Corporate News & RNS

2023

Fusion Antibodies plc (AIM: FAB), a contract research organisation (“CRO”) providing discovery, design, and optimisation services for therapeutic antibodies to the global healthcare market, announces its final results for the year ended 31 March 2023. 

Commercial and operational highlights

• Full year revenues lower by 40% to £2.9m (2022: £4.8m)
• Loss for the year of £2.6m (2022: loss £1.2m)
• Investment in R&D £0.8m (2022: £0.7m)
• Introduction of Integrated Therapeutic Antibody Service
• Introduction of Mammalian Display service
• Appointment of Adrian Kinkaid as CEO in August 2022
• Cash position at the year-end £0.2m (2022: £2.0m)

Post period end highlights

• Share proceeds of £1.5m (net of costs)
• Appointment of Stephen Smyth as interim CFO in September 2023
• Memorandum of Understanding (“MoU”) signed with leading US based AI/ML business and the first purchase order received

Separately, the Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the Company's Annual General Meeting ("AGM") are being posted to shareholders shortly. A copy of the 2023 Annual Report and Accounts, the Notice of AGM and accompanying form of proxy will soon be available to download from the Company website here: https://www.fusionantibodies-ir.com/.

The AGM will be held on 27 October 2023 at 11.00 am at the Company’s offices at Springbank Industrial Estate, 1 Springbank Rd, Dunmurry, Belfast BT17 0QL.

Director change

Sonya Ferguson, Non-executive Director, will not be seeking re-election at the AGM, as she has decided to pursue another business opportunity. She will cease to be a Director of the Company at the close of the AGM.

Adrian Kinkaid, CEO of Fusion Antibodies commented: “This has been a challenging year for the Company and we have been through a number of changes over the last few months. We successfully raised funds in a very difficult market in May and implemented some additional cost saving measures to provide us with the necessary capital we needed to progress the business.

“More recently, we announced we had signed an agreement with a US based AI/ML business to support our antibody discovery service, AI/ML-Ab^TM and subsequently received our first order under the framework of this agreement. We are continuing to work on other aspects of the OptiMAL® programme, and in particular the development of the fully human antibody library which we remain confident in.

“On a separate note, the Board would like to offer our sincere thanks to Sonya Ferguson for her service to the Company as a Non-executive Director. She has been with the Company since 2016, prior to our admission to trading on AIM.  We wish her well on her future endeavours. As a Company, we are looking forward to better times ahead, reaching profitability and delivering value to our shareholders.”

Investor briefing

Fusion will host an online live presentation open to all investors on Wednesday, 4 October 2023 at 11am BST, delivered by Dr Adrian Kinkaid, CEO and Stephen Smyth, CFO. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading.

The presentation will be hosted through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor

For those investors who have already registered and added to meet the Company, they will automatically be invited. Questions can be submitted pre-event via your IMC dashboard or in real time during the presentation, via the "Ask a Question" function. Whilst the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications. A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.

Enquiries:

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 ^TM 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 and expressed over 250 antibodies and successfully completed over 200 humanisation projects and has an international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

The Company was established in 2001 as a spin out from Queen's University Belfast. The Company's mission is to enable pharmaceutical and diagnostic companies to develop innovative products in a timely and cost-effective manner for the benefit of the global healthcare industry. Fusion Antibodies provides a broad range of services in antibody generation, development, production, characterisation and optimisation.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster, with the optimal drug candidate and ultimately speed up the drug development process. 

The global monoclonal antibody therapeutics market was valued at $186 billion in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal antibody therapies are approved and marketed globally as of June 2022 with the top four antibody drugs each having sales of more than $3 bn in 2021.  

Chairman’s Statement

This year has been a tough year for the Company and very commercially challenging.  The year has seen a downturn in market conditions and investment into our customers’ early-stage therapeutic pipelines Venture capital funding, typically the primary source of investment for early-stage biotech, has fallen to its lowest level since 2019.

The Biotechnology sector’s contribution to the global R&D pipeline has been growing in the last decade.  There are more biotech companies now than ever before, but consequently there is less investment to go around and this lack of growth capital for many biotech companies means they must be very cautious in their spending.  This has resulted in projects being delayed and reductions in head counts.  However, we believe that the reprioritization of pipelines and optimisation of development strategies will give Fusion more opportunities going forward as companies could look to outsource more of their projects to give them greater control of their fixed cost base.   We believe that Biotech companies generally are moving towards leveraging early engagement opportunities with full-service partners like Fusion to optimise the impact of external expertise across the development program, and to maximise their probability of success. 

With the biotechnology sector’s funding environment undergoing significant changes, creative solutions are required and Fusion has responded by introducing our new ITAS (Integrated Therapeutic Antibody Services) strategy which addresses this new market dynamic.  ITAS pulls together all our current solutions to provide a continuous service from target discovery to a final stable cell line ready for larger scale production and is consistent with Fusion’s established philosophy to “begin with the end in mind”. Furthermore, we are looking at ways that the antibody drug discovery timescale can be shortened, with the development of OptiMAL^®, our human antibody library and also through strategic alliances with AI/ML (artificial intelligence/machine learning) companies.

Business performance

The year showed a significant downturn in revenue from the previous year at £2.9m (2022: £4.8m) due to a combination of factors.  As mentioned, this is primarily due to weak market investment conditions for new drug discovery and development programs and the subsequent delays to a number of our contracts, both large and small, combined with the reduced drug development activity of some of our customers.   Notably, a small number of valuable projects have been suspended by clients due to delayed investment into those businesses. We are advised by our clients that we should expect these projects to recommence once their funding is secured, although the continued uncertainty of timescales to win and close out contracts and to recognise the revenues remains a challenge. 

This situation was further compounded by the several months without a CEO in place and the unusually high turnover in the commercial group this year, necessitating the recruitment and training of new staff which created some short-term loss of traction with our customer base.  The industry in general has seen significant movement in staff during and after the pandemic but more recently this situation has stabilised. It is worth noting that whilst the Company continues to retain an interest of longer-term future success milestone or royalty payments in many of our client projects, there were no such payments this year.

The Company has been carefully managing costs and in particular towards the later part of the year headcount has been reduced by 11% from an average of 54 to a headcount of 48 at the year end. To minimise the impact on capacity and capability to deliver customers’ projects, significant cross training of staff from different laboratories has been implemented.

The focus for our R&D has continued on the OptiMAL^® library project, with investment in R&D increasing by 29% over the same period in the previous year to £0.8m (2022: £0.7m).

The downturn in revenues generated an operating loss for the year of £2.6m (2022: loss £1.2m). Post year end, the Company successfully completed a £1.67m fundraise to provide additional working capital and we have now implemented circa. £1.6m in restructuring savings, including a further reduction in headcount from 48 at March 31 year end 2023 to 29. The Company had previously announced anticipated annualised cost savings of £2.2 million based on comparisons against the Company’s budgets and plans in place at that time. As the outrun for FY 2023 was lower than originally budgeted, the revised annualised cost savings identified now total £1.6m. The Board will continue to closely monitor the Company’s cost base and seek to identify additional cost savings that can be implemented without further impacting the operating capacity of the Company.

Development of New services

While trading conditions remain challenging, the Company continues to strive to be at the front of innovation and to provide new and cutting-edge services to the market.   We have implemented a new strategy and are introducing a new integrated approach in response to client needs and to ultimately increase revenues. We are re-aligning the Company’s service offering to best serve our clients who are seeking to outsource more of their work in therapeutic antibody drug discovery and positioning ourselves as more of a collaborative partner rather than just a fee-for-service relationship. Our Integrated Therapeutic Antibody Service (ITAS) integrates our current Discovery, Engineering and Supply services into one proposition which aims to enhance the client journey with the development of high performing antibodies to their targets. This approach has been trialled with an existing client with positive results and the Company’s aim is to build on this, while continuing to support our smaller clients who may wish to select individual services.

The antibody drug discovery industry is gradually moving away from the use of animals, something that as a Company we recognise and support.  Our R&D program to develop a cell-based mammalian display technology screening library, OptiMAL^®, for the direct identification of intact fully human antibodies against biomarkers and other targets of interest is progressing, with key stages of the process now developed, although further optimisation work is still required to deliver the full operational screening parameters.   We will continue to build a body of data with a view to establishing commercial relationships for further validation and the Directors remain optimistic about its likely reception by the market.

Since our last report, processes to transfect cells with unique sequences, express those sequences as antibodies and screen and select antibodies have been optimised. Work is ongoing to optimise the extraction of specific antibodies to build a body of data with a view to establishing commercial relationships for further validation. Already, the R&D investment is bearing fruit with two stages of the OptiMAL^® process adding value in that they enable us to further broaden the Company’s integrated service offering. The OptiMAL^® process includes a novel DNA library of antibody sequences at the front end and a Mammalian Display platform as the final step to enable the library antibodies to be expressed on the surface of mammalian cells as fully intact human IgG antibodies. We have commenced the development of two further discovery platforms utilising these two key OptiMAL^® steps.

The Mammalian Display platform is ideally suited to be used in conjunction with the output from artificial intelligence/machine learning (AI/ML) discovery platforms. These AI/ML platforms provide a method of designing panels of antibodies in-silico, with the AI/ML algorithms typically producing small libraries of sequences which are an excellent match with our Mammalian Display platform, which can transform these designs into real protein molecules for screening and final selection.  This is a potentially powerful combination to speed up the discovery process and the Company is actively engaging with leading AI/ML companies as potential partners to make these novel approaches available to our client base. In August 2023 we announced that the negotiations with a leading AI/ML company based in the USA have been finalised and the first order emanating from this collaboration to generate de-novo antibody sequences has been received. 

Furthermore as previously announced a Memorandum of Understanding (MoU) with another AI/ML company based in Europe has also been signed.  These collaborations are expected to provide for the development of partnerships that will enable the derivation and evaluation of AI generated antibodies and offer clients a new route to market using the AI/ML-Ab^TM service (pronounced AIM Lab), which will be complementary to our established discovery methods.

The novel DNA library of antibody sequences from OptiMAL^® will also be used as the input design for OptiPhage^TM, a phage display based version of the same DNA library. These DNA sequences are packaged into a more commonly used Phage display format where smaller antibody fragments can be screened, compared to whole antibodies via OptiMAL^®. We believe that the provision of OptiPhage^TM at a lower price point provides the Company with an ability to protect the premium pricing of the OptiMAL^® programme whilst meeting budgetary constraints of its customers. It may also be the platform of choice for those wanting antibody fragments as their end product.

As a Company, we are proud of our innovations and of our dedicated team of scientists who work on the next generation of antibody discovery technologies and we will continue to protect novel ideas through the filing of patents.  This year saw the filing of two new patents. The first one is in respect of the Company’s antigen display technology, which should increase the success rate in identifying highly potent antibodies from Fusion’s range of Antibody Discovery technologies, although it does have a wider potential application. The second is for a panel of antibodies that bind to an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by early pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Board and Employees

I was very pleased to announce the arrival of our new CEO, Dr Adrian Kinkaid, in August last year. Adrian brings a depth of experience in the life science and biotherapeutics industries and has expertise in the development and commercialisation of all the main classes of affinity reagents with over twenty-five years’ experience working in the bioscience sector. Adrian’s previous experience has included senior management positions in drug discovery, reagent technology and diagnostics and joins at a time where his strong leadership and vision will be key in the Company’s turnaround strategy. 

One further change to the Board during the financial year was Mr Tim Watts, who stepped down as a Non-Executive Director in September 2022.  Tim joined the Company at the time of the IPO in December 2017, was the Chair of the Company’s Audit Committee and has made a valuable contribution to the Company, particularly from his knowledge and experience of public companies.  On behalf of the Board, I would like to thank him for all that he had done for the Company and wish him well in his retirement.

Post the end of the year we announced that Mr James Fair, our Chief Financial Officer, was stepping down from the Board effective 31 May 2023. The Board would like to thank James for his significant contribution to the Company over the past 14 years and wish him well in his future endeavours. We are grateful to Ms Frances Johnston who stepped in as the Company Secretary until the appointment in September 2023 of Mr Stephen Smyth as an interim part time CFO and Company Secretary. Stephen Smyth was designated Company Secretary on 28 July 2023 and appointed on Companies House on 16 September 2023. We have outsourced some other financial management accounting activities until the point where the Company is in a stronger financial position to allow more permanent solutions.

I would also like to mention all the staff, who at the beginning of the year were still working under Covid-19 restrictions, with many of our business development and financial teams continuing to work from home.  The Company is continuing to offer flexible hybrid working where possible within the employee retention strategy.

The Fusion team has worked well under difficult conditions with a strong collaborative team effort and disciplined commitment for which the board is very grateful.  The formation of the new Scientific Advisory Panel (the "SAP") was announced last year and is a making a positive input into the Companies scientific strategy.  During the year there was a change in the makeup of the group with Professor Terry Rabbitts stepping down and with Dr Ulf Grawunder attending SAP meetings.   I would like to thank Professor Rabbitts for his contribution and welcome Dr Grawunder, who is based in Basel and who has extensive experience in the development of antibody-based therapeutics. He co-founded a company specializing in the development of therapies for cancer patients and has experience in mammalian cell-based antibody display platforms. 

The appointment of these industry experts has already had an impact in our new AI/ML focus, with Professor Charlotte Deane, Professor of Structural Bioinformatics at the University of Oxford sharing her insights in the development and application of future machine learning algorithms in the field of antibody design.

Corporate governance

The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report of the annual report and accounts.

Post year end and outlook

As mentioned previously, the significant downturn in revenues generated a larger than anticipated operating loss for the FY23 and as this put a major strain of the cash levels, a new round of funding was commenced at the end of this FY and completed successfully in June 2023.  Unfortunately, the need for this fundraising materialised at a point when investor confidence, and confidence in Fusion were at a low-point, resulting in a significant discount in the price at which new monies could be raised. 

The subscription of new shares was through a placing, a Directors subscription and a retail offer and I would like to thank all the shareholders, both current and new, who supported us in this round, and in particular the Directors who subscribed for just over 8% of the shares.  A total of £1,671,938 (£1.5m net of expenses) was raised through the issue of 33,438,768 ordinary shares at 5p per share. 

In light of the macro-economic headwinds which the Company and its customers are facing, the Board identified  £1.6 million of annualized savings, which were implemented after the fund raise.  This cost saving includes a significant reduction in headcount across all levels of the Company, including the Company’s non-executive directors having agreed to forgo all  remuneration that they are entitled to and the Company’s executive directors having agreed to changes in their remuneration (which  include taking shares in place of some cash remuneration) to further conserve cash until such time that the Company’s trading has recovered to an appropriate level.  

