Netscientific Regulatory News (NSCI)

NetScientific plc

("NetScientific" or the "Group")

ProAxsis Update

Following transformative year ProAxsis focuses on delivering revenues and profitability

London, UK - 24 May 2021 - NetScientific plc (AIM: NSCI), the international life sciences and sustainability technology investment and commercialisation Group, announces that David Ribeiro, Chief Executive Officer of NetScientific's wholly owned subsidiary ProAxsis Limited ("ProAxsis" or the Company") has provided an update on its operations, performance and strategy following the release of the Company's accounts to the year ended 31 December 2020 (the "Period").

As a growing health and life sciences company with a primary focus on respiratory diagnostics ProAxsis' ongoing emphasis is on creating value inflection points, as well as delivering significant future revenue and profitability. Whilst COVD-19 impacted sales and research during the Period, the Company was able to establish strong foundations for growth.

Highlights from the ProAxsis announcement include:

· Transformative year with the Company making significant corporate advancements with accelerated investments in its planned growth programmes

· Board restructuring to focus on the commercial development of the Company

· ProAxsis is now benefiting from more effective financial and commercial management, targeted investment and upgrades, a drive for commercialisation and a progressive systematic expansion

· The Company was awarded 5 separate grants within the 12-month period, with a total project value of over £1 million

· The Company expects to commercialise five novel/improved products over the coming year

o Forecast to contribute significant incremental sales

o Expected to drive substantial increases in revenue derived from clinical services offering

John Clarkson, Chairman of NetScientific and ProAxsis, commented: "In what has been a challenging year for ProAxsis, positive management actions have helped transform the Company's outlook. ProAxsis is now well positioned to pursue numerous opportunities and generate further revenues, profitability and value realisations.

"I would like to thank David and the team for their hard work and commitment to deliver the excellent progress shown over the past year. I look forward to building on the momentum made to fulfil the Company's exciting future potential."

NetScientific holds 95% of ProAxsis on a fully diluted basis.

The full text of the announcement from ProAxsis can be found below.

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Introduction

In parallel with the release of the company's 2020 financial statements, I am pleased to provide an associated update on the positive transformation achieved by the company in the previous 12-month period.

ProAxsis is a growing Health and Life Sciences company with a primary focus on respiratory diagnostics. Since being founded in 2013, as a spin-out of Queens University Belfast, ProAxsis has successfully progressed to commercial sales, established a state-of-the-art laboratory facility in the Titanic Quarter of Belfast, and built a growing customer base of pharmaceutical company and academic research laboratories. The company has had a transformative year and made significant corporate advancements in 2020 with accelerated investments in its planned growth programmes.

Ownership, IP & Governance

2020 saw a restructuring of ownership and streamlining of governance. ProAxsis' parent company NetScientific plc previously owned c. 56% of ProAxsis, yet had provided virtually all of the funding required by the company to date. This was an untenable situation, and a serious inhibitor to the company's progress and growth. Accordingly, in October 2020, NetScientific reached an agreement to acquire all outstanding shares from the academic founders and Queen's University, Belfast. The agreement also included the acquisition of the licensed IP associated with the company's core technology. The company was keen to maintain continuity of the established link with Queen's University and was therefore delighted that the University's Head of Spin-Outs and Investments, David Moore, agreed to continue with the Non-Executive Director role, which he has held since 2016.

Furthermore, the board has been restructured for the more commercially focused development of the company. In December 2020, John Clarkson was appointed Chairman of ProAxsis, after working with the company on the new strategy and growth action plans. John is the Chairman of Netscientific plc and a committed business professional, who brings many years of experience in commercial leadership and development roles. Professor Stephen Smith, who has held very senior roles in the NHS and academia, with excellent international and business experience, will continue to provide scientific and clinical input as a Non-Executive Director.

ProAxsis is now a fully-owned subsidiary of NetScientific, with the core ProteaseTag® technology patents now fully assigned to ProAxsis. The consolidated control has enabled fundamental change in the business, with more effective financial and commercial management, timely decisions, targeted investment and upgrades, a drive for commercialisation and a progressive systematic expansion.

Vast Market Potential and Need

The fresh approach comes at a time of growing global focus on diagnostics and monitoring tools for respiratory diseases, now also including the COVID-19 virus. ProAxsis uses its proprietary ProteaseTag® technology to develop laboratory-based assays and rapid point-of-care tests for the measurement of active protease biomarkers associated with chronic respiratory diseases; such as Chronic Obstructive Pulmonary Disease (COPD), cystic fibrosis and bronchiectasis. These respiratory diseases are leading causes of death and disability globally:

· The global respiratory care devices market was valued at $13 billion in 2015 and is poised to reach $21 billion by 2022.

· Respiratory disease affects c. 20% of the global population.

· Prevalence of COPD is estimated at between 15 and 27 million people in the US alone.

· In 2013, the total annual cost of care and productivity losses for COPD equated to €48 billion in the European Union.

· The yearly economic burden of COPD on the UK's National Health Service is approximately £2 billion.

At the start of 2020, the company underwent a substantial review of the opportunities available to address this vast market potential, with its core expertise in the measurement of active proteases, and building on the UK's position as a global leader in respiratory medicine. As a result, a number of attractive projects were identified, and assessed through a robust evaluation process. This determined the particular targets, and highlighted their potential to create value inflection points for the company, as well as deliver significant future revenue and profitability. Following this, 8 key projects were deemed to have the potential to provide significant future benefits. The company committed its own funding to initiate these projects, enhanced by other non-dilutive grant funding where available.

