Tissue Regenix Group Regulatory News (TRX)

Tissue Regenix Group plc

("Tissue Regenix" or "the Group")

Unaudited Interim Results for the six months ended 31 July 2016

Leeds, 12th October 2016 - Tissue Regenix Group (AIM:TRX) "Tissue Regenix" or "The Group", the regenerative medical devices company, today announces its unaudited interim results for the six months ended 31 July 2016.

Highlights

During the period, the Group has achieved the following important milestones:

· Delivered revenue of £631k (2015: £252k) 150% increase

· 510(k) Market clearance for SurgiPure™ XD

· First dCELL® process approval by the FDA

· OrthoPure™ XT regulatory process shortened

· First GPO contract signed in the US for DermaPure®

· Further Medicare approvals for DermaPure® - 93% now covered

· Appointment of VP Orthopedics North America

Antony Odell, CEO of Tissue Regenix Group plc commented: "Tissue Regenix delivered revenue of £631k during the six months to 31st July 2016, a 150% increase over the comparative period. Our continued focus on adoption and advocacy was rewarded with further Medicare approvals and our first Group Purchasing Order agreement, both significant steps for the continuing success of DermaPure®, and highlights the growing commercial traction DermaPure® has gained within the competitive US wound care market.

Alongside this, we continue to progress with our European market entry and expect to be in a position to launch our first orthopaedic product, OrthoPure™ XT, into this market in H1 2017, with CE mark submission expected to be made a full six months ahead of schedule.

The developing momentum behind our dCELL® Technology product portfolio brings us confidence that we will achieve our year end corporate goals. We look forward to reporting our progress in the coming months."

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About Tissue Regenix

Tissue Regenix is a leading medical devices company in the field of regenerative medicine. The company's patented decellularisation ('dCELL®') technology removes DNA and other cellular material from animal and human tissue leaving an acellular tissue scaffold which is not rejected by the patient's body which can then be used to repair diseased or worn out body parts. The potential applications of this process are diverse and address many critical clinical needs such as vascular disease, heart valve replacement and knee repair.

Tissue Regenix was formed in 2006 when it was spun-out from the University of Leeds. The company commercialises academic research conducted by our partners around the World.

In November 2012 Tissue Regenix Group plc set up a subsidiary company in the United States - 'Tissue Regenix Wound Care Inc.', as part of its commercialisation strategy for its dCELL® technology platform.

TISSUE rEGENIX GROUP PLC

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 JULY 2016

HIGHLIGHTS

"During this period Tissue Regenix Group has made significant progress in operations across both the US and EU, highlighted by a twofold increase in revenue in the US, confirming our ability to successfully commercialise products, whilst also identifying further market entry opportunities."

JOHN SAMUELCHAIRMAN

During the period to 31 July 2016 the Group has continued to make significant progress in operations across both the US and EU.

Fundamental to this is the growing adoption of DermaPure® in the US Wound Care market, with momentum continuing beyond the initial £0.8m reported for the full year, now reflected in a two fold increase in revenue over the previous comparative period.

This, however, should not overshadow the significant strides made in Europe, with OrthoPure™ XT now increasingly close to a commercial market launch.

The decision to supersede our initial clinical trial for OrthoPure™ XM with a further iteration of the implant should ultimately facilitate its market introduction into Europe, but crucially also assist in the US market launch in the coming years.

Progress in the last six months continues to vindicate our confidence in our product portfolio, both in the marketplace and in the development pipeline.

As the development and expansion of the company continues in line with our ambitions and expectations, we are confident that our results for the full year will reflect this.

OPERATIONAL REVIEW

OverviewIn the six months to July 2016 Tissue Regenix Group has continued to see commercial and corporate growth in line with our expectations and strategic goals. DermaPure® continues to perform well in the competitive US wound care market, our orthopaedic business is coming to the fore within Europe and significant progress has been made in bringing our dCELL® heart valves to the European market.

Alongside these early commercial milestones we continue the development of additional applications arising from our research pipeline agreements with The University of Leeds and research partner the Pontificial Catholic University of Paranà. Furthermore, we continue to exploit opportunities for product line extensions that would allow for a broader use of our existing products.