The Directors believe that, notwithstanding these cost reductions, the Company will still be able to progress the launch of ITAS. Budgets have been maintained for sales and marketing and travel and, where possible, the Company will seek client contributions for further collaborative trials with a view to full commercialization of OptiMAL^® and the initial AI/ML-Ab^TM and OptiPhage^TM projects. As mentioned, in August 2023, we were pleased to announce that an agreement had been signed with a leading US-based AI/ML company and the first order received, from a customer based in Australia. This represents an important first step in delivering this strategy.

Whilst there remains a significant amount of uncertainty over the timing and implementation of future contract wins due to reduced investment in the broader biotech sector, we expect trading to recover incrementally over the short to medium term both in respect of existing services and the new services coming on stream.

Simon Douglas

Chairman

28 September 2023

CEO’s report and operations review

The Therapeutics industry’s need for antibodies has arguably never been higher, with significant breakthroughs such as the approval of lecanemab, donanemab and others for Alzheimer’s disease demonstrating the applicability of antibodies to treat central nervous system diseases and that a new set of therapeutic targets are now to be considered viable. Similarly, the diagnostics industry is enjoying an unprecedented level of awareness and familiarity, especially with antibody enabled lateral flow devices having been used extensively in the detection of Covid 19. However, largely due to macro-economic factors, FY2023 was also a challenging year for the associated services industry with investment into the biotech sector reducing significantly in the principal geographical regions as Covid related investment rebalanced. As we entered the financial year, the Company was inevitably exposed to these factors with a high proportion of our business directly linked to venture capital funded clients. Faced with uncertainty about their funding, many clients opted to place projects on hold and not to initiate new projects until the economic landscape had improved.

Transitioning to a model whereby we can derive more revenue from those clients still actively progressing their research programmes became increasingly important to the Company and I am pleased to say we have made significant progress with the launch of our Integrated Therapeutic Antibody Services (ITAS). This also positions the business to better exploit our emerging platforms for antibody discovery, or “Discovery Engines”, which we are developing from the OptiMAL^® research project. The initial objective for the research project was to create OptiMAL^®, a groundbreaking and industry leading platform for the discovery of human antibodies through a highly diverse library of DNA sequences expressed as fully intact antibodies, or IgG molecules, expressed on the surface of mammalian cells. We now have clear evidence that this has been achieved with cells stained to show the antibodies displayed on the cell surface.  With the antibody on the cell surface, a cell can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

This image shows individual cells at high magnification. The cells have been stained with a red stain that is specifically for the expressed human antibody created by the OptiMAL^® process.  The red stain is seen predominantly on the cellular surface showing that antibodies are being produced by the cell and on the cell surface.  Such cells can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

We are also in the process of spinning out two further discovery platforms from the same research program: AI/ML-Ab^TM and Optiphage^TM.  The Mammalian Display element of OptiMAL^® is being combined with algorithms for the de novo design of novel antibodies from various artificial intelligence (AI) and Machine Learning (ML) technologies (AI/ML-Ab^TM) which have very much come to the fore in the last year or two, whilst  Optiphage^TM utilizes a library based on the same sequences as OptiMAL^®, but modified for use in a more industry standard phage-display format. The availability of these diverse and complementary proprietary discovery engines, which can be deployed singly or in concert, also enables us to provide a de-risked approach to antibody discovery, further benefiting our clients and strengthening Fusion Antibodies’ position as the partner of choice.  In August 2023 we were pleased to announce that we had a signed agreement with a leading US-based AI/ML company.  It is envisaged that both parties will co-market the combined service offerings and as announced we have already received the first order. This purchase order demonstrates commercial traction for AI/ML-Ab^TM and we believe that there is significant market potential for this service offering.

At Fusion, our aim is to develop a range of services that gives our clients choice and a range of solutions best suited to the biological needs of their targets.  We understand that ‘one size’ does not fit all and aim to broaden our service menu to give the customer the best chance of meeting their technical objectives with the least risk.  This is already in place with our cell line development (CLD) and stabilization services, where we offer a number of cell lines. We offer our clients the choice of three separate cell lines, all in-licensed, which have different biological characteristics and financial price points. The final selection process is empirical, with the screening process involving the assessment of yield and stability which will vary from antibody to antibody. CLD is a service that is required towards the end of the development process and we intend to develop and introduce a similar choice at the beginning: at the discovery end of the development plan.

Due to the strong headwinds caused by the macro-economic conditions, the Company ended the year looking to secure additional investment which it successfully completed in June 2023, raising just under £1.7 million (before expenses).   Thanks to the continued support of our shareholders, we can move forward with re-establishing our presence in the market and maintaining investment in our new discovery services.  

Business Review

The Company’s revenue performance for the financial year to 31 March 2023 fell by 40% vs 2022 to £2.9m due to the macroeconomic headwinds. Despite the reduction in revenues, we have experienced continuing interest and uptake of our proprietary RAMP^TM technology service platform which represents a key driver of revenues for the business. Over the course of the year, Fusion has initiated and successfully completed a number of RAMP^TM client projects, which further affirms the valuable contribution of this service offering to both the Company and to our customers. The key geographical region of North America represented 50% of revenues and with a number of key client accounts. The Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, were also impacted by the global downturn in the sector, although client relationships are strengthening and opportunities are increasing. In addition to the ‘Fee for Service’ revenue model, and where there is a significant contribution to the client’s intellectual property, we look to enter into a collaborative agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable the Company to unlock the intrinsic value that our proprietary service platforms provide to our clients and generate additional shareholder value.

We continued to drive investment and innovation into the R&D pipeline of new service offerings. In the financial year, we made further progress on the development work of OptiMAL^® with successful proof of concept for the Mammalian Display element. This has already been harnessed to support the AI/ML-Ab^TM offering, which is itself attracting market attention, and is already generating new leads. I strongly believe that AI/ML-Ab^TM, Optiphage^TM and OptiMAL^® represent key differentiators and future drivers of growth for the business and will enable the Company to access a sizeable addressable market generating significant shareholder value.

We are pleased to report that the Company filed a patent application for a panel of antibodies that bind an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Our Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services has been particularly valuable in the development of the new platforms and it is anticipated that their continued guidance will further support the commercialisation of these valuable assets.

Inventory of consumables has been maintained at relatively high levels to allow for any supply chain disruption from the UK’s departure from the European Union and the disruption caused by the Coronavirus pandemic. In the year, 14% of the Company’s revenues arose from exports to the EU countries and we look to build on this, supported by Northern Ireland’s unique trading position with the EU and UK. We also continue to develop other export markets as our services find universal acclaim and to mitigate risks of overexposure to any one geographical market.

Financial Results

Full year revenues for the year in total were down by 40% to £2.9m (2022: £4.8m).

The EBITDA loss for the year was £2.5m (2022: £0.6m loss) (see note 26) and, excluding the R&D expenditure of £0.8m, EBITDA for the year was a loss of £1.5m. The loss before tax was £2.9m (2022: £1.3m loss).

The Company held current net assets of £0.8m at 31 March 2023 (2022: £3.1m) which mainly comprised inventories and trade and other receivables.

The Company ended the year with £0.2m of cash and cash equivalents, having used £1.7m of cash in operations during the year of which £0.8m was for R&D, invested £0.1m in property, plant and equipment and £0.1m servicing asset-based borrowings. As previously mentioned, in June 2023 the Company issued equity for net proceeds of c.£1.5m which puts it in a good position to continue its sales and marketing activities and the development of new discovery platforms and services.  

The current financial year commenced with similar conditions to those experienced in the latter part of FY 2023, with new business significantly lower than historic levels. In the past few months, the Company has enjoyed an uplift in business engagement from lead generation through to quote drafting and, pleasingly, purchase orders received. We've seen a strengthening of the pipeline of approximately three-fold since the end of 2023. As a result, revenues for FY2024 will be significantly weighted towards the second half of the year. The Board is optimistic that our new services, such as AI/ML-Ab, will contribute positively to future revenue growth.

Despite FY2023 being a commercially challenging year, I feel optimistic about the year ahead. Since the year end we have reduced our cost base significantly but kept a strong and broad technical base within the Company, raised finance and are in a good cash position and have some exciting and enviable discovery services in development.  I believe that the slowdown in the market is beginning to show a level of recovery, with our pipeline already showing growth, and that we are in a good position to return to growth on a stronger more stable foundation. 

Adrian Kinkaid

Chief Executive Officer

28 September 2023

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2023

Statement of Financial Position

As at 31 March 2023

Simon Douglas                                               Adrian Kinkaid

Director                                                            Director

Registered in Northern Ireland, number NI039740

Statement of Changes in Equity

For the year ended 31 March 2023

Statement of Cash Flows

For the year ended 31 March 2023

2022

Fusion Antibodies plc (AIM: FAB), a contract research organisation (“CRO”) providing discovery, design, and optimisation services for therapeutic antibodies to the global healthcare market, announces its final results for the year ended 31 March 2023. 

Commercial and operational highlights

• Full year revenues lower by 40% to £2.9m (2022: £4.8m)
• Loss for the year of £2.6m (2022: loss £1.2m)
• Investment in R&D £0.8m (2022: £0.7m)
• Introduction of Integrated Therapeutic Antibody Service
• Introduction of Mammalian Display service
• Appointment of Adrian Kinkaid as CEO in August 2022
• Cash position at the year-end £0.2m (2022: £2.0m)

Post period end highlights

• Share proceeds of £1.5m (net of costs)
• Appointment of Stephen Smyth as interim CFO in September 2023
• Memorandum of Understanding (“MoU”) signed with leading US based AI/ML business and the first purchase order received

Separately, the Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the Company's Annual General Meeting ("AGM") are being posted to shareholders shortly. A copy of the 2023 Annual Report and Accounts, the Notice of AGM and accompanying form of proxy will soon be available to download from the Company website here: https://www.fusionantibodies-ir.com/.

The AGM will be held on 27 October 2023 at 11.00 am at the Company’s offices at Springbank Industrial Estate, 1 Springbank Rd, Dunmurry, Belfast BT17 0QL.

Director change

Sonya Ferguson, Non-executive Director, will not be seeking re-election at the AGM, as she has decided to pursue another business opportunity. She will cease to be a Director of the Company at the close of the AGM.

Adrian Kinkaid, CEO of Fusion Antibodies commented: “This has been a challenging year for the Company and we have been through a number of changes over the last few months. We successfully raised funds in a very difficult market in May and implemented some additional cost saving measures to provide us with the necessary capital we needed to progress the business.

“More recently, we announced we had signed an agreement with a US based AI/ML business to support our antibody discovery service, AI/ML-Ab^TM and subsequently received our first order under the framework of this agreement. We are continuing to work on other aspects of the OptiMAL® programme, and in particular the development of the fully human antibody library which we remain confident in.

“On a separate note, the Board would like to offer our sincere thanks to Sonya Ferguson for her service to the Company as a Non-executive Director. She has been with the Company since 2016, prior to our admission to trading on AIM.  We wish her well on her future endeavours. As a Company, we are looking forward to better times ahead, reaching profitability and delivering value to our shareholders.”

Investor briefing

Fusion will host an online live presentation open to all investors on Wednesday, 4 October 2023 at 11am BST, delivered by Dr Adrian Kinkaid, CEO and Stephen Smyth, CFO. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading.

The presentation will be hosted through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor

For those investors who have already registered and added to meet the Company, they will automatically be invited. Questions can be submitted pre-event via your IMC dashboard or in real time during the presentation, via the "Ask a Question" function. Whilst the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications. A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.

Enquiries:

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 ^TM 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 and expressed over 250 antibodies and successfully completed over 200 humanisation projects and has an international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

The Company was established in 2001 as a spin out from Queen's University Belfast. The Company's mission is to enable pharmaceutical and diagnostic companies to develop innovative products in a timely and cost-effective manner for the benefit of the global healthcare industry. Fusion Antibodies provides a broad range of services in antibody generation, development, production, characterisation and optimisation.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster, with the optimal drug candidate and ultimately speed up the drug development process. 

The global monoclonal antibody therapeutics market was valued at $186 billion in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal antibody therapies are approved and marketed globally as of June 2022 with the top four antibody drugs each having sales of more than $3 bn in 2021.  

Chairman’s Statement

This year has been a tough year for the Company and very commercially challenging.  The year has seen a downturn in market conditions and investment into our customers’ early-stage therapeutic pipelines Venture capital funding, typically the primary source of investment for early-stage biotech, has fallen to its lowest level since 2019.

The Biotechnology sector’s contribution to the global R&D pipeline has been growing in the last decade.  There are more biotech companies now than ever before, but consequently there is less investment to go around and this lack of growth capital for many biotech companies means they must be very cautious in their spending.  This has resulted in projects being delayed and reductions in head counts.  However, we believe that the reprioritization of pipelines and optimisation of development strategies will give Fusion more opportunities going forward as companies could look to outsource more of their projects to give them greater control of their fixed cost base.   We believe that Biotech companies generally are moving towards leveraging early engagement opportunities with full-service partners like Fusion to optimise the impact of external expertise across the development program, and to maximise their probability of success. 

With the biotechnology sector’s funding environment undergoing significant changes, creative solutions are required and Fusion has responded by introducing our new ITAS (Integrated Therapeutic Antibody Services) strategy which addresses this new market dynamic.  ITAS pulls together all our current solutions to provide a continuous service from target discovery to a final stable cell line ready for larger scale production and is consistent with Fusion’s established philosophy to “begin with the end in mind”. Furthermore, we are looking at ways that the antibody drug discovery timescale can be shortened, with the development of OptiMAL^®, our human antibody library and also through strategic alliances with AI/ML (artificial intelligence/machine learning) companies.

Business performance

The year showed a significant downturn in revenue from the previous year at £2.9m (2022: £4.8m) due to a combination of factors.  As mentioned, this is primarily due to weak market investment conditions for new drug discovery and development programs and the subsequent delays to a number of our contracts, both large and small, combined with the reduced drug development activity of some of our customers.   Notably, a small number of valuable projects have been suspended by clients due to delayed investment into those businesses. We are advised by our clients that we should expect these projects to recommence once their funding is secured, although the continued uncertainty of timescales to win and close out contracts and to recognise the revenues remains a challenge. 

This situation was further compounded by the several months without a CEO in place and the unusually high turnover in the commercial group this year, necessitating the recruitment and training of new staff which created some short-term loss of traction with our customer base.  The industry in general has seen significant movement in staff during and after the pandemic but more recently this situation has stabilised. It is worth noting that whilst the Company continues to retain an interest of longer-term future success milestone or royalty payments in many of our client projects, there were no such payments this year.

