Last checked at 11 Mar 2009 07:04
http://www.rns-pdf.londonstockexchange.com/rns/6652O_1-2009-3-11.pdf
Epistem Holdings Plc
11 March 2009
Epistem Plc (LSE: EHP), the rapidly growing UK biotechnology company with adult epithelial stem cell expertise in oncology, gastrointestinal and dermatological diseases, announced today its interim results for the six month period ended 31 December 2008.
During the period the Group made significant progress on a number of key fronts:
Highlights:
Year on year revenue growth of 31%
Acceleration of the Novel Therapy lead (drug) development programme
Launch of new Biomarker division and encouraging revenue growth
Firm demand for Contract Research Services in difficult market conditions
Strengthening business model with significantly reduced risk profile
Forecasting to move into profitability post the Novartis collaboration and strengthen cash reserves
Since the end of the period the Group has also announced a research and development collaboration with Novartis to identify new drug targets and therapeutics across a variety of disease areas. Novartis will pay Epistem an upfront cash payment of US$4.0m and will also provide research funding for 2 years.
Commenting on the Interim results, Matthew Walls, CEO of Epistem said: "Following a successful first half of this financial year, the Board of Epistem remains convinced that the Group is well placed to deliver increased shareholder value in the medium term based on its current performance and the increased value opportunities now emerging".
For further details, please contact:
Epistem Plc
Matthew Walls CEO +44 (0) 161 606 7258
John Rylands CFO
Piper Jaffray Ltd.
Neil Mackison / James Steel +44 (0) 0203 142 8700
Corporate Broking: Jamie Adams
Mike Wort / Anna Dunphy +44 (0) 207 861 3838
De Facto Communications
Chairman and Chief Executive Officer Statement
Epistem's business model continues to strengthen across each of our divisions as we begin to differentiate ourselves within the biotech sector by delivering improved trading revenues, a move towards profitability and a strengthening commercial outlook. With the recent announcement of our collaboration with Novartis, the potential of our Novel Therapies division and continuing progress in our other divisions, the Board believes that the Company offers a lower risk biotechnology business model with significant upside potential.
This Half Year report covers the six month period from the 1 July 2008 to 31 December 2008.
Please note that the first half reported results do not include any financial figures in relation to the recently announced Novartis collaboration.
Overview
The reported 2008/09 half year results maintained an important period of growth for Epistem set against an increasingly volatile external market.
Results for the first six months saw Company revenues increase by 31% to £1.4m (£1.1m: 2007/08), primarily from our 'fee for service' Contract Research Services and Biomarker divisions. The revenue increase was largely supported by growth in the newly formed Biomarker division which recorded significant revenues in its first period of reporting.
Contract Research Services showed marginal revenue growth over the first half at £1.1m (£1.0m: 2007/08). Market sentiment was dampened by the difficult economic picture and this was reflected in caution around new business opportunities. Despite this, the Contract Research Services quality of business and sales order book remain firm.
The newly formed Biomarker division saw accelerated technical and commercial developments with revenues lifting significantly to £0.3m (£nil: 2007/08) over the period underpinned by contracts with select big pharmaceutical groups. Our biomarker scientific and technical advances were also presented as abstracts at the American Society of Clinical Oncology (ASCO) and American Association for Cancer Research (AACR) meetings.
Our Novel Therapies division progressed at pace with the continued development of our therapeutic targets and leads and the announcement earlier this month of our research and development collaboration with Novartis. The collaboration has validated our discovery approach and will allow us to integrate our discovery platform and preclinical models with a world class partner to discover new targets and accelerate our lead development and represents a major step in the development of the Company.
Despite wider market conditions, the strength of our business model has been recognised by investors with the share price well over double its AIM admission price from April 2007.
Cash reserves at 31 December 2008 remain healthy at £1.2m (£2.1m: 30 June 2008), which excludes the recently announced US$4.0m upfront cash payment receivable from Novartis, with the prospect of improving revenues and a move into profitability following the announcement of the Novartis collaboration.
