Provexis Regulatory News (PXS)

31 December 2019

Provexis plc

UNAUDITED INTERIM RESULTS FOR SIX MONTHS TO 30 SEPTEMBER 2019

AND TOTAL VOTING RIGHTS

Provexis plc ("Provexis" or the "Company"), the business that develops, licenses and sells the proprietary, scientifically-proven Fruitflow® heart-health functional food ingredient, announces its unaudited interim results for the six months ended 30 September 2019.

Highlights

·; Total revenue for the period of £222k, 15% ahead of the prior year (2018: £194k) and an all-time high number in the first half of the year for the Fruitflow business.

·; Planned launch by By-Health, a £3bn listed Chinese dietary supplement business, of a number of Fruitflow based products in the Chinese market is progressing well. Potential sales volumes remain at a significant multiple of existing Fruitflow sales.

·; By-Health has made a significant investment in nine separate studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. Studies conducted in China are needed to obtain 'blue cap' health claim status for dietary supplements, as required by the Chinese State Administration for Market Regulation (SAMR).

·; The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By-Health in its regulatory submissions for Fruitflow. If a successful blue cap health claim is achieved it would be expected to result in some significant orders for Fruitflow, potentially at a multiple of Fruitflow's existing annual sales.

·; Open-ended collaboration agreement secured with By-Health in August 2019, with project work to be managed and conducted by Provexis primarily in the UK; initial project agreed which will concentrate on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health in China. The agreement further strengthens the close relationship between By-Health and Provexis.

·; The Company and its commercial partner DSM have seen an encouraging and sustained increase in brand awareness and customer interest in Fruitflow in recent years, with the total projected annual sales value of the prospective sales pipeline for Fruitflow standing at a substantial multiple of existing annual sales. Total revenue from the DSM Alliance for the period was £162k, 35% ahead of the prior year (2018: £120k) and an all-time high number in the first half of the year for the Fruitflow DSM Alliance business.

·; Total sales of the Company's Fruitflow+ Omega-3 dietary supplement business grew by 28% in the half year to £60k (2018: £47k) across Holland & Barrett, the Company's website www.fruitflowplus.com and Amazon UK. Subscriber numbers on the www.fruitflowplus.com website have been growing steadily, and currently stand at an all-time high level. Further UK and international sales channel opportunities are currently being progressed.

·; Underlying operating loss* reduced to £126k, 18% lower than the prior year (2018: £154k) and a record low for the Group in the first half of the year.

·; Cash £173k at 30 September 2019 (2018: £556k). The Company raised £301k from a placing in December 2019 with new and existing investors at 0.40p per new ordinary share.

*before share based payments of £39k (2018: £75k), as set out on the face of the Consolidated Statement of Comprehensive Income

Provexis Chairman Dawson Buck commented:

'The Company has seen a strong start to the 2019/20 financial year, with total revenues 15% ahead of the prior year. Revenues from the DSM Alliance Agreement for Fruitflow grew by 35% year on year, and sales from the Company's Fruitflow+ Omega-3 dietary supplement business grew by 28% in the half year, with subscriber numbers on the www.fruitflowplus.com website currently standing at an all-time high level.

The planned launch by By-Health, a £3bn listed Chinese dietary supplement business, of a number of Fruitflow based products in the Chinese market is progressing well with potential sales volumes remaining at a significant multiple of existing Fruitflow sales.

By-Health has made a significant investment in nine separate clinical studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By-Health in its regulatory submissions for Fruitflow.

If a successful blue cap health claim is achieved for Fruitflow in China it would currently be expected to result in some significant recurring orders for Fruitflow, at a multiple of current total sales values.

In August 2019 the Company was delighted to announce it had signed an open-ended collaboration agreement with By-Health, in support of By-Health's planned launch of Fruitflow based products in the Chinese market. Project work will be managed and conducted by Provexis primarily in the UK, with the first project agreed concentrating on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health. The agreement further strengthens the close relationship between By-Health and Provexis.

The Company would like to thank its customers and shareholders for their continued support, and the Board remains positive about the outlook for Fruitflow and the Provexis business for the second half of the financial year and beyond.'

For further information please contact:

Chairman's statement

The Company has had an active first six months of the year, seeking to enhance further the commercial prospects of its innovative, patented Fruitflow® heart-health ingredient.

The Company's Alliance partner DSM Nutritional Products ('DSM') has continued to develop the market actively for Fruitflow in all global markets. More than 90 regional consumer healthcare brands have now been launched by direct customers of DSM, and a number of further regional brands have been launched through DSM's distributor channels.