The Company has been carefully managing costs and in particular towards the later part of the year headcount has been reduced by 11% from an average of 54 to a headcount of 48 at the year end. To minimise the impact on capacity and capability to deliver customers’ projects, significant cross training of staff from different laboratories has been implemented.

The focus for our R&D has continued on the OptiMAL^® library project, with investment in R&D increasing by 29% over the same period in the previous year to £0.8m (2022: £0.7m).

The downturn in revenues generated an operating loss for the year of £2.6m (2022: loss £1.2m). Post year end, the Company successfully completed a £1.67m fundraise to provide additional working capital and we have now implemented circa. £1.6m in restructuring savings, including a further reduction in headcount from 48 at March 31 year end 2023 to 29. The Company had previously announced anticipated annualised cost savings of £2.2 million based on comparisons against the Company’s budgets and plans in place at that time. As the outrun for FY 2023 was lower than originally budgeted, the revised annualised cost savings identified now total £1.6m. The Board will continue to closely monitor the Company’s cost base and seek to identify additional cost savings that can be implemented without further impacting the operating capacity of the Company.

Development of New services

While trading conditions remain challenging, the Company continues to strive to be at the front of innovation and to provide new and cutting-edge services to the market.   We have implemented a new strategy and are introducing a new integrated approach in response to client needs and to ultimately increase revenues. We are re-aligning the Company’s service offering to best serve our clients who are seeking to outsource more of their work in therapeutic antibody drug discovery and positioning ourselves as more of a collaborative partner rather than just a fee-for-service relationship. Our Integrated Therapeutic Antibody Service (ITAS) integrates our current Discovery, Engineering and Supply services into one proposition which aims to enhance the client journey with the development of high performing antibodies to their targets. This approach has been trialled with an existing client with positive results and the Company’s aim is to build on this, while continuing to support our smaller clients who may wish to select individual services.

The antibody drug discovery industry is gradually moving away from the use of animals, something that as a Company we recognise and support.  Our R&D program to develop a cell-based mammalian display technology screening library, OptiMAL^®, for the direct identification of intact fully human antibodies against biomarkers and other targets of interest is progressing, with key stages of the process now developed, although further optimisation work is still required to deliver the full operational screening parameters.   We will continue to build a body of data with a view to establishing commercial relationships for further validation and the Directors remain optimistic about its likely reception by the market.

Since our last report, processes to transfect cells with unique sequences, express those sequences as antibodies and screen and select antibodies have been optimised. Work is ongoing to optimise the extraction of specific antibodies to build a body of data with a view to establishing commercial relationships for further validation. Already, the R&D investment is bearing fruit with two stages of the OptiMAL^® process adding value in that they enable us to further broaden the Company’s integrated service offering. The OptiMAL^® process includes a novel DNA library of antibody sequences at the front end and a Mammalian Display platform as the final step to enable the library antibodies to be expressed on the surface of mammalian cells as fully intact human IgG antibodies. We have commenced the development of two further discovery platforms utilising these two key OptiMAL^® steps.

The Mammalian Display platform is ideally suited to be used in conjunction with the output from artificial intelligence/machine learning (AI/ML) discovery platforms. These AI/ML platforms provide a method of designing panels of antibodies in-silico, with the AI/ML algorithms typically producing small libraries of sequences which are an excellent match with our Mammalian Display platform, which can transform these designs into real protein molecules for screening and final selection.  This is a potentially powerful combination to speed up the discovery process and the Company is actively engaging with leading AI/ML companies as potential partners to make these novel approaches available to our client base. In August 2023 we announced that the negotiations with a leading AI/ML company based in the USA have been finalised and the first order emanating from this collaboration to generate de-novo antibody sequences has been received. 

Furthermore as previously announced a Memorandum of Understanding (MoU) with another AI/ML company based in Europe has also been signed.  These collaborations are expected to provide for the development of partnerships that will enable the derivation and evaluation of AI generated antibodies and offer clients a new route to market using the AI/ML-Ab^TM service (pronounced AIM Lab), which will be complementary to our established discovery methods.

The novel DNA library of antibody sequences from OptiMAL^® will also be used as the input design for OptiPhage^TM, a phage display based version of the same DNA library. These DNA sequences are packaged into a more commonly used Phage display format where smaller antibody fragments can be screened, compared to whole antibodies via OptiMAL^®. We believe that the provision of OptiPhage^TM at a lower price point provides the Company with an ability to protect the premium pricing of the OptiMAL^® programme whilst meeting budgetary constraints of its customers. It may also be the platform of choice for those wanting antibody fragments as their end product.

As a Company, we are proud of our innovations and of our dedicated team of scientists who work on the next generation of antibody discovery technologies and we will continue to protect novel ideas through the filing of patents.  This year saw the filing of two new patents. The first one is in respect of the Company’s antigen display technology, which should increase the success rate in identifying highly potent antibodies from Fusion’s range of Antibody Discovery technologies, although it does have a wider potential application. The second is for a panel of antibodies that bind to an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by early pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Board and Employees

I was very pleased to announce the arrival of our new CEO, Dr Adrian Kinkaid, in August last year. Adrian brings a depth of experience in the life science and biotherapeutics industries and has expertise in the development and commercialisation of all the main classes of affinity reagents with over twenty-five years’ experience working in the bioscience sector. Adrian’s previous experience has included senior management positions in drug discovery, reagent technology and diagnostics and joins at a time where his strong leadership and vision will be key in the Company’s turnaround strategy. 

One further change to the Board during the financial year was Mr Tim Watts, who stepped down as a Non-Executive Director in September 2022.  Tim joined the Company at the time of the IPO in December 2017, was the Chair of the Company’s Audit Committee and has made a valuable contribution to the Company, particularly from his knowledge and experience of public companies.  On behalf of the Board, I would like to thank him for all that he had done for the Company and wish him well in his retirement.

Post the end of the year we announced that Mr James Fair, our Chief Financial Officer, was stepping down from the Board effective 31 May 2023. The Board would like to thank James for his significant contribution to the Company over the past 14 years and wish him well in his future endeavours. We are grateful to Ms Frances Johnston who stepped in as the Company Secretary until the appointment in September 2023 of Mr Stephen Smyth as an interim part time CFO and Company Secretary. Stephen Smyth was designated Company Secretary on 28 July 2023 and appointed on Companies House on 16 September 2023. We have outsourced some other financial management accounting activities until the point where the Company is in a stronger financial position to allow more permanent solutions.

I would also like to mention all the staff, who at the beginning of the year were still working under Covid-19 restrictions, with many of our business development and financial teams continuing to work from home.  The Company is continuing to offer flexible hybrid working where possible within the employee retention strategy.

The Fusion team has worked well under difficult conditions with a strong collaborative team effort and disciplined commitment for which the board is very grateful.  The formation of the new Scientific Advisory Panel (the "SAP") was announced last year and is a making a positive input into the Companies scientific strategy.  During the year there was a change in the makeup of the group with Professor Terry Rabbitts stepping down and with Dr Ulf Grawunder attending SAP meetings.   I would like to thank Professor Rabbitts for his contribution and welcome Dr Grawunder, who is based in Basel and who has extensive experience in the development of antibody-based therapeutics. He co-founded a company specializing in the development of therapies for cancer patients and has experience in mammalian cell-based antibody display platforms. 

The appointment of these industry experts has already had an impact in our new AI/ML focus, with Professor Charlotte Deane, Professor of Structural Bioinformatics at the University of Oxford sharing her insights in the development and application of future machine learning algorithms in the field of antibody design.

Corporate governance

The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report of the annual report and accounts.

Post year end and outlook

As mentioned previously, the significant downturn in revenues generated a larger than anticipated operating loss for the FY23 and as this put a major strain of the cash levels, a new round of funding was commenced at the end of this FY and completed successfully in June 2023.  Unfortunately, the need for this fundraising materialised at a point when investor confidence, and confidence in Fusion were at a low-point, resulting in a significant discount in the price at which new monies could be raised. 

The subscription of new shares was through a placing, a Directors subscription and a retail offer and I would like to thank all the shareholders, both current and new, who supported us in this round, and in particular the Directors who subscribed for just over 8% of the shares.  A total of £1,671,938 (£1.5m net of expenses) was raised through the issue of 33,438,768 ordinary shares at 5p per share. 

In light of the macro-economic headwinds which the Company and its customers are facing, the Board identified  £1.6 million of annualized savings, which were implemented after the fund raise.  This cost saving includes a significant reduction in headcount across all levels of the Company, including the Company’s non-executive directors having agreed to forgo all  remuneration that they are entitled to and the Company’s executive directors having agreed to changes in their remuneration (which  include taking shares in place of some cash remuneration) to further conserve cash until such time that the Company’s trading has recovered to an appropriate level.  

The Directors believe that, notwithstanding these cost reductions, the Company will still be able to progress the launch of ITAS. Budgets have been maintained for sales and marketing and travel and, where possible, the Company will seek client contributions for further collaborative trials with a view to full commercialization of OptiMAL^® and the initial AI/ML-Ab^TM and OptiPhage^TM projects. As mentioned, in August 2023, we were pleased to announce that an agreement had been signed with a leading US-based AI/ML company and the first order received, from a customer based in Australia. This represents an important first step in delivering this strategy.

Whilst there remains a significant amount of uncertainty over the timing and implementation of future contract wins due to reduced investment in the broader biotech sector, we expect trading to recover incrementally over the short to medium term both in respect of existing services and the new services coming on stream.

Simon Douglas

Chairman

28 September 2023

CEO’s report and operations review

The Therapeutics industry’s need for antibodies has arguably never been higher, with significant breakthroughs such as the approval of lecanemab, donanemab and others for Alzheimer’s disease demonstrating the applicability of antibodies to treat central nervous system diseases and that a new set of therapeutic targets are now to be considered viable. Similarly, the diagnostics industry is enjoying an unprecedented level of awareness and familiarity, especially with antibody enabled lateral flow devices having been used extensively in the detection of Covid 19. However, largely due to macro-economic factors, FY2023 was also a challenging year for the associated services industry with investment into the biotech sector reducing significantly in the principal geographical regions as Covid related investment rebalanced. As we entered the financial year, the Company was inevitably exposed to these factors with a high proportion of our business directly linked to venture capital funded clients. Faced with uncertainty about their funding, many clients opted to place projects on hold and not to initiate new projects until the economic landscape had improved.

Transitioning to a model whereby we can derive more revenue from those clients still actively progressing their research programmes became increasingly important to the Company and I am pleased to say we have made significant progress with the launch of our Integrated Therapeutic Antibody Services (ITAS). This also positions the business to better exploit our emerging platforms for antibody discovery, or “Discovery Engines”, which we are developing from the OptiMAL^® research project. The initial objective for the research project was to create OptiMAL^®, a groundbreaking and industry leading platform for the discovery of human antibodies through a highly diverse library of DNA sequences expressed as fully intact antibodies, or IgG molecules, expressed on the surface of mammalian cells. We now have clear evidence that this has been achieved with cells stained to show the antibodies displayed on the cell surface.  With the antibody on the cell surface, a cell can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

This image shows individual cells at high magnification. The cells have been stained with a red stain that is specifically for the expressed human antibody created by the OptiMAL^® process.  The red stain is seen predominantly on the cellular surface showing that antibodies are being produced by the cell and on the cell surface.  Such cells can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

We are also in the process of spinning out two further discovery platforms from the same research program: AI/ML-Ab^TM and Optiphage^TM.  The Mammalian Display element of OptiMAL^® is being combined with algorithms for the de novo design of novel antibodies from various artificial intelligence (AI) and Machine Learning (ML) technologies (AI/ML-Ab^TM) which have very much come to the fore in the last year or two, whilst  Optiphage^TM utilizes a library based on the same sequences as OptiMAL^®, but modified for use in a more industry standard phage-display format. The availability of these diverse and complementary proprietary discovery engines, which can be deployed singly or in concert, also enables us to provide a de-risked approach to antibody discovery, further benefiting our clients and strengthening Fusion Antibodies’ position as the partner of choice.  In August 2023 we were pleased to announce that we had a signed agreement with a leading US-based AI/ML company.  It is envisaged that both parties will co-market the combined service offerings and as announced we have already received the first order. This purchase order demonstrates commercial traction for AI/ML-Ab^TM and we believe that there is significant market potential for this service offering.

At Fusion, our aim is to develop a range of services that gives our clients choice and a range of solutions best suited to the biological needs of their targets.  We understand that ‘one size’ does not fit all and aim to broaden our service menu to give the customer the best chance of meeting their technical objectives with the least risk.  This is already in place with our cell line development (CLD) and stabilization services, where we offer a number of cell lines. We offer our clients the choice of three separate cell lines, all in-licensed, which have different biological characteristics and financial price points. The final selection process is empirical, with the screening process involving the assessment of yield and stability which will vary from antibody to antibody. CLD is a service that is required towards the end of the development process and we intend to develop and introduce a similar choice at the beginning: at the discovery end of the development plan.

Due to the strong headwinds caused by the macro-economic conditions, the Company ended the year looking to secure additional investment which it successfully completed in June 2023, raising just under £1.7 million (before expenses).   Thanks to the continued support of our shareholders, we can move forward with re-establishing our presence in the market and maintaining investment in our new discovery services.  

Business Review

The Company’s revenue performance for the financial year to 31 March 2023 fell by 40% vs 2022 to £2.9m due to the macroeconomic headwinds. Despite the reduction in revenues, we have experienced continuing interest and uptake of our proprietary RAMP^TM technology service platform which represents a key driver of revenues for the business. Over the course of the year, Fusion has initiated and successfully completed a number of RAMP^TM client projects, which further affirms the valuable contribution of this service offering to both the Company and to our customers. The key geographical region of North America represented 50% of revenues and with a number of key client accounts. The Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, were also impacted by the global downturn in the sector, although client relationships are strengthening and opportunities are increasing. In addition to the ‘Fee for Service’ revenue model, and where there is a significant contribution to the client’s intellectual property, we look to enter into a collaborative agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable the Company to unlock the intrinsic value that our proprietary service platforms provide to our clients and generate additional shareholder value.

We continued to drive investment and innovation into the R&D pipeline of new service offerings. In the financial year, we made further progress on the development work of OptiMAL^® with successful proof of concept for the Mammalian Display element. This has already been harnessed to support the AI/ML-Ab^TM offering, which is itself attracting market attention, and is already generating new leads. I strongly believe that AI/ML-Ab^TM, Optiphage^TM and OptiMAL^® represent key differentiators and future drivers of growth for the business and will enable the Company to access a sizeable addressable market generating significant shareholder value.

