company delivered revenues of £1.5m, a new high for the Company and indicates a strong recovery from the weak trading (£0.7m) in the first six months (H1). However, revenues for the full year were 19% lower than the previous financial year as a result.
Sales from our humanisation service were again the main contributor to revenues. Our newly introduced Antibody Developability by Design also began to generate modest revenues in the year.
In terms of geographical performance, revenues from North America grew by 23% to become our largest market in the year with a reduction in revenues recorded for the UK, rest of Europe and rest of world. During the year the business development team welcomed new recruits who have been increasing our client contact for increased order acquisition. In particular several trips have been made to Asia as the Company builds relationships in Japan and South Korea and develops new opportunities in China.
In addition to the fees charged for performing services, several contracts now carry a royalty or success payment which becomes payable when the customer project reaches a certain milestone. Having received a small milestone payment in FY 2018, the Company did not receive any milestone payments in the FY 2019. We maintain our interest in several molecules humanised by the Company and developed by others, including Mab Discovery, and have added new milestones for work performed this year which will crystallise if these projects proceed to clinical trials in the coming years.
In August 2018, we completed the expansion of our laboratory capacity which has improved the workflows and efficiency so that we maintained our gross profit margin in H2 in the face of competitive pressures. Our newly equipped laboratories provide bespoke facilities for delivery of our RAMP™ service, research and development of new services and a foundation for the future growth of all the Company's services.
We continued to invest in both RAMP™ and the development of the fully human antibody library during the year. We view these as a source of substantial growth over the next few years. Following the introduction of RAMP™ we will produce more scientific data in parallel with, and to support, the commercial roll out.
Inventory of consumables was increased at the year end to allow for any supply chain disruption from the UK's planned exit from the European Union, which has now been deferred to October 2019. In the year, 30% of the Company's revenues arose from exports to the EU countries. The Company continues to monitor potential risks and opportunities arising from leaving the EU. We also continue to develop other export markets to mitigate risks of overexposure to any one geographical market.
Net current assets of £2.5m at 31 March 2019 mainly comprised inventories and cash and cash equivalents.
The Company ended the year with £2.0m of cash, having used £1.1m of cash in operations during the year and invested almost £1.4m in property, plant and equipment. This cash level puts the Company in a strong position to progress plans for growth in existing services and the introduction of new services in 2020.
Financial Results
The decline in revenues seen in the second half of FY 2018 accelerated sharply in H1 FY 2019 for the reasons discussed above. However, the Board addressed the factors contributing to this and H2 FY 2019 recovered strongly to record our strongest ever six month period and a resumption in our organic revenue growth seen in recent years. However, revenues for the year in total were down 19% to £2.2m (2018: £2.7m). Revenues were lower in all geographical markets apart from North America which grew by 23%.
The EBITDA loss for the year was £1.1m (2018: £0.6m loss) as a result of the lower than expected revenues in H1 and the investment the Company has made in future growth, investing in employees, facilities and research which are expected to deliver further significant revenue growth. The Company produced a loss before tax of £1.5m (2018: £0.7m loss).
The Company used £1.1m of cash in operations (2018: £0.1m generated) and invested £1.4m in expenditure on capital equipment and intangible assets. Cash and cash equivalents as at 31 March 2019 totalled £2.0m (2018: £4.5m).
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 | 2019 | 2018 |
| Revenue change year on year | (19)% | 41% |
| EBITDA | (£1.1m) | (£0.6m) |
| Adjusted EBITDA | (£1.1m) | £0.1m |
| Cash (used in)/generated from operations | (£1.1m) | £0.1m |
Outlook
The directors remain confident that order levels seen in the second half of FY 2019 can be maintained in FY 2020 augmented by new orders for the RAMP™ service, such that significant revenue growth is achievable in the current financial year.