The Company and DSM have seen an encouraging increase in brand awareness and customer interest in Fruitflow in recent years, with an increasing number of further commercial projects being initiated with prospective customers, including some prospective customers which are part of global businesses.

The Company continues to work closely with DSM, seeking to support various prospective customers globally with their commercialisation plans for Fruitflow, and the total projected annual sales value of the prospective sales pipeline for Fruitflow continues to stand at a substantial multiple of existing annual sales.

Revenues for the half year were £222k (2018: £194k), an increase of 15% relative to the prior year, reflecting:

·; An increase in the net income received from the Company's Alliance Agreement with DSM, which grew by 35% to £162k in the period (2018: £120k), an all-time high number in the first half of the year for the Fruitflow DSM Alliance business;

·; An increase in revenue from the Company's Fruitflow+ Omega-3 business, including Holland & Barrett, the Company's website www.fruitflowplus.com and Amazon UK. This business grew by 28% in the half year to £60k (2018: £47k).

·; Amounts in excess of £26k which were received in the prior year for marketing support, compared to amounts of £Nil which were received in the current year.

Underlying operating loss for the half year was reduced to £126k, 18% lower than the prior year (2018: £154k) and a record low for the Group in the first half of the year.

By-Health Co., Ltd.

The Company has previously announced it was working with DSM and BY-HEALTH Co., Ltd ('By-Health'), a listed Chinese dietary supplement business valued at approximately £3bn, to support the planned launch of a number of Fruitflow based products in the Chinese market.

The planned launch of a number of Fruitflow based products in the Chinese market, with potential volumes at a significant multiple of existing Fruitflow sales, is progressing well, with activities driven at present by the need to obtain 'blue cap' health claim status for Fruitflow as a dietary supplement with the State Administration for Market Regulation (SAMR), a new Chinese market regulator which has taken over the responsibilities of the former China Food and Drug Administration (CFDA).

Clinical studies conducted in China are typically required to obtain blue cap health claim status, and a significant investment in nine separate studies, in support of the Fruitflow based products which By-Health plans to launch in China, is being undertaken at By-Health's expense.

Five studies have been successfully completed in China, one clinical study and one animal study are currently ongoing and a further planned two human studies in 2020 have recently been confirmed by By-Health.

The five completed studies showed excellent results in use for Fruitflow, and they provide strong evidence for By-Health in its blue cap and other regulatory submissions to the SAMR for Fruitflow, supported by the Company's existing European Food Safety Authority ('EFSA') health claim for Fruitflow.

If a successful blue cap health claim is achieved for Fruitflow it would currently be expected to result in some significant orders for the product, potentially at a multiple of current total sales values. The Company will provide shareholders with as much information as it can on the timing of this highly commercially sensitive and potentially transformative process, subject to the multi-party confidentiality arrangements which inevitably surround the process.

In August 2019 the Company confirmed it had entered into a new collaboration agreement with By-Health to support the planned launch by By-Health of a number of Fruitflow based products in the Chinese market. The new collaboration agreement has been structured on an open-ended framework basis, enabling the parties to conduct a number of different projects over an unspecified period of time under the one overriding agreement, with all projects envisaged to be at By-Health's sole expense.

Projects conducted under the agreement will be focussed on specific areas of commercial focus for By-Health, and the first project which has been agreed will concentrate on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health in China. Project work will be managed and conducted by Provexis primarily in the UK, led by Provexis' Chief Scientific Officer Dr Niamh O'Kennedy and supported by outsourced research partners which will be appointed and managed by Provexis.

The Fruitflow with nitrates in exercise project is expected to provide gross income to Provexis in excess of £55k in the 2020 calendar year, to include an element of overhead recovery. The project will not affect the ownership of Provexis' existing, substantial intellectual property for the Fruitflow with nitrates formulation, which already has patents granted in the UK, Australia and Japan. Further patents for this formulation are being sought in Europe, the US, China and ten other territories, with potential patent protection out to December 2033.

There are more than 230m people in China who are currently thought to have cardiovascular disease, and a significant increase in cardiovascular events is expected in China over the course of the next decade based on population aging and growth alone (source: World Health Organisation - Cardiovascular diseases, China www.wpro.who.int/china/mediacentre/factsheets/cvd/en). China is now the world's second-largest pharmaceuticals market, measured by how much patients and the state spend on drugs (source: health-care information company IQVIA). The Company believes that Fruitflow has the potential to play an important role in the Chinese cardiovascular health market.