We are pleased to report that the Company filed a patent application for a panel of antibodies that bind an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Our Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services has been particularly valuable in the development of the new platforms and it is anticipated that their continued guidance will further support the commercialisation of these valuable assets.

Inventory of consumables has been maintained at relatively high levels to allow for any supply chain disruption from the UK’s departure from the European Union and the disruption caused by the Coronavirus pandemic. In the year, 14% of the Company’s revenues arose from exports to the EU countries and we look to build on this, supported by Northern Ireland’s unique trading position with the EU and UK. We also continue to develop other export markets as our services find universal acclaim and to mitigate risks of overexposure to any one geographical market.

Financial Results

Full year revenues for the year in total were down by 40% to £2.9m (2022: £4.8m).

The EBITDA loss for the year was £2.5m (2022: £0.6m loss) (see note 26) and, excluding the R&D expenditure of £0.8m, EBITDA for the year was a loss of £1.5m. The loss before tax was £2.9m (2022: £1.3m loss).

The Company held current net assets of £0.8m at 31 March 2023 (2022: £3.1m) which mainly comprised inventories and trade and other receivables.

The Company ended the year with £0.2m of cash and cash equivalents, having used £1.7m of cash in operations during the year of which £0.8m was for R&D, invested £0.1m in property, plant and equipment and £0.1m servicing asset-based borrowings. As previously mentioned, in June 2023 the Company issued equity for net proceeds of c.£1.5m which puts it in a good position to continue its sales and marketing activities and the development of new discovery platforms and services.  

The current financial year commenced with similar conditions to those experienced in the latter part of FY 2023, with new business significantly lower than historic levels. In the past few months, the Company has enjoyed an uplift in business engagement from lead generation through to quote drafting and, pleasingly, purchase orders received. We've seen a strengthening of the pipeline of approximately three-fold since the end of 2023. As a result, revenues for FY2024 will be significantly weighted towards the second half of the year. The Board is optimistic that our new services, such as AI/ML-Ab, will contribute positively to future revenue growth.

Despite FY2023 being a commercially challenging year, I feel optimistic about the year ahead. Since the year end we have reduced our cost base significantly but kept a strong and broad technical base within the Company, raised finance and are in a good cash position and have some exciting and enviable discovery services in development.  I believe that the slowdown in the market is beginning to show a level of recovery, with our pipeline already showing growth, and that we are in a good position to return to growth on a stronger more stable foundation. 

Adrian Kinkaid

Chief Executive Officer

28 September 2023

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2023

Statement of Financial Position

As at 31 March 2023

Simon Douglas                                               Adrian Kinkaid

Director                                                            Director

Registered in Northern Ireland, number NI039740

Statement of Changes in Equity

For the year ended 31 March 2023

Statement of Cash Flows

For the year ended 31 March 2023

2021

Fusion Antibodies plc (AIM: FAB), a contract research organisation (“CRO”) providing discovery, design, and optimisation services for therapeutic antibodies to the global healthcare market, announces its final results for the year ended 31 March 2023. 

Commercial and operational highlights

• Full year revenues lower by 40% to £2.9m (2022: £4.8m)
• Loss for the year of £2.6m (2022: loss £1.2m)
• Investment in R&D £0.8m (2022: £0.7m)
• Introduction of Integrated Therapeutic Antibody Service
• Introduction of Mammalian Display service
• Appointment of Adrian Kinkaid as CEO in August 2022
• Cash position at the year-end £0.2m (2022: £2.0m)

Post period end highlights

• Share proceeds of £1.5m (net of costs)
• Appointment of Stephen Smyth as interim CFO in September 2023
• Memorandum of Understanding (“MoU”) signed with leading US based AI/ML business and the first purchase order received

Separately, the Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the Company's Annual General Meeting ("AGM") are being posted to shareholders shortly. A copy of the 2023 Annual Report and Accounts, the Notice of AGM and accompanying form of proxy will soon be available to download from the Company website here: https://www.fusionantibodies-ir.com/.

The AGM will be held on 27 October 2023 at 11.00 am at the Company’s offices at Springbank Industrial Estate, 1 Springbank Rd, Dunmurry, Belfast BT17 0QL.

Director change

Sonya Ferguson, Non-executive Director, will not be seeking re-election at the AGM, as she has decided to pursue another business opportunity. She will cease to be a Director of the Company at the close of the AGM.

Adrian Kinkaid, CEO of Fusion Antibodies commented: “This has been a challenging year for the Company and we have been through a number of changes over the last few months. We successfully raised funds in a very difficult market in May and implemented some additional cost saving measures to provide us with the necessary capital we needed to progress the business.

“More recently, we announced we had signed an agreement with a US based AI/ML business to support our antibody discovery service, AI/ML-Ab^TM and subsequently received our first order under the framework of this agreement. We are continuing to work on other aspects of the OptiMAL® programme, and in particular the development of the fully human antibody library which we remain confident in.

“On a separate note, the Board would like to offer our sincere thanks to Sonya Ferguson for her service to the Company as a Non-executive Director. She has been with the Company since 2016, prior to our admission to trading on AIM.  We wish her well on her future endeavours. As a Company, we are looking forward to better times ahead, reaching profitability and delivering value to our shareholders.”

Investor briefing

Fusion will host an online live presentation open to all investors on Wednesday, 4 October 2023 at 11am BST, delivered by Dr Adrian Kinkaid, CEO and Stephen Smyth, CFO. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading.

The presentation will be hosted through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor

For those investors who have already registered and added to meet the Company, they will automatically be invited. Questions can be submitted pre-event via your IMC dashboard or in real time during the presentation, via the "Ask a Question" function. Whilst the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications. A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.

Enquiries:

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 ^TM 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 and expressed over 250 antibodies and successfully completed over 200 humanisation projects and has an international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

The Company was established in 2001 as a spin out from Queen's University Belfast. The Company's mission is to enable pharmaceutical and diagnostic companies to develop innovative products in a timely and cost-effective manner for the benefit of the global healthcare industry. Fusion Antibodies provides a broad range of services in antibody generation, development, production, characterisation and optimisation.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster, with the optimal drug candidate and ultimately speed up the drug development process. 

The global monoclonal antibody therapeutics market was valued at $186 billion in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal antibody therapies are approved and marketed globally as of June 2022 with the top four antibody drugs each having sales of more than $3 bn in 2021.  

Chairman’s Statement

This year has been a tough year for the Company and very commercially challenging.  The year has seen a downturn in market conditions and investment into our customers’ early-stage therapeutic pipelines Venture capital funding, typically the primary source of investment for early-stage biotech, has fallen to its lowest level since 2019.

The Biotechnology sector’s contribution to the global R&D pipeline has been growing in the last decade.  There are more biotech companies now than ever before, but consequently there is less investment to go around and this lack of growth capital for many biotech companies means they must be very cautious in their spending.  This has resulted in projects being delayed and reductions in head counts.  However, we believe that the reprioritization of pipelines and optimisation of development strategies will give Fusion more opportunities going forward as companies could look to outsource more of their projects to give them greater control of their fixed cost base.   We believe that Biotech companies generally are moving towards leveraging early engagement opportunities with full-service partners like Fusion to optimise the impact of external expertise across the development program, and to maximise their probability of success. 

With the biotechnology sector’s funding environment undergoing significant changes, creative solutions are required and Fusion has responded by introducing our new ITAS (Integrated Therapeutic Antibody Services) strategy which addresses this new market dynamic.  ITAS pulls together all our current solutions to provide a continuous service from target discovery to a final stable cell line ready for larger scale production and is consistent with Fusion’s established philosophy to “begin with the end in mind”. Furthermore, we are looking at ways that the antibody drug discovery timescale can be shortened, with the development of OptiMAL^®, our human antibody library and also through strategic alliances with AI/ML (artificial intelligence/machine learning) companies.

Business performance

The year showed a significant downturn in revenue from the previous year at £2.9m (2022: £4.8m) due to a combination of factors.  As mentioned, this is primarily due to weak market investment conditions for new drug discovery and development programs and the subsequent delays to a number of our contracts, both large and small, combined with the reduced drug development activity of some of our customers.   Notably, a small number of valuable projects have been suspended by clients due to delayed investment into those businesses. We are advised by our clients that we should expect these projects to recommence once their funding is secured, although the continued uncertainty of timescales to win and close out contracts and to recognise the revenues remains a challenge. 

This situation was further compounded by the several months without a CEO in place and the unusually high turnover in the commercial group this year, necessitating the recruitment and training of new staff which created some short-term loss of traction with our customer base.  The industry in general has seen significant movement in staff during and after the pandemic but more recently this situation has stabilised. It is worth noting that whilst the Company continues to retain an interest of longer-term future success milestone or royalty payments in many of our client projects, there were no such payments this year.

The Company has been carefully managing costs and in particular towards the later part of the year headcount has been reduced by 11% from an average of 54 to a headcount of 48 at the year end. To minimise the impact on capacity and capability to deliver customers’ projects, significant cross training of staff from different laboratories has been implemented.

The focus for our R&D has continued on the OptiMAL^® library project, with investment in R&D increasing by 29% over the same period in the previous year to £0.8m (2022: £0.7m).

The downturn in revenues generated an operating loss for the year of £2.6m (2022: loss £1.2m). Post year end, the Company successfully completed a £1.67m fundraise to provide additional working capital and we have now implemented circa. £1.6m in restructuring savings, including a further reduction in headcount from 48 at March 31 year end 2023 to 29. The Company had previously announced anticipated annualised cost savings of £2.2 million based on comparisons against the Company’s budgets and plans in place at that time. As the outrun for FY 2023 was lower than originally budgeted, the revised annualised cost savings identified now total £1.6m. The Board will continue to closely monitor the Company’s cost base and seek to identify additional cost savings that can be implemented without further impacting the operating capacity of the Company.

Development of New services

While trading conditions remain challenging, the Company continues to strive to be at the front of innovation and to provide new and cutting-edge services to the market.   We have implemented a new strategy and are introducing a new integrated approach in response to client needs and to ultimately increase revenues. We are re-aligning the Company’s service offering to best serve our clients who are seeking to outsource more of their work in therapeutic antibody drug discovery and positioning ourselves as more of a collaborative partner rather than just a fee-for-service relationship. Our Integrated Therapeutic Antibody Service (ITAS) integrates our current Discovery, Engineering and Supply services into one proposition which aims to enhance the client journey with the development of high performing antibodies to their targets. This approach has been trialled with an existing client with positive results and the Company’s aim is to build on this, while continuing to support our smaller clients who may wish to select individual services.

The antibody drug discovery industry is gradually moving away from the use of animals, something that as a Company we recognise and support.  Our R&D program to develop a cell-based mammalian display technology screening library, OptiMAL^®, for the direct identification of intact fully human antibodies against biomarkers and other targets of interest is progressing, with key stages of the process now developed, although further optimisation work is still required to deliver the full operational screening parameters.   We will continue to build a body of data with a view to establishing commercial relationships for further validation and the Directors remain optimistic about its likely reception by the market.

Since our last report, processes to transfect cells with unique sequences, express those sequences as antibodies and screen and select antibodies have been optimised. Work is ongoing to optimise the extraction of specific antibodies to build a body of data with a view to establishing commercial relationships for further validation. Already, the R&D investment is bearing fruit with two stages of the OptiMAL^® process adding value in that they enable us to further broaden the Company’s integrated service offering. The OptiMAL^® process includes a novel DNA library of antibody sequences at the front end and a Mammalian Display platform as the final step to enable the library antibodies to be expressed on the surface of mammalian cells as fully intact human IgG antibodies. We have commenced the development of two further discovery platforms utilising these two key OptiMAL^® steps.

The Mammalian Display platform is ideally suited to be used in conjunction with the output from artificial intelligence/machine learning (AI/ML) discovery platforms. These AI/ML platforms provide a method of designing panels of antibodies in-silico, with the AI/ML algorithms typically producing small libraries of sequences which are an excellent match with our Mammalian Display platform, which can transform these designs into real protein molecules for screening and final selection.  This is a potentially powerful combination to speed up the discovery process and the Company is actively engaging with leading AI/ML companies as potential partners to make these novel approaches available to our client base. In August 2023 we announced that the negotiations with a leading AI/ML company based in the USA have been finalised and the first order emanating from this collaboration to generate de-novo antibody sequences has been received. 

Furthermore as previously announced a Memorandum of Understanding (MoU) with another AI/ML company based in Europe has also been signed.  These collaborations are expected to provide for the development of partnerships that will enable the derivation and evaluation of AI generated antibodies and offer clients a new route to market using the AI/ML-Ab^TM service (pronounced AIM Lab), which will be complementary to our established discovery methods.

The novel DNA library of antibody sequences from OptiMAL^® will also be used as the input design for OptiPhage^TM, a phage display based version of the same DNA library. These DNA sequences are packaged into a more commonly used Phage display format where smaller antibody fragments can be screened, compared to whole antibodies via OptiMAL^®. We believe that the provision of OptiPhage^TM at a lower price point provides the Company with an ability to protect the premium pricing of the OptiMAL^® programme whilst meeting budgetary constraints of its customers. It may also be the platform of choice for those wanting antibody fragments as their end product.

As a Company, we are proud of our innovations and of our dedicated team of scientists who work on the next generation of antibody discovery technologies and we will continue to protect novel ideas through the filing of patents.  This year saw the filing of two new patents. The first one is in respect of the Company’s antigen display technology, which should increase the success rate in identifying highly potent antibodies from Fusion’s range of Antibody Discovery technologies, although it does have a wider potential application. The second is for a panel of antibodies that bind to an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by early pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Board and Employees

I was very pleased to announce the arrival of our new CEO, Dr Adrian Kinkaid, in August last year. Adrian brings a depth of experience in the life science and biotherapeutics industries and has expertise in the development and commercialisation of all the main classes of affinity reagents with over twenty-five years’ experience working in the bioscience sector. Adrian’s previous experience has included senior management positions in drug discovery, reagent technology and diagnostics and joins at a time where his strong leadership and vision will be key in the Company’s turnaround strategy. 

One further change to the Board during the financial year was Mr Tim Watts, who stepped down as a Non-Executive Director in September 2022.  Tim joined the Company at the time of the IPO in December 2017, was the Chair of the Company’s Audit Committee and has made a valuable contribution to the Company, particularly from his knowledge and experience of public companies.  On behalf of the Board, I would like to thank him for all that he had done for the Company and wish him well in his retirement.