2020 Accounts

The company has just released its annual accounts for 2020. The company assessed the negative impact of the coronavirus pandemic on the research market and put an immediate plan in place for increased emphasis on grant submissions to expedite commercial development projects, and cash preservation. During 2020, the company experienced expected delays in sales due to the pandemic, in particular delaying clinical trials research into chronic respiratory diseases and therefore postponing revenues from our existing pipeline and relationships.

However, the downturn in sales revenue has been balanced by the significantly increased grant submission activity and successes. The company was awarded 5 separate grants within the 12-month period, with a total project value of over £1 million. These grant-supported projects are summarised in the table below, which enabled:

· An accelerated R&D programme

· An enhancement to the existing product portfolio

· Development of new revenue streams, including as part of the global response to the COVID-19 pandemic

· A strong underlying financial position

As can be seen in the summary table above, as a direct result of these projects, the company expects to commercialise five novel/improved products over the coming year. These are forecast to contribute significant incremental sales. The company also expects the availability of these new products to drive substantial increases in revenue derived from our clinical services offering over the same period.

Several projects have progressed from research to the commercial development of products for sale, hence these development costs have been capitalised in accordance with the existing accounting policy. 

Growth Strategy

The company's transformative strategy is to accelerate the increase revenues, profitability and capital growth through the following:

1. Expanding usage of existing products with current customer base by

a. Increasing the customer-focused team to support enhanced customer service and sales (new members joining the company in Q2 2021).

b. A planned and structured extension of sales and marketing activities for the existing portfolio and clinical services offering.

2. Expansion of market opportunities globally via

a. Improved access to global markets through international distributorships. For instance, the company appointed Diapharma Inc. as its exclusive North American distributor in Q4 2020.

b. Targeting further expansion of its clinical services offering via a potential laboratory and direct service offering in North America.

c. Exploring the possibility of facilitating American companies' entry into the UK and Europe (in the first instance targeting other NetScientific portfolio companies).

3. Expansion of the company's product portfolio through both in-house R&D and an active in-licensing programme for diagnostics developed by Third Parties.

a. In February 2021, the company announced an agreement with a leading Swiss university enabling ProAxsis to obtain the global commercialisation rights of a highly novel protease-related immunoassay for use in the monitoring of Bone Health.

b. A second in-licensing agreement is being targeted for completion by the end of Q2 2021.

To deliver this planned growth the company is continuing to develop the necessary infrastructure, with new management systems, lab facilities and equipment, utilising capital investments and non-dilutive grant opportunities where available, including: 

o Additional new lab equipment for more cost-effective production

o New lab systems and project management to further enhance service and meet projected demand

o Significantly extending lab, manufacturing and associated space in Belfast

o Expanding its team to support increased activities

Impact of COVID-19 and Future Outlook

The pre-planning and strong decisions taken upfront, mitigated the impact of the COVID-19 global pandemic. The company re-focused its activities on specific high-potential projects including devoting some of its extensive expertise to the global response to the pandemic itself. The business has been able to develop new initiatives, which will provide expansion of the product portfolio and clinical services offering of ProAxsis in the near-term, together with a range of additional revenue streams and increased value for the future. These may be further boosted by new opportunities arising from the COVID-19 follow-up.

The reality of 2020 and early 2021 has been a deferment of sales due to delays in our clients' clinical trials. However, there are now encouraging signs of a revitalisation of these revenue streams in 2021. The expectation is not only for a return to the pre-pandemic upward trajectory, but also rapid revenue growth in the near term, increased sales derived from both expanded use of the core product lines, and the onboarding of new internal and external sources revenue.

David Ribeiro CEO

John Clarkson, Chairman, was delighted that the new strategy and positive management actions had transformed the company over the past year. He thanked David and the team for all their hard work and commitment to deliver the agreed plans. He noted that the company is now in excellent shape and well placed to continue this excellent progress; and that we are looking forward to ProAxsis fulfilling this exciting future potential.

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

For more information, please contact:

About NetScientific

NetScientific plc (AIM: NSCI) is a holding company, that invests in, develops, commercialises and realises shareholder value in life sciences/healthcare, sustainability and technology companies, which offer significant growth potential predominately in the UK and USA, as well as globally. 

With the acquisition of EMV Capital in August 2020, the Group doubled its portfolio from 8 to 17 companies, either through direct subsidiary, balance sheet investment or capital under advisory, varying from start-up private companies to publicly listed equities. 

NetScientific delivers shareholder returns through a proactive and hands-on management approach to their portfolio companies; identifying, investing in, and helping to build game-changing companies. The Group targets value inflection points and the release of value through partial or full exits from trade sales, public listings, or equity sales. The Company has a strong transatlantic and growing international presence, providing attractive expansion prospects. 

NSCI can deploy a capital-light investment structure; utilising the power of the PLC Brand, and the NetScientific balance sheet to anchor future investments and achieve a multiplier effect by attracting 3rd party investment for the portfolio companies. 

NetScientific is headquartered in London, United Kingdom, and was admitted to trading on AIM, a market operated by the London Stock Exchange, in 2013 (website: www.netscientific.net).