Financial Review
Sales revenues from business operations for the first six months of this financial year were £1.4m (£1.1m: 2007/08), a year on year increase of £0.3m. Revenue growth was driven by increased demand for our 'fee for service' businesses, primarily in relation to our new Biomarker services. Demand for our plucked hair biomarker rose sharply over the first half to £0.3m. Contract Research Services recorded only marginally increased revenues over the period.
Novel Therapies development costs for the first half remained consistent with last year, with manpower costs forecast to increase in the second half to meet the onset of the Novartis collaboration. The ongoing cost of the Novel Therapies collaboration will though be fully funded by Novartis. Other operational cost increases over the period were largely in relation to the commissioning of the new Biomarker division with other costs under tight control.
The loss for the period was £0.5m (£0.4m: 2007/08) which was broadly in line with last year, but depressed by the Biomarker start up costs and initial low level sales. We are well placed to see our Biomarker business move into profitability over the second half with continued revenue growth.
The corresponding loss per share figure for the Interim period was (7p) against (6p) for the previous year.
Despite the wider economic conditions the Directors consider that the Group's cash reserves, bolstered by the Novartis collaboration up-front cash payment, places the business in a strong position, which along with our growth prospects will allow the Company to take advantage of acquisition opportunities which may present themselves in such market conditions.
Operational Review
Contract Research Services experienced steady growth over the first half with oncology services including cancer stem cells and angiogenesis receiving the strongest interest. Revenues in support of the US National Institutes of Health (NIH) showed increases from a widening in the scope of work undertaken. The early signs are that the recent change in US administration appears to have strengthened support for the likely extension of the NIH biodefence programme.
Following the commercial launch of the new hair Biomarker division at the beginning of this financial year, business opportunities have accelerated over the first half with contracts now underway with a select group of top tier pharmaceutical companies. Business contracts cover both preclinical and clinical biomarker studies with companies using the technology to better understand the drug-induced molecular expression change in treated subjects as a PD/PK (Pharmacodynamic/Pharmacokinetic) biomarker. Whilst still in the early stages of technical and commercial development, successful clinical results are expected to further accelerate its growth as a personalised biomarker of drug effect.
The recent announcement of our Novel Therapies collaboration with Novartis will identify new drug targets across a variety of disease areas. The collaboration combines Epistem's stem cell expertise and drug discovery programme, designed to identify the body's own key regulators of epithelial stem cells, with Novartis's insights into disease pathways & bioinformatics and drug development. The collaboration will select the best targets within these pathways for the development of new drug candidates. In addition, Epistem's preclinical models will be used to test efficacy and identify the role and mechanism of action of Novartis compounds.
Strategy
The Board believes that the next phase of Epistem's growth will see the Company transition into a profitable and cash generative company. In addition we will consider complementary acquisitions of technology and business opportunities in order to continue to deliver attractive growth. The Board believes that Epistem's business model, recently strengthened by the Novartis collaboration, differentiates Epistem within the biotech sector as a lower risk investment proposition with significant growth potential.
Outlook
We anticipate continued growth and increasing revenues over the second half of the current year across each of our operating divisions. This growth will include a mix of accelerated revenue growth in Biomarkers and more modest growth across our Contract Research Services. Our Novel Therapies collaboration will see the advancement in development of our lead targets and therapeutics with Novartis in order to accelerate our identification of the key stem cell regulators. The revenue growth forecast in the second half of the current year is expected to move the Company towards profitability.
With an upbeat outlook, we will also look to build on our platform strength by acquiring complementary technologies and groups as opportunities arise.
The Company is committed to maintaining its policy of employee share ownership and we will be introducing an employee share investment plan to encourage share ownership of the Company.
We believe that our heritage in stem cells, growing international status and expertise will enable us to exploit the rapidly growing stem cell and regenerative medicine industry.
The Board of Epistem remains convinced that the Group is well placed to deliver increased shareholder value in the medium term based on its current performance and the increased value opportunities now emerging.
David Evans Matthew Walls
Chairman Chief Executive Officer
11 March 2009