Post the end of the year we announced that Mr James Fair, our Chief Financial Officer, was stepping down from the Board effective 31 May 2023. The Board would like to thank James for his significant contribution to the Company over the past 14 years and wish him well in his future endeavours. We are grateful to Ms Frances Johnston who stepped in as the Company Secretary until the appointment in September 2023 of Mr Stephen Smyth as an interim part time CFO and Company Secretary. Stephen Smyth was designated Company Secretary on 28 July 2023 and appointed on Companies House on 16 September 2023. We have outsourced some other financial management accounting activities until the point where the Company is in a stronger financial position to allow more permanent solutions.

I would also like to mention all the staff, who at the beginning of the year were still working under Covid-19 restrictions, with many of our business development and financial teams continuing to work from home.  The Company is continuing to offer flexible hybrid working where possible within the employee retention strategy.

The Fusion team has worked well under difficult conditions with a strong collaborative team effort and disciplined commitment for which the board is very grateful.  The formation of the new Scientific Advisory Panel (the "SAP") was announced last year and is a making a positive input into the Companies scientific strategy.  During the year there was a change in the makeup of the group with Professor Terry Rabbitts stepping down and with Dr Ulf Grawunder attending SAP meetings.   I would like to thank Professor Rabbitts for his contribution and welcome Dr Grawunder, who is based in Basel and who has extensive experience in the development of antibody-based therapeutics. He co-founded a company specializing in the development of therapies for cancer patients and has experience in mammalian cell-based antibody display platforms. 

The appointment of these industry experts has already had an impact in our new AI/ML focus, with Professor Charlotte Deane, Professor of Structural Bioinformatics at the University of Oxford sharing her insights in the development and application of future machine learning algorithms in the field of antibody design.

Corporate governance

The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report of the annual report and accounts.

Post year end and outlook

As mentioned previously, the significant downturn in revenues generated a larger than anticipated operating loss for the FY23 and as this put a major strain of the cash levels, a new round of funding was commenced at the end of this FY and completed successfully in June 2023.  Unfortunately, the need for this fundraising materialised at a point when investor confidence, and confidence in Fusion were at a low-point, resulting in a significant discount in the price at which new monies could be raised. 

The subscription of new shares was through a placing, a Directors subscription and a retail offer and I would like to thank all the shareholders, both current and new, who supported us in this round, and in particular the Directors who subscribed for just over 8% of the shares.  A total of £1,671,938 (£1.5m net of expenses) was raised through the issue of 33,438,768 ordinary shares at 5p per share. 

In light of the macro-economic headwinds which the Company and its customers are facing, the Board identified  £1.6 million of annualized savings, which were implemented after the fund raise.  This cost saving includes a significant reduction in headcount across all levels of the Company, including the Company’s non-executive directors having agreed to forgo all  remuneration that they are entitled to and the Company’s executive directors having agreed to changes in their remuneration (which  include taking shares in place of some cash remuneration) to further conserve cash until such time that the Company’s trading has recovered to an appropriate level.  

The Directors believe that, notwithstanding these cost reductions, the Company will still be able to progress the launch of ITAS. Budgets have been maintained for sales and marketing and travel and, where possible, the Company will seek client contributions for further collaborative trials with a view to full commercialization of OptiMAL^® and the initial AI/ML-Ab^TM and OptiPhage^TM projects. As mentioned, in August 2023, we were pleased to announce that an agreement had been signed with a leading US-based AI/ML company and the first order received, from a customer based in Australia. This represents an important first step in delivering this strategy.

Whilst there remains a significant amount of uncertainty over the timing and implementation of future contract wins due to reduced investment in the broader biotech sector, we expect trading to recover incrementally over the short to medium term both in respect of existing services and the new services coming on stream.

Simon Douglas

Chairman

28 September 2023

CEO’s report and operations review

The Therapeutics industry’s need for antibodies has arguably never been higher, with significant breakthroughs such as the approval of lecanemab, donanemab and others for Alzheimer’s disease demonstrating the applicability of antibodies to treat central nervous system diseases and that a new set of therapeutic targets are now to be considered viable. Similarly, the diagnostics industry is enjoying an unprecedented level of awareness and familiarity, especially with antibody enabled lateral flow devices having been used extensively in the detection of Covid 19. However, largely due to macro-economic factors, FY2023 was also a challenging year for the associated services industry with investment into the biotech sector reducing significantly in the principal geographical regions as Covid related investment rebalanced. As we entered the financial year, the Company was inevitably exposed to these factors with a high proportion of our business directly linked to venture capital funded clients. Faced with uncertainty about their funding, many clients opted to place projects on hold and not to initiate new projects until the economic landscape had improved.

Transitioning to a model whereby we can derive more revenue from those clients still actively progressing their research programmes became increasingly important to the Company and I am pleased to say we have made significant progress with the launch of our Integrated Therapeutic Antibody Services (ITAS). This also positions the business to better exploit our emerging platforms for antibody discovery, or “Discovery Engines”, which we are developing from the OptiMAL^® research project. The initial objective for the research project was to create OptiMAL^®, a groundbreaking and industry leading platform for the discovery of human antibodies through a highly diverse library of DNA sequences expressed as fully intact antibodies, or IgG molecules, expressed on the surface of mammalian cells. We now have clear evidence that this has been achieved with cells stained to show the antibodies displayed on the cell surface.  With the antibody on the cell surface, a cell can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

This image shows individual cells at high magnification. The cells have been stained with a red stain that is specifically for the expressed human antibody created by the OptiMAL^® process.  The red stain is seen predominantly on the cellular surface showing that antibodies are being produced by the cell and on the cell surface.  Such cells can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

We are also in the process of spinning out two further discovery platforms from the same research program: AI/ML-Ab^TM and Optiphage^TM.  The Mammalian Display element of OptiMAL^® is being combined with algorithms for the de novo design of novel antibodies from various artificial intelligence (AI) and Machine Learning (ML) technologies (AI/ML-Ab^TM) which have very much come to the fore in the last year or two, whilst  Optiphage^TM utilizes a library based on the same sequences as OptiMAL^®, but modified for use in a more industry standard phage-display format. The availability of these diverse and complementary proprietary discovery engines, which can be deployed singly or in concert, also enables us to provide a de-risked approach to antibody discovery, further benefiting our clients and strengthening Fusion Antibodies’ position as the partner of choice.  In August 2023 we were pleased to announce that we had a signed agreement with a leading US-based AI/ML company.  It is envisaged that both parties will co-market the combined service offerings and as announced we have already received the first order. This purchase order demonstrates commercial traction for AI/ML-Ab^TM and we believe that there is significant market potential for this service offering.

At Fusion, our aim is to develop a range of services that gives our clients choice and a range of solutions best suited to the biological needs of their targets.  We understand that ‘one size’ does not fit all and aim to broaden our service menu to give the customer the best chance of meeting their technical objectives with the least risk.  This is already in place with our cell line development (CLD) and stabilization services, where we offer a number of cell lines. We offer our clients the choice of three separate cell lines, all in-licensed, which have different biological characteristics and financial price points. The final selection process is empirical, with the screening process involving the assessment of yield and stability which will vary from antibody to antibody. CLD is a service that is required towards the end of the development process and we intend to develop and introduce a similar choice at the beginning: at the discovery end of the development plan.

Due to the strong headwinds caused by the macro-economic conditions, the Company ended the year looking to secure additional investment which it successfully completed in June 2023, raising just under £1.7 million (before expenses).   Thanks to the continued support of our shareholders, we can move forward with re-establishing our presence in the market and maintaining investment in our new discovery services.  

Business Review

The Company’s revenue performance for the financial year to 31 March 2023 fell by 40% vs 2022 to £2.9m due to the macroeconomic headwinds. Despite the reduction in revenues, we have experienced continuing interest and uptake of our proprietary RAMP^TM technology service platform which represents a key driver of revenues for the business. Over the course of the year, Fusion has initiated and successfully completed a number of RAMP^TM client projects, which further affirms the valuable contribution of this service offering to both the Company and to our customers. The key geographical region of North America represented 50% of revenues and with a number of key client accounts. The Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, were also impacted by the global downturn in the sector, although client relationships are strengthening and opportunities are increasing. In addition to the ‘Fee for Service’ revenue model, and where there is a significant contribution to the client’s intellectual property, we look to enter into a collaborative agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable the Company to unlock the intrinsic value that our proprietary service platforms provide to our clients and generate additional shareholder value.

We continued to drive investment and innovation into the R&D pipeline of new service offerings. In the financial year, we made further progress on the development work of OptiMAL^® with successful proof of concept for the Mammalian Display element. This has already been harnessed to support the AI/ML-Ab^TM offering, which is itself attracting market attention, and is already generating new leads. I strongly believe that AI/ML-Ab^TM, Optiphage^TM and OptiMAL^® represent key differentiators and future drivers of growth for the business and will enable the Company to access a sizeable addressable market generating significant shareholder value.

We are pleased to report that the Company filed a patent application for a panel of antibodies that bind an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Our Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services has been particularly valuable in the development of the new platforms and it is anticipated that their continued guidance will further support the commercialisation of these valuable assets.

Inventory of consumables has been maintained at relatively high levels to allow for any supply chain disruption from the UK’s departure from the European Union and the disruption caused by the Coronavirus pandemic. In the year, 14% of the Company’s revenues arose from exports to the EU countries and we look to build on this, supported by Northern Ireland’s unique trading position with the EU and UK. We also continue to develop other export markets as our services find universal acclaim and to mitigate risks of overexposure to any one geographical market.

Financial Results

Full year revenues for the year in total were down by 40% to £2.9m (2022: £4.8m).

The EBITDA loss for the year was £2.5m (2022: £0.6m loss) (see note 26) and, excluding the R&D expenditure of £0.8m, EBITDA for the year was a loss of £1.5m. The loss before tax was £2.9m (2022: £1.3m loss).

The Company held current net assets of £0.8m at 31 March 2023 (2022: £3.1m) which mainly comprised inventories and trade and other receivables.

The Company ended the year with £0.2m of cash and cash equivalents, having used £1.7m of cash in operations during the year of which £0.8m was for R&D, invested £0.1m in property, plant and equipment and £0.1m servicing asset-based borrowings. As previously mentioned, in June 2023 the Company issued equity for net proceeds of c.£1.5m which puts it in a good position to continue its sales and marketing activities and the development of new discovery platforms and services.  

The current financial year commenced with similar conditions to those experienced in the latter part of FY 2023, with new business significantly lower than historic levels. In the past few months, the Company has enjoyed an uplift in business engagement from lead generation through to quote drafting and, pleasingly, purchase orders received. We've seen a strengthening of the pipeline of approximately three-fold since the end of 2023. As a result, revenues for FY2024 will be significantly weighted towards the second half of the year. The Board is optimistic that our new services, such as AI/ML-Ab, will contribute positively to future revenue growth.

Despite FY2023 being a commercially challenging year, I feel optimistic about the year ahead. Since the year end we have reduced our cost base significantly but kept a strong and broad technical base within the Company, raised finance and are in a good cash position and have some exciting and enviable discovery services in development.  I believe that the slowdown in the market is beginning to show a level of recovery, with our pipeline already showing growth, and that we are in a good position to return to growth on a stronger more stable foundation. 

Adrian Kinkaid

Chief Executive Officer

28 September 2023

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2023

Statement of Financial Position

As at 31 March 2023

Simon Douglas                                               Adrian Kinkaid

Director                                                            Director

Registered in Northern Ireland, number NI039740

Statement of Changes in Equity

For the year ended 31 March 2023

Statement of Cash Flows

For the year ended 31 March 2023

2020

Fusion Antibodies plc (AIM: FAB), a contract research organisation (“CRO”) providing discovery, design, and optimisation services for therapeutic antibodies to the global healthcare market, announces its final results for the year ended 31 March 2023. 

Commercial and operational highlights

• Full year revenues lower by 40% to £2.9m (2022: £4.8m)
• Loss for the year of £2.6m (2022: loss £1.2m)
• Investment in R&D £0.8m (2022: £0.7m)
• Introduction of Integrated Therapeutic Antibody Service
• Introduction of Mammalian Display service
• Appointment of Adrian Kinkaid as CEO in August 2022
• Cash position at the year-end £0.2m (2022: £2.0m)

Post period end highlights

• Share proceeds of £1.5m (net of costs)
• Appointment of Stephen Smyth as interim CFO in September 2023
• Memorandum of Understanding (“MoU”) signed with leading US based AI/ML business and the first purchase order received

Separately, the Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the Company's Annual General Meeting ("AGM") are being posted to shareholders shortly. A copy of the 2023 Annual Report and Accounts, the Notice of AGM and accompanying form of proxy will soon be available to download from the Company website here: https://www.fusionantibodies-ir.com/.

The AGM will be held on 27 October 2023 at 11.00 am at the Company’s offices at Springbank Industrial Estate, 1 Springbank Rd, Dunmurry, Belfast BT17 0QL.

Director change

Sonya Ferguson, Non-executive Director, will not be seeking re-election at the AGM, as she has decided to pursue another business opportunity. She will cease to be a Director of the Company at the close of the AGM.

Adrian Kinkaid, CEO of Fusion Antibodies commented: “This has been a challenging year for the Company and we have been through a number of changes over the last few months. We successfully raised funds in a very difficult market in May and implemented some additional cost saving measures to provide us with the necessary capital we needed to progress the business.

“More recently, we announced we had signed an agreement with a US based AI/ML business to support our antibody discovery service, AI/ML-Ab^TM and subsequently received our first order under the framework of this agreement. We are continuing to work on other aspects of the OptiMAL® programme, and in particular the development of the fully human antibody library which we remain confident in.

“On a separate note, the Board would like to offer our sincere thanks to Sonya Ferguson for her service to the Company as a Non-executive Director. She has been with the Company since 2016, prior to our admission to trading on AIM.  We wish her well on her future endeavours. As a Company, we are looking forward to better times ahead, reaching profitability and delivering value to our shareholders.”

Investor briefing

Fusion will host an online live presentation open to all investors on Wednesday, 4 October 2023 at 11am BST, delivered by Dr Adrian Kinkaid, CEO and Stephen Smyth, CFO. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading.

The presentation will be hosted through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor

For those investors who have already registered and added to meet the Company, they will automatically be invited. Questions can be submitted pre-event via your IMC dashboard or in real time during the presentation, via the "Ask a Question" function. Whilst the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications. A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.

Enquiries:

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 ^TM 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 and expressed over 250 antibodies and successfully completed over 200 humanisation projects and has an international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

The Company was established in 2001 as a spin out from Queen's University Belfast. The Company's mission is to enable pharmaceutical and diagnostic companies to develop innovative products in a timely and cost-effective manner for the benefit of the global healthcare industry. Fusion Antibodies provides a broad range of services in antibody generation, development, production, characterisation and optimisation.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster, with the optimal drug candidate and ultimately speed up the drug development process. 