Fruitflow+ dietary supplement products

In August 2018 Fruitflow+ Omega-3 was launched in more than 660 Holland & Barrett stores across the UK and Ireland, giving Fruitflow+ Omega-3 widespread consumer exposure.

Fruitflow+ Omega-3 is also available to purchase from Amazon UK and from the Company's e-commerce website www.fruitflowplus.com which is particularly focussed on subscription orders. The product has a Facebook page at www.facebook.com/FruitflowPlus and a newly developed Instagram page at www.instagram.com/fruitflowplus.

Subscriber numbers on the www.fruitflowplus.com website have been growing steadily, and currently stand at an all-time high level. The Company is seeking to expand further its commercial activities with Fruitflow+ Omega-3 and other Fruitflow+ combination products, with some UK and international sales channel opportunities currently being progressed.

The Company believes that Fruitflow has an important role to play in women's cardiovascular health, and it has launched a dedicated new section of its consumer website at www.fruitflowplus.com/womens-health. The Company sponsored the annual MegsMenopause conference in May 2019, and delivered a high-profile presentation at the conference.

A dedicated product video for Fruitflow+ Omega-3 was launched in March 2019, and a Fruitflow App is also being developed, primarily for use on mobile device platforms.

Further interest in the role of Fruitflow in exercise was generated by Team Sunweb Pro Cycling's use of Fruitflow in the 2018 Tour de France, and the Company is progressing the formulation and launch of a Fruitflow+ nitrates dietary supplement product which was used by Team Sunweb in the 2019 Tour de France www.fruitflowplus.com/sportrecovery.

Intellectual property

The Company is responsible for filing and maintaining patents and trade marks for Fruitflow as part of the Alliance Agreement with DSM, and patent coverage for Fruitflow now includes the following patent families:

·; Improved Fruitflow / Fruit Extracts, which was granted by the European Patent Office in January 2017. The patent has been granted in eight other major territories to include China, and patent applications are at a late stage of progression in a further six global territories, with potential patent protection out to November 2029.

·; Antihypertensive (blood pressure lowering) effects in collaboration with the University of Oslo, which have now been granted for Fruitflow in Europe and three other major territories. Patent applications are being progressed in a further five major territories to include the US and China, with potential patent protection out to April 2033.

·; The use of Fruitflow with nitrates in mitigating exercise-induced inflammation and for promoting recovery from intense exercise. The patent was first granted by the UK IPO (Intellectual Property Office) in May 2017, and further patents have been granted in Australia and Japan. Further patents for this formulation are being sought in Europe, the US, China and ten other territories, with potential patent protection out to December 2033.

·; The use of Fruitflow in protecting against the adverse effects of air pollution on the body's cardiovascular system, which extends potential patent protection for Fruitflow out to November 2037. Recent laboratory work has shown that Fruitflow can reduce the platelet activation caused by airborne particulate matter, such as that from diesel emissions, by approximately one third.

Research and development costs for the half year were £134k (2018: £114k), with the £20k year on year increase being primarily due to Fruitflow air pollution patents entering the national phase of the patent application process, a one-off event in the process which represents the most significant pre-patent grant costs.

Capital structure and funding

On 11 December 2019 the Group announced it had raised proceeds of £301,333 via the placing of 75,333,333 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 17 December 2019.

The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Company's cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Company remains in a loss-making position it will need to raise funds to support working capital on occasions.

People

In April 2019 the Company announced the appointment of Dr Niamh O'Kennedy as an Executive Director of the Company, and as Chief Scientific Officer.

In conjunction with Niamh's appointment, Ian Ford's role was expanded to Chief Financial Officer and Chief Operating Officer and Dawson Buck's role changed from Executive Chairman to Non-executive Chairman. In September 2019 Ian Ford's role was further expanded to CEO (now, CEO and CFO).

Outlook

The Company has seen a strong start to the 2019/20 financial year, with total revenues 15% ahead of the prior year. Revenues from the DSM Alliance Agreement for Fruitflow grew by 35% year on year, and sales from the Company's Fruitflow+ Omega-3 dietary supplement business grew by 28% in the half year, with subscriber numbers on the www.fruitflowplus.com website currently standing at an all-time high level.

The planned launch by By-Health, a £3bn listed Chinese dietary supplement business, of a number of Fruitflow based products in the Chinese market is progressing well with potential sales volumes remaining at a significant multiple of existing Fruitflow sales.