Dr Paul Kerr
Chief Executive Officer
01 July 2019
Statement of Comprehensive Income
| 2019 | 2018 | ||||||
| Notes | Before non- recurring items |
Non- recurring items (note 29) |
After non- recurring items |
Before non- recurring items |
Non- recurring items (note 29) |
After non- recurring items |
|
| £ | £ | £ | £ | £ | £ | ||
| Revenue | 4 | 2,181,838 | - | 2,181,838 | 2,690,744 | - | 2,690,744 |
| Cost of sales | (1,377,836) | - | (1,377,836) | (1,207,331) | - | (1,207,331) | |
| Gross profit | 804,002 | - | 804,002 | 1,483,413 | - | 1,483,413 | |
| Other operating income | 86,406 | - | 86,406 | 54,626 | - | 54,626 | |
| Administrative expenses | (2,398,842) | - | (2,398,842) | (1,475,646) | (772,936) | (2,248,582) | |
| Operating (loss)/profit | 5 | (1,508,434) | - | (1,508,434) | 62,393 | (772,936) | (710,543) |
| Finance income | 8 | 12,596 | - | 12,596 | 4,043 | - | 4,043 |
| Finance costs | 8 | (4,033) | - | (4,033) | (4,862) | - | (4,862) |
| (Loss)/profit before tax | (1,499,871) | - | (1,499,871) | 61,574 | (772,936) | (711,362) | |
| Income tax credit/(expense) | 10 | 235,489 | - | 235,489 | (63,883) | 75,304 | 11,421 |
| Loss for the financial year | (1,264,382) | - | (1,264,382) | (2,309) | (697,632) | (699,941) | |
| Total comprehensive expense for the year | (1,264,382) | - | (1,264,382) | (2,309) | (697,632) | (699,941) | |
| Pence | Pence | ||||||
| Loss per share | |||||||
| Basic | 11 | (5.7) | (4.3) | ||||
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
Statement of Financial Position
| Notes | 2019 £ |
2018 £ |
|
| Assets | |||
| Non-current assets | |||
| Intangible assets | 12 | 6,214 | - |
| Property, plant and equipment | 13 | 1,587,999 | 546,734 |
| Deferred tax assets | 15 | 1,342,385 | 1,156,047 |
| 2,936,598 | 1,702,781 | ||
| Current assets | |||
| Inventories | 16 | 242,669 | 81,815 |
| Trade and other receivables | 17 | 1,056,382 | 926,220 |
| Current tax receivable | 22,645 | 6,906 | |
| Cash and cash equivalents | 1,984,338 | 4,490,931 | |
| 3,306,034 | 5,505,872 | ||
| Total assets | 6,242,632 | 7,208,653 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 18 | 729,360 | 536,299 |
| Borrowings | 19 | 66,539 | 33,758 |
| 795,899 | 570,057 | ||
| Net current assets | 2,510,135 | 4,935,815 | |
| Non-current liabilities | |||
| Borrowings | 19 | 72,636 | 43,529 |
| Provisions for other liabilities and charges | 20 | 20,000 | 20,000 |
| 92,636 | 63,529 | ||
| Total liabilities | 888,535 | 633,586 | |
| Net assets | 5,354,097 | 6,575,067 | |
| Equity | |||
| Called up share capital | 22 | 883,648 | 883,648 |
| Share premium reserve | 4,872,327 | 4,872,327 | |
| (Accumulated losses)/retained earnings | (401,878) | 819,092 | |
| Total equity | 5,354,097 | 6,575,067 |
Statement of Changes in Equity
| Called up share capital £ |
Share premium reserve £ |
(Accumulated losses)/retained earnings £ |
Total equity £ |
|
| At 1 April 2018 | 883,648 | 4,872,327 | 819,092 | 6,575,067 |
| Restatement (see note 30) | - | - | (23,632) | (23,632) |
| At 1 April 2018 restated | 883,648 | 4,872,327 | 795,460 | 6,551,435 |
| Loss and total comprehensive expense for the year | - | - | (1,264,382) | (1,264,382) |
| Share options - value of employee services | - | - | 97,634 | 97,634 |
| Tax charge relating to share option scheme | - | - | (30,590) | (30,590) |
| Total transactions with owners, recognised directly in equity | - | - | 67,044 | 67,044 |
| At 31 March 2019 | 883,648 | 4,872,327 | (401,878) | 5,354,097 |
| At 1 April 2017 | 547,655 | 6,161,269 | (5,251,909) | 1,457,015 |
| Loss and total comprehensive expense 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 |
Statement of Cash Flows
| 2019 £ |
2018 £ |
|
| Cash flows from operating activities | ||
| Loss for the year | (1,264,382) | (699,941) |
| Adjustments for: | ||
| Share based payment expense | 97,634 | 330,176 |
| Cost of raising capital | - | 609,836 |
| Depreciation | 429,385 | 69,625 |
| Amortisation of intangible assets | 1,830 | - |
| Finance income | (12,596) | (4,043) |
| Finance costs | 4,033 | 4,862 |
| Income tax credit | (235,489) | (11,421) |
| Increase in inventories | (160,854) | (11,554) |
| Increase in trade and other receivables | (157,938) | (225,322) |
| Increase in trade and other payables | 193,061 | 14,974 |
| Cash (used in)/generated from operations | (1,105,316) | 77,192 |
| Income tax received | 6,906 | - |
| Net cash (used in)/generated from operating activities | (1,098,350) | 77,192 |
| Cash flows from investing activities | ||
| Purchase of intangible assets | (8,044) | - |
| Purchase of property, plant and equipment | (1,372,533) | (444,595) |
| Net cash used in investing activities | (1,380,577) | (444,595) |
| Cash flows from financing activities | ||
| Proceeds from issue of share capital | - | 4,598,650 |
| Repayment of borrowings | (36,229) | (25,182) |
| Finance income - interest received | 12,596 | 4,043 |
| Finance costs - interest paid | (4,033) | (4,862) |
| Net cash (used in)/generated from financing activities | (27,666) | 4,572,649 |
| Net (decrease)/increase in cash and cash equivalents | (2,506,593) | 4,205,246 |
| Cash and cash equivalents at the beginning of the year | 4,490,931 | 285,685 |
| Cash and cash equivalents at the end of the year | 1,984,338 | 4,490,931 |