The global monoclonal antibody therapeutics market was valued at $186 billion in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal antibody therapies are approved and marketed globally as of June 2022 with the top four antibody drugs each having sales of more than $3 bn in 2021.  

Chairman’s Statement

This year has been a tough year for the Company and very commercially challenging.  The year has seen a downturn in market conditions and investment into our customers’ early-stage therapeutic pipelines Venture capital funding, typically the primary source of investment for early-stage biotech, has fallen to its lowest level since 2019.

The Biotechnology sector’s contribution to the global R&D pipeline has been growing in the last decade.  There are more biotech companies now than ever before, but consequently there is less investment to go around and this lack of growth capital for many biotech companies means they must be very cautious in their spending.  This has resulted in projects being delayed and reductions in head counts.  However, we believe that the reprioritization of pipelines and optimisation of development strategies will give Fusion more opportunities going forward as companies could look to outsource more of their projects to give them greater control of their fixed cost base.   We believe that Biotech companies generally are moving towards leveraging early engagement opportunities with full-service partners like Fusion to optimise the impact of external expertise across the development program, and to maximise their probability of success. 

With the biotechnology sector’s funding environment undergoing significant changes, creative solutions are required and Fusion has responded by introducing our new ITAS (Integrated Therapeutic Antibody Services) strategy which addresses this new market dynamic.  ITAS pulls together all our current solutions to provide a continuous service from target discovery to a final stable cell line ready for larger scale production and is consistent with Fusion’s established philosophy to “begin with the end in mind”. Furthermore, we are looking at ways that the antibody drug discovery timescale can be shortened, with the development of OptiMAL^®, our human antibody library and also through strategic alliances with AI/ML (artificial intelligence/machine learning) companies.

Business performance

The year showed a significant downturn in revenue from the previous year at £2.9m (2022: £4.8m) due to a combination of factors.  As mentioned, this is primarily due to weak market investment conditions for new drug discovery and development programs and the subsequent delays to a number of our contracts, both large and small, combined with the reduced drug development activity of some of our customers.   Notably, a small number of valuable projects have been suspended by clients due to delayed investment into those businesses. We are advised by our clients that we should expect these projects to recommence once their funding is secured, although the continued uncertainty of timescales to win and close out contracts and to recognise the revenues remains a challenge. 

This situation was further compounded by the several months without a CEO in place and the unusually high turnover in the commercial group this year, necessitating the recruitment and training of new staff which created some short-term loss of traction with our customer base.  The industry in general has seen significant movement in staff during and after the pandemic but more recently this situation has stabilised. It is worth noting that whilst the Company continues to retain an interest of longer-term future success milestone or royalty payments in many of our client projects, there were no such payments this year.

The Company has been carefully managing costs and in particular towards the later part of the year headcount has been reduced by 11% from an average of 54 to a headcount of 48 at the year end. To minimise the impact on capacity and capability to deliver customers’ projects, significant cross training of staff from different laboratories has been implemented.

The focus for our R&D has continued on the OptiMAL^® library project, with investment in R&D increasing by 29% over the same period in the previous year to £0.8m (2022: £0.7m).

The downturn in revenues generated an operating loss for the year of £2.6m (2022: loss £1.2m). Post year end, the Company successfully completed a £1.67m fundraise to provide additional working capital and we have now implemented circa. £1.6m in restructuring savings, including a further reduction in headcount from 48 at March 31 year end 2023 to 29. The Company had previously announced anticipated annualised cost savings of £2.2 million based on comparisons against the Company’s budgets and plans in place at that time. As the outrun for FY 2023 was lower than originally budgeted, the revised annualised cost savings identified now total £1.6m. The Board will continue to closely monitor the Company’s cost base and seek to identify additional cost savings that can be implemented without further impacting the operating capacity of the Company.

Development of New services

While trading conditions remain challenging, the Company continues to strive to be at the front of innovation and to provide new and cutting-edge services to the market.   We have implemented a new strategy and are introducing a new integrated approach in response to client needs and to ultimately increase revenues. We are re-aligning the Company’s service offering to best serve our clients who are seeking to outsource more of their work in therapeutic antibody drug discovery and positioning ourselves as more of a collaborative partner rather than just a fee-for-service relationship. Our Integrated Therapeutic Antibody Service (ITAS) integrates our current Discovery, Engineering and Supply services into one proposition which aims to enhance the client journey with the development of high performing antibodies to their targets. This approach has been trialled with an existing client with positive results and the Company’s aim is to build on this, while continuing to support our smaller clients who may wish to select individual services.

The antibody drug discovery industry is gradually moving away from the use of animals, something that as a Company we recognise and support.  Our R&D program to develop a cell-based mammalian display technology screening library, OptiMAL^®, for the direct identification of intact fully human antibodies against biomarkers and other targets of interest is progressing, with key stages of the process now developed, although further optimisation work is still required to deliver the full operational screening parameters.   We will continue to build a body of data with a view to establishing commercial relationships for further validation and the Directors remain optimistic about its likely reception by the market.

Since our last report, processes to transfect cells with unique sequences, express those sequences as antibodies and screen and select antibodies have been optimised. Work is ongoing to optimise the extraction of specific antibodies to build a body of data with a view to establishing commercial relationships for further validation. Already, the R&D investment is bearing fruit with two stages of the OptiMAL^® process adding value in that they enable us to further broaden the Company’s integrated service offering. The OptiMAL^® process includes a novel DNA library of antibody sequences at the front end and a Mammalian Display platform as the final step to enable the library antibodies to be expressed on the surface of mammalian cells as fully intact human IgG antibodies. We have commenced the development of two further discovery platforms utilising these two key OptiMAL^® steps.

The Mammalian Display platform is ideally suited to be used in conjunction with the output from artificial intelligence/machine learning (AI/ML) discovery platforms. These AI/ML platforms provide a method of designing panels of antibodies in-silico, with the AI/ML algorithms typically producing small libraries of sequences which are an excellent match with our Mammalian Display platform, which can transform these designs into real protein molecules for screening and final selection.  This is a potentially powerful combination to speed up the discovery process and the Company is actively engaging with leading AI/ML companies as potential partners to make these novel approaches available to our client base. In August 2023 we announced that the negotiations with a leading AI/ML company based in the USA have been finalised and the first order emanating from this collaboration to generate de-novo antibody sequences has been received. 

Furthermore as previously announced a Memorandum of Understanding (MoU) with another AI/ML company based in Europe has also been signed.  These collaborations are expected to provide for the development of partnerships that will enable the derivation and evaluation of AI generated antibodies and offer clients a new route to market using the AI/ML-Ab^TM service (pronounced AIM Lab), which will be complementary to our established discovery methods.

The novel DNA library of antibody sequences from OptiMAL^® will also be used as the input design for OptiPhage^TM, a phage display based version of the same DNA library. These DNA sequences are packaged into a more commonly used Phage display format where smaller antibody fragments can be screened, compared to whole antibodies via OptiMAL^®. We believe that the provision of OptiPhage^TM at a lower price point provides the Company with an ability to protect the premium pricing of the OptiMAL^® programme whilst meeting budgetary constraints of its customers. It may also be the platform of choice for those wanting antibody fragments as their end product.

As a Company, we are proud of our innovations and of our dedicated team of scientists who work on the next generation of antibody discovery technologies and we will continue to protect novel ideas through the filing of patents.  This year saw the filing of two new patents. The first one is in respect of the Company’s antigen display technology, which should increase the success rate in identifying highly potent antibodies from Fusion’s range of Antibody Discovery technologies, although it does have a wider potential application. The second is for a panel of antibodies that bind to an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by early pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Board and Employees

I was very pleased to announce the arrival of our new CEO, Dr Adrian Kinkaid, in August last year. Adrian brings a depth of experience in the life science and biotherapeutics industries and has expertise in the development and commercialisation of all the main classes of affinity reagents with over twenty-five years’ experience working in the bioscience sector. Adrian’s previous experience has included senior management positions in drug discovery, reagent technology and diagnostics and joins at a time where his strong leadership and vision will be key in the Company’s turnaround strategy. 

One further change to the Board during the financial year was Mr Tim Watts, who stepped down as a Non-Executive Director in September 2022.  Tim joined the Company at the time of the IPO in December 2017, was the Chair of the Company’s Audit Committee and has made a valuable contribution to the Company, particularly from his knowledge and experience of public companies.  On behalf of the Board, I would like to thank him for all that he had done for the Company and wish him well in his retirement.

Post the end of the year we announced that Mr James Fair, our Chief Financial Officer, was stepping down from the Board effective 31 May 2023. The Board would like to thank James for his significant contribution to the Company over the past 14 years and wish him well in his future endeavours. We are grateful to Ms Frances Johnston who stepped in as the Company Secretary until the appointment in September 2023 of Mr Stephen Smyth as an interim part time CFO and Company Secretary. Stephen Smyth was designated Company Secretary on 28 July 2023 and appointed on Companies House on 16 September 2023. We have outsourced some other financial management accounting activities until the point where the Company is in a stronger financial position to allow more permanent solutions.

I would also like to mention all the staff, who at the beginning of the year were still working under Covid-19 restrictions, with many of our business development and financial teams continuing to work from home.  The Company is continuing to offer flexible hybrid working where possible within the employee retention strategy.

The Fusion team has worked well under difficult conditions with a strong collaborative team effort and disciplined commitment for which the board is very grateful.  The formation of the new Scientific Advisory Panel (the "SAP") was announced last year and is a making a positive input into the Companies scientific strategy.  During the year there was a change in the makeup of the group with Professor Terry Rabbitts stepping down and with Dr Ulf Grawunder attending SAP meetings.   I would like to thank Professor Rabbitts for his contribution and welcome Dr Grawunder, who is based in Basel and who has extensive experience in the development of antibody-based therapeutics. He co-founded a company specializing in the development of therapies for cancer patients and has experience in mammalian cell-based antibody display platforms. 

The appointment of these industry experts has already had an impact in our new AI/ML focus, with Professor Charlotte Deane, Professor of Structural Bioinformatics at the University of Oxford sharing her insights in the development and application of future machine learning algorithms in the field of antibody design.

Corporate governance

The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report of the annual report and accounts.

Post year end and outlook

As mentioned previously, the significant downturn in revenues generated a larger than anticipated operating loss for the FY23 and as this put a major strain of the cash levels, a new round of funding was commenced at the end of this FY and completed successfully in June 2023.  Unfortunately, the need for this fundraising materialised at a point when investor confidence, and confidence in Fusion were at a low-point, resulting in a significant discount in the price at which new monies could be raised. 

The subscription of new shares was through a placing, a Directors subscription and a retail offer and I would like to thank all the shareholders, both current and new, who supported us in this round, and in particular the Directors who subscribed for just over 8% of the shares.  A total of £1,671,938 (£1.5m net of expenses) was raised through the issue of 33,438,768 ordinary shares at 5p per share. 

In light of the macro-economic headwinds which the Company and its customers are facing, the Board identified  £1.6 million of annualized savings, which were implemented after the fund raise.  This cost saving includes a significant reduction in headcount across all levels of the Company, including the Company’s non-executive directors having agreed to forgo all  remuneration that they are entitled to and the Company’s executive directors having agreed to changes in their remuneration (which  include taking shares in place of some cash remuneration) to further conserve cash until such time that the Company’s trading has recovered to an appropriate level.  

The Directors believe that, notwithstanding these cost reductions, the Company will still be able to progress the launch of ITAS. Budgets have been maintained for sales and marketing and travel and, where possible, the Company will seek client contributions for further collaborative trials with a view to full commercialization of OptiMAL^® and the initial AI/ML-Ab^TM and OptiPhage^TM projects. As mentioned, in August 2023, we were pleased to announce that an agreement had been signed with a leading US-based AI/ML company and the first order received, from a customer based in Australia. This represents an important first step in delivering this strategy.

Whilst there remains a significant amount of uncertainty over the timing and implementation of future contract wins due to reduced investment in the broader biotech sector, we expect trading to recover incrementally over the short to medium term both in respect of existing services and the new services coming on stream.

Simon Douglas

Chairman

28 September 2023

CEO’s report and operations review

The Therapeutics industry’s need for antibodies has arguably never been higher, with significant breakthroughs such as the approval of lecanemab, donanemab and others for Alzheimer’s disease demonstrating the applicability of antibodies to treat central nervous system diseases and that a new set of therapeutic targets are now to be considered viable. Similarly, the diagnostics industry is enjoying an unprecedented level of awareness and familiarity, especially with antibody enabled lateral flow devices having been used extensively in the detection of Covid 19. However, largely due to macro-economic factors, FY2023 was also a challenging year for the associated services industry with investment into the biotech sector reducing significantly in the principal geographical regions as Covid related investment rebalanced. As we entered the financial year, the Company was inevitably exposed to these factors with a high proportion of our business directly linked to venture capital funded clients. Faced with uncertainty about their funding, many clients opted to place projects on hold and not to initiate new projects until the economic landscape had improved.

Transitioning to a model whereby we can derive more revenue from those clients still actively progressing their research programmes became increasingly important to the Company and I am pleased to say we have made significant progress with the launch of our Integrated Therapeutic Antibody Services (ITAS). This also positions the business to better exploit our emerging platforms for antibody discovery, or “Discovery Engines”, which we are developing from the OptiMAL^® research project. The initial objective for the research project was to create OptiMAL^®, a groundbreaking and industry leading platform for the discovery of human antibodies through a highly diverse library of DNA sequences expressed as fully intact antibodies, or IgG molecules, expressed on the surface of mammalian cells. We now have clear evidence that this has been achieved with cells stained to show the antibodies displayed on the cell surface.  With the antibody on the cell surface, a cell can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

This image shows individual cells at high magnification. The cells have been stained with a red stain that is specifically for the expressed human antibody created by the OptiMAL^® process.  The red stain is seen predominantly on the cellular surface showing that antibodies are being produced by the cell and on the cell surface.  Such cells can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

We are also in the process of spinning out two further discovery platforms from the same research program: AI/ML-Ab^TM and Optiphage^TM.  The Mammalian Display element of OptiMAL^® is being combined with algorithms for the de novo design of novel antibodies from various artificial intelligence (AI) and Machine Learning (ML) technologies (AI/ML-Ab^TM) which have very much come to the fore in the last year or two, whilst  Optiphage^TM utilizes a library based on the same sequences as OptiMAL^®, but modified for use in a more industry standard phage-display format. The availability of these diverse and complementary proprietary discovery engines, which can be deployed singly or in concert, also enables us to provide a de-risked approach to antibody discovery, further benefiting our clients and strengthening Fusion Antibodies’ position as the partner of choice.  In August 2023 we were pleased to announce that we had a signed agreement with a leading US-based AI/ML company.  It is envisaged that both parties will co-market the combined service offerings and as announced we have already received the first order. This purchase order demonstrates commercial traction for AI/ML-Ab^TM and we believe that there is significant market potential for this service offering.