By-Health has made a significant investment in nine separate clinical studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By-Health in its regulatory submissions for Fruitflow.

If a successful blue cap health claim is achieved for Fruitflow in China it would currently be expected to result in some significant recurring orders for Fruitflow, at a multiple of current total sales values.

In August 2019 the Company was delighted to announce it had signed an open-ended collaboration agreement with By-Health, in support of By-Health's planned launch of Fruitflow based products in the Chinese market. Project work will be managed and conducted by Provexis primarily in the UK, with the first project agreed concentrating on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health. The agreement further strengthens the close relationship between By-Health and Provexis.

The Company would like to thank its customers and shareholders for their continued support, and the Board remains positive about the outlook for Fruitflow and the Provexis business for the second half of the financial year and beyond.

Dawson Buck

Chairman

1. General information, basis of preparation and accounting policies

General information

Provexis plc is a public limited company incorporated and domiciled in the United Kingdom (registration number 05102907). The address of the registered office is 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK.

The main activities of the Group are those of developing, licensing and selling the proprietary, scientifically-proven Fruitflow® heart-health functional food ingredient.

Basis of preparation

This condensed financial information has been prepared using accounting policies consistent with International Financial Reporting Standards in the European Union (IFRS).

The same accounting policies, presentation and methods of computation are followed in this condensed financial information as are applied in the Group's latest annual audited financial statements, except as set out below. While the financial figures included in this half-yearly report have been computed in accordance with IFRS applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

Use of non-GAAP profit measure - underlying operating profit

The directors believe that the operating loss before share based payments measure provides additional useful information for shareholders on underlying trends and performance. This measure is used for internal performance analysis. Underlying operating loss is not defined by IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. It is not intended to be a substitute for, or superior to IFRS measurements of profit.

The interim financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and has been neither audited nor reviewed by the Company's auditors BDO LLP pursuant to guidance issued by the Auditing Practices Board.

The results for the year ended 31 March 2019 are not statutory accounts. The statutory accounts for the last year ended 31 March 2019 were approved by the Board on 9 September 2019 and are filed at Companies House. The report of the auditors on those accounts was unqualified, contained an emphasis of matter with respect to going concern, and did not contain a statement under section 498 of the Companies Act 2006.

The interim report for the six months ended 30 September 2019 can be downloaded from the Company's website www.provexis.com. Further copies of the interim report and copies of the 2019 annual report and accounts can be obtained by writing to the Company Secretary, Provexis plc, 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK.

This announcement was approved by the Board of Provexis plc for release on 31 December 2019.

Going concern

The Directors are of the opinion that at 31 December 2019, the Group and Company's liquidity and capital resources are adequate to deliver the current strategic objectives and 2020 business plan and that the Group and Company remain a going concern.

Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2019, as described in those annual financial statements.

2. Segmental reporting

The Group's operating segments are determined based on the Group's internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been determined to be the Board of Directors as it is primarily responsible for the allocation of resources to segments and the assessment of performance of the segments. The performance of operating segments is assessed on revenue.

The CODM uses revenue as the key measure of the segments' results as it reflects the segments' underlying trading performance for the financial period under evaluation. Revenue is reported separately to the CODM and all other reports are prepared as a single business unit.

3. Earnings per share

Basic earnings per share amounts are calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period.

The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.

Basic and diluted loss per share amounts are in respect of all activities.

There were 193,500,000 share options in issue at 30 September 2019 (2018: 138,000,000) that are currently anti-dilutive and have therefore been excluded from the calculations of the diluted loss per share.

On 11 December 2019 the Group announced it had raised proceeds of £301,333 via the placing of 75,333,333 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 17 December 2019. The new shares issued would change the weighted average number of shares in issue as shown above for the period ended 30 September 2019, but they would not significantly change the resulting loss per share calculations.

4. Share capital and Total Voting Rights

At 31 December 2019, the date of this announcement, the Company's issued share capital comprises 2,059,321,507 ordinary shares of 0.1 pence each, each with equal voting rights. The Company does not hold any shares in treasury and therefore the total number of ordinary shares and voting rights in the Company is 2,059,321,507.

The above figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or change to their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.

5. Cautionary statement

This document contains certain forward-looking statements with respect to the financial condition, results and operations of the business. These statements involve risk and uncertainty as they relate to events and depend on circumstances that will incur in the future. Nothing in this interim report should be construed as a profit forecast.