At Fusion, our aim is to develop a range of services that gives our clients choice and a range of solutions best suited to the biological needs of their targets.  We understand that ‘one size’ does not fit all and aim to broaden our service menu to give the customer the best chance of meeting their technical objectives with the least risk.  This is already in place with our cell line development (CLD) and stabilization services, where we offer a number of cell lines. We offer our clients the choice of three separate cell lines, all in-licensed, which have different biological characteristics and financial price points. The final selection process is empirical, with the screening process involving the assessment of yield and stability which will vary from antibody to antibody. CLD is a service that is required towards the end of the development process and we intend to develop and introduce a similar choice at the beginning: at the discovery end of the development plan.

Due to the strong headwinds caused by the macro-economic conditions, the Company ended the year looking to secure additional investment which it successfully completed in June 2023, raising just under £1.7 million (before expenses).   Thanks to the continued support of our shareholders, we can move forward with re-establishing our presence in the market and maintaining investment in our new discovery services.  

Business Review

The Company’s revenue performance for the financial year to 31 March 2023 fell by 40% vs 2022 to £2.9m due to the macroeconomic headwinds. Despite the reduction in revenues, we have experienced continuing interest and uptake of our proprietary RAMP^TM technology service platform which represents a key driver of revenues for the business. Over the course of the year, Fusion has initiated and successfully completed a number of RAMP^TM client projects, which further affirms the valuable contribution of this service offering to both the Company and to our customers. The key geographical region of North America represented 50% of revenues and with a number of key client accounts. The Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, were also impacted by the global downturn in the sector, although client relationships are strengthening and opportunities are increasing. In addition to the ‘Fee for Service’ revenue model, and where there is a significant contribution to the client’s intellectual property, we look to enter into a collaborative agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable the Company to unlock the intrinsic value that our proprietary service platforms provide to our clients and generate additional shareholder value.

We continued to drive investment and innovation into the R&D pipeline of new service offerings. In the financial year, we made further progress on the development work of OptiMAL^® with successful proof of concept for the Mammalian Display element. This has already been harnessed to support the AI/ML-Ab^TM offering, which is itself attracting market attention, and is already generating new leads. I strongly believe that AI/ML-Ab^TM, Optiphage^TM and OptiMAL^® represent key differentiators and future drivers of growth for the business and will enable the Company to access a sizeable addressable market generating significant shareholder value.

We are pleased to report that the Company filed a patent application for a panel of antibodies that bind an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Our Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services has been particularly valuable in the development of the new platforms and it is anticipated that their continued guidance will further support the commercialisation of these valuable assets.

Inventory of consumables has been maintained at relatively high levels to allow for any supply chain disruption from the UK’s departure from the European Union and the disruption caused by the Coronavirus pandemic. In the year, 14% of the Company’s revenues arose from exports to the EU countries and we look to build on this, supported by Northern Ireland’s unique trading position with the EU and UK. We also continue to develop other export markets as our services find universal acclaim and to mitigate risks of overexposure to any one geographical market.

Financial Results

Full year revenues for the year in total were down by 40% to £2.9m (2022: £4.8m).

The EBITDA loss for the year was £2.5m (2022: £0.6m loss) (see note 26) and, excluding the R&D expenditure of £0.8m, EBITDA for the year was a loss of £1.5m. The loss before tax was £2.9m (2022: £1.3m loss).

The Company held current net assets of £0.8m at 31 March 2023 (2022: £3.1m) which mainly comprised inventories and trade and other receivables.

The Company ended the year with £0.2m of cash and cash equivalents, having used £1.7m of cash in operations during the year of which £0.8m was for R&D, invested £0.1m in property, plant and equipment and £0.1m servicing asset-based borrowings. As previously mentioned, in June 2023 the Company issued equity for net proceeds of c.£1.5m which puts it in a good position to continue its sales and marketing activities and the development of new discovery platforms and services.  

The current financial year commenced with similar conditions to those experienced in the latter part of FY 2023, with new business significantly lower than historic levels. In the past few months, the Company has enjoyed an uplift in business engagement from lead generation through to quote drafting and, pleasingly, purchase orders received. We've seen a strengthening of the pipeline of approximately three-fold since the end of 2023. As a result, revenues for FY2024 will be significantly weighted towards the second half of the year. The Board is optimistic that our new services, such as AI/ML-Ab, will contribute positively to future revenue growth.

Despite FY2023 being a commercially challenging year, I feel optimistic about the year ahead. Since the year end we have reduced our cost base significantly but kept a strong and broad technical base within the Company, raised finance and are in a good cash position and have some exciting and enviable discovery services in development.  I believe that the slowdown in the market is beginning to show a level of recovery, with our pipeline already showing growth, and that we are in a good position to return to growth on a stronger more stable foundation. 

Adrian Kinkaid

Chief Executive Officer

28 September 2023

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2023

Statement of Financial Position

As at 31 March 2023

Simon Douglas                                               Adrian Kinkaid

Director                                                            Director

Registered in Northern Ireland, number NI039740

Statement of Changes in Equity

For the year ended 31 March 2023

Statement of Cash Flows

For the year ended 31 March 2023

2019

Fusion Antibodies plc (AIM: FAB), a contract research organisation (“CRO”) providing discovery, design, and optimisation services for therapeutic antibodies to the global healthcare market, announces its final results for the year ended 31 March 2023. 

Commercial and operational highlights

• Full year revenues lower by 40% to £2.9m (2022: £4.8m)
• Loss for the year of £2.6m (2022: loss £1.2m)
• Investment in R&D £0.8m (2022: £0.7m)
• Introduction of Integrated Therapeutic Antibody Service
• Introduction of Mammalian Display service
• Appointment of Adrian Kinkaid as CEO in August 2022
• Cash position at the year-end £0.2m (2022: £2.0m)

Post period end highlights

• Share proceeds of £1.5m (net of costs)
• Appointment of Stephen Smyth as interim CFO in September 2023
• Memorandum of Understanding (“MoU”) signed with leading US based AI/ML business and the first purchase order received

Separately, the Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the Company's Annual General Meeting ("AGM") are being posted to shareholders shortly. A copy of the 2023 Annual Report and Accounts, the Notice of AGM and accompanying form of proxy will soon be available to download from the Company website here: https://www.fusionantibodies-ir.com/.

The AGM will be held on 27 October 2023 at 11.00 am at the Company’s offices at Springbank Industrial Estate, 1 Springbank Rd, Dunmurry, Belfast BT17 0QL.

Director change

Sonya Ferguson, Non-executive Director, will not be seeking re-election at the AGM, as she has decided to pursue another business opportunity. She will cease to be a Director of the Company at the close of the AGM.

Adrian Kinkaid, CEO of Fusion Antibodies commented: “This has been a challenging year for the Company and we have been through a number of changes over the last few months. We successfully raised funds in a very difficult market in May and implemented some additional cost saving measures to provide us with the necessary capital we needed to progress the business.

“More recently, we announced we had signed an agreement with a US based AI/ML business to support our antibody discovery service, AI/ML-Ab^TM and subsequently received our first order under the framework of this agreement. We are continuing to work on other aspects of the OptiMAL® programme, and in particular the development of the fully human antibody library which we remain confident in.

“On a separate note, the Board would like to offer our sincere thanks to Sonya Ferguson for her service to the Company as a Non-executive Director. She has been with the Company since 2016, prior to our admission to trading on AIM.  We wish her well on her future endeavours. As a Company, we are looking forward to better times ahead, reaching profitability and delivering value to our shareholders.”

Investor briefing

Fusion will host an online live presentation open to all investors on Wednesday, 4 October 2023 at 11am BST, delivered by Dr Adrian Kinkaid, CEO and Stephen Smyth, CFO. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading.

The presentation will be hosted through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor

For those investors who have already registered and added to meet the Company, they will automatically be invited. Questions can be submitted pre-event via your IMC dashboard or in real time during the presentation, via the "Ask a Question" function. Whilst the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market through regulatory notifications. A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.

Enquiries:

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 ^TM 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 and expressed over 250 antibodies and successfully completed over 200 humanisation projects and has an international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

The Company was established in 2001 as a spin out from Queen's University Belfast. The Company's mission is to enable pharmaceutical and diagnostic companies to develop innovative products in a timely and cost-effective manner for the benefit of the global healthcare industry. Fusion Antibodies provides a broad range of services in antibody generation, development, production, characterisation and optimisation.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster, with the optimal drug candidate and ultimately speed up the drug development process. 

The global monoclonal antibody therapeutics market was valued at $186 billion in 2021 and is forecast to surpass $445 billion in 2028, an increase at a CAGR of 13.2 per cent. for the period 2022 to 2028. Approximately 150 monoclonal antibody therapies are approved and marketed globally as of June 2022 with the top four antibody drugs each having sales of more than $3 bn in 2021.  

Chairman’s Statement

This year has been a tough year for the Company and very commercially challenging.  The year has seen a downturn in market conditions and investment into our customers’ early-stage therapeutic pipelines Venture capital funding, typically the primary source of investment for early-stage biotech, has fallen to its lowest level since 2019.

The Biotechnology sector’s contribution to the global R&D pipeline has been growing in the last decade.  There are more biotech companies now than ever before, but consequently there is less investment to go around and this lack of growth capital for many biotech companies means they must be very cautious in their spending.  This has resulted in projects being delayed and reductions in head counts.  However, we believe that the reprioritization of pipelines and optimisation of development strategies will give Fusion more opportunities going forward as companies could look to outsource more of their projects to give them greater control of their fixed cost base.   We believe that Biotech companies generally are moving towards leveraging early engagement opportunities with full-service partners like Fusion to optimise the impact of external expertise across the development program, and to maximise their probability of success. 

With the biotechnology sector’s funding environment undergoing significant changes, creative solutions are required and Fusion has responded by introducing our new ITAS (Integrated Therapeutic Antibody Services) strategy which addresses this new market dynamic.  ITAS pulls together all our current solutions to provide a continuous service from target discovery to a final stable cell line ready for larger scale production and is consistent with Fusion’s established philosophy to “begin with the end in mind”. Furthermore, we are looking at ways that the antibody drug discovery timescale can be shortened, with the development of OptiMAL^®, our human antibody library and also through strategic alliances with AI/ML (artificial intelligence/machine learning) companies.

Business performance

The year showed a significant downturn in revenue from the previous year at £2.9m (2022: £4.8m) due to a combination of factors.  As mentioned, this is primarily due to weak market investment conditions for new drug discovery and development programs and the subsequent delays to a number of our contracts, both large and small, combined with the reduced drug development activity of some of our customers.   Notably, a small number of valuable projects have been suspended by clients due to delayed investment into those businesses. We are advised by our clients that we should expect these projects to recommence once their funding is secured, although the continued uncertainty of timescales to win and close out contracts and to recognise the revenues remains a challenge. 

This situation was further compounded by the several months without a CEO in place and the unusually high turnover in the commercial group this year, necessitating the recruitment and training of new staff which created some short-term loss of traction with our customer base.  The industry in general has seen significant movement in staff during and after the pandemic but more recently this situation has stabilised. It is worth noting that whilst the Company continues to retain an interest of longer-term future success milestone or royalty payments in many of our client projects, there were no such payments this year.

The Company has been carefully managing costs and in particular towards the later part of the year headcount has been reduced by 11% from an average of 54 to a headcount of 48 at the year end. To minimise the impact on capacity and capability to deliver customers’ projects, significant cross training of staff from different laboratories has been implemented.

The focus for our R&D has continued on the OptiMAL^® library project, with investment in R&D increasing by 29% over the same period in the previous year to £0.8m (2022: £0.7m).

The downturn in revenues generated an operating loss for the year of £2.6m (2022: loss £1.2m). Post year end, the Company successfully completed a £1.67m fundraise to provide additional working capital and we have now implemented circa. £1.6m in restructuring savings, including a further reduction in headcount from 48 at March 31 year end 2023 to 29. The Company had previously announced anticipated annualised cost savings of £2.2 million based on comparisons against the Company’s budgets and plans in place at that time. As the outrun for FY 2023 was lower than originally budgeted, the revised annualised cost savings identified now total £1.6m. The Board will continue to closely monitor the Company’s cost base and seek to identify additional cost savings that can be implemented without further impacting the operating capacity of the Company.

Development of New services

While trading conditions remain challenging, the Company continues to strive to be at the front of innovation and to provide new and cutting-edge services to the market.   We have implemented a new strategy and are introducing a new integrated approach in response to client needs and to ultimately increase revenues. We are re-aligning the Company’s service offering to best serve our clients who are seeking to outsource more of their work in therapeutic antibody drug discovery and positioning ourselves as more of a collaborative partner rather than just a fee-for-service relationship. Our Integrated Therapeutic Antibody Service (ITAS) integrates our current Discovery, Engineering and Supply services into one proposition which aims to enhance the client journey with the development of high performing antibodies to their targets. This approach has been trialled with an existing client with positive results and the Company’s aim is to build on this, while continuing to support our smaller clients who may wish to select individual services.

The antibody drug discovery industry is gradually moving away from the use of animals, something that as a Company we recognise and support.  Our R&D program to develop a cell-based mammalian display technology screening library, OptiMAL^®, for the direct identification of intact fully human antibodies against biomarkers and other targets of interest is progressing, with key stages of the process now developed, although further optimisation work is still required to deliver the full operational screening parameters.   We will continue to build a body of data with a view to establishing commercial relationships for further validation and the Directors remain optimistic about its likely reception by the market.

Since our last report, processes to transfect cells with unique sequences, express those sequences as antibodies and screen and select antibodies have been optimised. Work is ongoing to optimise the extraction of specific antibodies to build a body of data with a view to establishing commercial relationships for further validation. Already, the R&D investment is bearing fruit with two stages of the OptiMAL^® process adding value in that they enable us to further broaden the Company’s integrated service offering. The OptiMAL^® process includes a novel DNA library of antibody sequences at the front end and a Mammalian Display platform as the final step to enable the library antibodies to be expressed on the surface of mammalian cells as fully intact human IgG antibodies. We have commenced the development of two further discovery platforms utilising these two key OptiMAL^® steps.

The Mammalian Display platform is ideally suited to be used in conjunction with the output from artificial intelligence/machine learning (AI/ML) discovery platforms. These AI/ML platforms provide a method of designing panels of antibodies in-silico, with the AI/ML algorithms typically producing small libraries of sequences which are an excellent match with our Mammalian Display platform, which can transform these designs into real protein molecules for screening and final selection.  This is a potentially powerful combination to speed up the discovery process and the Company is actively engaging with leading AI/ML companies as potential partners to make these novel approaches available to our client base. In August 2023 we announced that the negotiations with a leading AI/ML company based in the USA have been finalised and the first order emanating from this collaboration to generate de-novo antibody sequences has been received. 

Furthermore as previously announced a Memorandum of Understanding (MoU) with another AI/ML company based in Europe has also been signed.  These collaborations are expected to provide for the development of partnerships that will enable the derivation and evaluation of AI generated antibodies and offer clients a new route to market using the AI/ML-Ab^TM service (pronounced AIM Lab), which will be complementary to our established discovery methods.

The novel DNA library of antibody sequences from OptiMAL^® will also be used as the input design for OptiPhage^TM, a phage display based version of the same DNA library. These DNA sequences are packaged into a more commonly used Phage display format where smaller antibody fragments can be screened, compared to whole antibodies via OptiMAL^®. We believe that the provision of OptiPhage^TM at a lower price point provides the Company with an ability to protect the premium pricing of the OptiMAL^® programme whilst meeting budgetary constraints of its customers. It may also be the platform of choice for those wanting antibody fragments as their end product.

As a Company, we are proud of our innovations and of our dedicated team of scientists who work on the next generation of antibody discovery technologies and we will continue to protect novel ideas through the filing of patents.  This year saw the filing of two new patents. The first one is in respect of the Company’s antigen display technology, which should increase the success rate in identifying highly potent antibodies from Fusion’s range of Antibody Discovery technologies, although it does have a wider potential application. The second is for a panel of antibodies that bind to an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by early pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Board and Employees

I was very pleased to announce the arrival of our new CEO, Dr Adrian Kinkaid, in August last year. Adrian brings a depth of experience in the life science and biotherapeutics industries and has expertise in the development and commercialisation of all the main classes of affinity reagents with over twenty-five years’ experience working in the bioscience sector. Adrian’s previous experience has included senior management positions in drug discovery, reagent technology and diagnostics and joins at a time where his strong leadership and vision will be key in the Company’s turnaround strategy. 

One further change to the Board during the financial year was Mr Tim Watts, who stepped down as a Non-Executive Director in September 2022.  Tim joined the Company at the time of the IPO in December 2017, was the Chair of the Company’s Audit Committee and has made a valuable contribution to the Company, particularly from his knowledge and experience of public companies.  On behalf of the Board, I would like to thank him for all that he had done for the Company and wish him well in his retirement.

Post the end of the year we announced that Mr James Fair, our Chief Financial Officer, was stepping down from the Board effective 31 May 2023. The Board would like to thank James for his significant contribution to the Company over the past 14 years and wish him well in his future endeavours. We are grateful to Ms Frances Johnston who stepped in as the Company Secretary until the appointment in September 2023 of Mr Stephen Smyth as an interim part time CFO and Company Secretary. Stephen Smyth was designated Company Secretary on 28 July 2023 and appointed on Companies House on 16 September 2023. We have outsourced some other financial management accounting activities until the point where the Company is in a stronger financial position to allow more permanent solutions.

I would also like to mention all the staff, who at the beginning of the year were still working under Covid-19 restrictions, with many of our business development and financial teams continuing to work from home.  The Company is continuing to offer flexible hybrid working where possible within the employee retention strategy.

The Fusion team has worked well under difficult conditions with a strong collaborative team effort and disciplined commitment for which the board is very grateful.  The formation of the new Scientific Advisory Panel (the "SAP") was announced last year and is a making a positive input into the Companies scientific strategy.  During the year there was a change in the makeup of the group with Professor Terry Rabbitts stepping down and with Dr Ulf Grawunder attending SAP meetings.   I would like to thank Professor Rabbitts for his contribution and welcome Dr Grawunder, who is based in Basel and who has extensive experience in the development of antibody-based therapeutics. He co-founded a company specializing in the development of therapies for cancer patients and has experience in mammalian cell-based antibody display platforms. 

The appointment of these industry experts has already had an impact in our new AI/ML focus, with Professor Charlotte Deane, Professor of Structural Bioinformatics at the University of Oxford sharing her insights in the development and application of future machine learning algorithms in the field of antibody design.

Corporate governance

The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report of the annual report and accounts.

Post year end and outlook

As mentioned previously, the significant downturn in revenues generated a larger than anticipated operating loss for the FY23 and as this put a major strain of the cash levels, a new round of funding was commenced at the end of this FY and completed successfully in June 2023.  Unfortunately, the need for this fundraising materialised at a point when investor confidence, and confidence in Fusion were at a low-point, resulting in a significant discount in the price at which new monies could be raised. 

The subscription of new shares was through a placing, a Directors subscription and a retail offer and I would like to thank all the shareholders, both current and new, who supported us in this round, and in particular the Directors who subscribed for just over 8% of the shares.  A total of £1,671,938 (£1.5m net of expenses) was raised through the issue of 33,438,768 ordinary shares at 5p per share. 

In light of the macro-economic headwinds which the Company and its customers are facing, the Board identified  £1.6 million of annualized savings, which were implemented after the fund raise.  This cost saving includes a significant reduction in headcount across all levels of the Company, including the Company’s non-executive directors having agreed to forgo all  remuneration that they are entitled to and the Company’s executive directors having agreed to changes in their remuneration (which  include taking shares in place of some cash remuneration) to further conserve cash until such time that the Company’s trading has recovered to an appropriate level.  

The Directors believe that, notwithstanding these cost reductions, the Company will still be able to progress the launch of ITAS. Budgets have been maintained for sales and marketing and travel and, where possible, the Company will seek client contributions for further collaborative trials with a view to full commercialization of OptiMAL^® and the initial AI/ML-Ab^TM and OptiPhage^TM projects. As mentioned, in August 2023, we were pleased to announce that an agreement had been signed with a leading US-based AI/ML company and the first order received, from a customer based in Australia. This represents an important first step in delivering this strategy.

Whilst there remains a significant amount of uncertainty over the timing and implementation of future contract wins due to reduced investment in the broader biotech sector, we expect trading to recover incrementally over the short to medium term both in respect of existing services and the new services coming on stream.

Simon Douglas

Chairman

28 September 2023

CEO’s report and operations review

The Therapeutics industry’s need for antibodies has arguably never been higher, with significant breakthroughs such as the approval of lecanemab, donanemab and others for Alzheimer’s disease demonstrating the applicability of antibodies to treat central nervous system diseases and that a new set of therapeutic targets are now to be considered viable. Similarly, the diagnostics industry is enjoying an unprecedented level of awareness and familiarity, especially with antibody enabled lateral flow devices having been used extensively in the detection of Covid 19. However, largely due to macro-economic factors, FY2023 was also a challenging year for the associated services industry with investment into the biotech sector reducing significantly in the principal geographical regions as Covid related investment rebalanced. As we entered the financial year, the Company was inevitably exposed to these factors with a high proportion of our business directly linked to venture capital funded clients. Faced with uncertainty about their funding, many clients opted to place projects on hold and not to initiate new projects until the economic landscape had improved.

Transitioning to a model whereby we can derive more revenue from those clients still actively progressing their research programmes became increasingly important to the Company and I am pleased to say we have made significant progress with the launch of our Integrated Therapeutic Antibody Services (ITAS). This also positions the business to better exploit our emerging platforms for antibody discovery, or “Discovery Engines”, which we are developing from the OptiMAL^® research project. The initial objective for the research project was to create OptiMAL^®, a groundbreaking and industry leading platform for the discovery of human antibodies through a highly diverse library of DNA sequences expressed as fully intact antibodies, or IgG molecules, expressed on the surface of mammalian cells. We now have clear evidence that this has been achieved with cells stained to show the antibodies displayed on the cell surface.  With the antibody on the cell surface, a cell can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

This image shows individual cells at high magnification. The cells have been stained with a red stain that is specifically for the expressed human antibody created by the OptiMAL^® process.  The red stain is seen predominantly on the cellular surface showing that antibodies are being produced by the cell and on the cell surface.  Such cells can be individually selected and manipulated to produce larger quantities of the antibody of interest and it is this last stage that requires further optimisation.

We are also in the process of spinning out two further discovery platforms from the same research program: AI/ML-Ab^TM and Optiphage^TM.  The Mammalian Display element of OptiMAL^® is being combined with algorithms for the de novo design of novel antibodies from various artificial intelligence (AI) and Machine Learning (ML) technologies (AI/ML-Ab^TM) which have very much come to the fore in the last year or two, whilst  Optiphage^TM utilizes a library based on the same sequences as OptiMAL^®, but modified for use in a more industry standard phage-display format. The availability of these diverse and complementary proprietary discovery engines, which can be deployed singly or in concert, also enables us to provide a de-risked approach to antibody discovery, further benefiting our clients and strengthening Fusion Antibodies’ position as the partner of choice.  In August 2023 we were pleased to announce that we had a signed agreement with a leading US-based AI/ML company.  It is envisaged that both parties will co-market the combined service offerings and as announced we have already received the first order. This purchase order demonstrates commercial traction for AI/ML-Ab^TM and we believe that there is significant market potential for this service offering.

At Fusion, our aim is to develop a range of services that gives our clients choice and a range of solutions best suited to the biological needs of their targets.  We understand that ‘one size’ does not fit all and aim to broaden our service menu to give the customer the best chance of meeting their technical objectives with the least risk.  This is already in place with our cell line development (CLD) and stabilization services, where we offer a number of cell lines. We offer our clients the choice of three separate cell lines, all in-licensed, which have different biological characteristics and financial price points. The final selection process is empirical, with the screening process involving the assessment of yield and stability which will vary from antibody to antibody. CLD is a service that is required towards the end of the development process and we intend to develop and introduce a similar choice at the beginning: at the discovery end of the development plan.

Due to the strong headwinds caused by the macro-economic conditions, the Company ended the year looking to secure additional investment which it successfully completed in June 2023, raising just under £1.7 million (before expenses).   Thanks to the continued support of our shareholders, we can move forward with re-establishing our presence in the market and maintaining investment in our new discovery services.  

Business Review

The Company’s revenue performance for the financial year to 31 March 2023 fell by 40% vs 2022 to £2.9m due to the macroeconomic headwinds. Despite the reduction in revenues, we have experienced continuing interest and uptake of our proprietary RAMP^TM technology service platform which represents a key driver of revenues for the business. Over the course of the year, Fusion has initiated and successfully completed a number of RAMP^TM client projects, which further affirms the valuable contribution of this service offering to both the Company and to our customers. The key geographical region of North America represented 50% of revenues and with a number of key client accounts. The Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, were also impacted by the global downturn in the sector, although client relationships are strengthening and opportunities are increasing. In addition to the ‘Fee for Service’ revenue model, and where there is a significant contribution to the client’s intellectual property, we look to enter into a collaborative agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable the Company to unlock the intrinsic value that our proprietary service platforms provide to our clients and generate additional shareholder value.

We continued to drive investment and innovation into the R&D pipeline of new service offerings. In the financial year, we made further progress on the development work of OptiMAL^® with successful proof of concept for the Mammalian Display element. This has already been harnessed to support the AI/ML-Ab^TM offering, which is itself attracting market attention, and is already generating new leads. I strongly believe that AI/ML-Ab^TM, Optiphage^TM and OptiMAL^® represent key differentiators and future drivers of growth for the business and will enable the Company to access a sizeable addressable market generating significant shareholder value.

We are pleased to report that the Company filed a patent application for a panel of antibodies that bind an important target for cancer therapeutics. These antibodies have the potential to inhibit the pro-tumourigenic activity of their target in cancer, which is supported by pre-clinical data. The Company is exploring options to out-licence these antibodies to a clinical development company to progress them into Phase I clinical trials.

Our Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services has been particularly valuable in the development of the new platforms and it is anticipated that their continued guidance will further support the commercialisation of these valuable assets.

Inventory of consumables has been maintained at relatively high levels to allow for any supply chain disruption from the UK’s departure from the European Union and the disruption caused by the Coronavirus pandemic. In the year, 14% of the Company’s revenues arose from exports to the EU countries and we look to build on this, supported by Northern Ireland’s unique trading position with the EU and UK. We also continue to develop other export markets as our services find universal acclaim and to mitigate risks of overexposure to any one geographical market.

Financial Results

Full year revenues for the year in total were down by 40% to £2.9m (2022: £4.8m).

The EBITDA loss for the year was £2.5m (2022: £0.6m loss) (see note 26) and, excluding the R&D expenditure of £0.8m, EBITDA for the year was a loss of £1.5m. The loss before tax was £2.9m (2022: £1.3m loss).

The Company held current net assets of £0.8m at 31 March 2023 (2022: £3.1m) which mainly comprised inventories and trade and other receivables.

The Company ended the year with £0.2m of cash and cash equivalents, having used £1.7m of cash in operations during the year of which £0.8m was for R&D, invested £0.1m in property, plant and equipment and £0.1m servicing asset-based borrowings. As previously mentioned, in June 2023 the Company issued equity for net proceeds of c.£1.5m which puts it in a good position to continue its sales and marketing activities and the development of new discovery platforms and services.  

The current financial year commenced with similar conditions to those experienced in the latter part of FY 2023, with new business significantly lower than historic levels. In the past few months, the Company has enjoyed an uplift in business engagement from lead generation through to quote drafting and, pleasingly, purchase orders received. We've seen a strengthening of the pipeline of approximately three-fold since the end of 2023. As a result, revenues for FY2024 will be significantly weighted towards the second half of the year. The Board is optimistic that our new services, such as AI/ML-Ab, will contribute positively to future revenue growth.

Despite FY2023 being a commercially challenging year, I feel optimistic about the year ahead. Since the year end we have reduced our cost base significantly but kept a strong and broad technical base within the Company, raised finance and are in a good cash position and have some exciting and enviable discovery services in development.  I believe that the slowdown in the market is beginning to show a level of recovery, with our pipeline already showing growth, and that we are in a good position to return to growth on a stronger more stable foundation. 

Adrian Kinkaid

Chief Executive Officer

28 September 2023

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2023

Statement of Financial Position

As at 31 March 2023

Simon Douglas                                               Adrian Kinkaid

Director                                                            Director

Registered in Northern Ireland, number NI039740

Statement of Changes in Equity

For the year ended 31 March 2023

Statement of Cash Flows

For the year ended 31 March 2023