USDuring the period our US business continued to make significant progress, as demonstrated in this set of results, with a two fold increase in sales comparative to the first six months of the previous year. We expect this year to follow a similar revenue profile as seen previously, accelerating towards the end, as demonstrated during H2 FY16 where the revenue increase was +131% against H1.

Further Medicare coverage has been gained, with now only one jurisdiction outstanding. Our focus on adoption and advocacy continues as the importance of health economics increases within the US healthcare market, and the economic advantages of products such as DermaPure® become apparent. 

As we look to meet the demand of new applications for DermaPure® we have expanded our portfolio of products to allow for larger and thicker sizes in response to physician feedback. We continue to pursue opportunities in different markets such as dentistry and burns and anticipate further progress in this regard in the coming year. 

The 510(k) market clearance for SurgiPure™ XD was another major inflection point. This is the first time the FDA has reviewed the full dCELL® process and SurgiPure™ XD therefore becomes our first FDA approved product, with an expected launch in H217.

Alongside this we have also progressed with the groundwork for our US Orthopedic subsidiary, appointing a VP for North America. With an initial focus on human tissue applications, we have begun discussions with multiple potential partners. In conjunction with these developments, we have established a clinical advisory board consisting of five experts with varying specialties in sports medicine, with an emphasis on ligament reconstruction, meniscal replacement, and cartilage restoration. We expect this area of our business to develop significantly over the coming year. 

EuropeOrthopaedics continues to be our primary focus within the European market and our recent announcement, that the CE mark submission for OrthoPure™ XT (porcine tendon) would be completed six months ahead of schedule is a testament to the hard work ongoing in our orthopaedic division, whilst also highlighting the growing need and demand for such a treatment within this field. We anticipate that we will be in a position to launch OrthoPure™ XT into the European market in H117.

The OrthoPure™ XM (porcine meniscus) clinical trial closed earlier in the year, with the clinical data showing biocompatibility and integration into the patient's tissues. Feedback from the trial led to the decision to undertake a second clinical trial with a modified implant to allow the same product to be marketed in both the EU and US.

GBM-V, our Joint Venture tissue bank in Rostock, Germany, continues to carve out a path for our human tissue applications in mainland Europe, with an initial focus on CardioPure™, dCELL® heart valves, and DermaPure®. We now have an experienced team in place to lead us through the regulatory process and currently remain on track to produce the first heart valves in H217.

Summary and OutlookThe next twelve months promise some significant milestones for Tissue Regenix, including the launch of our first orthopaedic application in Europe, the launch of our second wound care product, SurgiPure™ XD into the US and the ongoing regulatory submissions to the German authorities for decellurised tissues to be treated at GBM-V. Alongside this, the continued growth of DermaPure®, as evidenced by these results, and the ongoing development of our orthopaedic business within the US ensure that we remain on track to end our year accomplishing our corporate goals, and we look forward to reporting our progress over the coming months.

Financial SummaryFor the 6 months ended 31 July 2016 Tissue Regenix Group delivered revenue of £631k (2015: £252k) generating an operating loss of £5,523k (2015: £4,133k). With finance income of £81k (2015: £116k) and a research and development tax credit of £280k (2015: £335k) the loss after tax was £5,162k (2015: £3,682k), of which £5,082k (2015: £3,682k) was attributable to the equity holders of the parent company. Cash balances at the end of the period were £13,515k (2015: £24,887k) and the Group was debt free. The results were in line with our expectations.

Wound CareWound care revenue for the period of £631k (2015: £244k) was derived from sales of DermaPure® in the USA, representing a more than two fold increase over the prior period. The local currency equivalents, to eliminate the effects of exchange, were $891k (2015: $371k). As was the case in the previous year, revenue phasing across the year is expected to be weighted towards H2. With more visibility now regarding the appointment of distributors and contract approvals, the 12-month revenue guidance range has been narrowed to $2.5m -$3.5m compared to the 12-month prior period of $1.2m (however, please note shortened accounting period below). Gross margin for the period for the Wound Care division was 81% (2015: 75%). SG&A costs increased as expected, impacted by the full year effect of previous year direct sales hires and commission costs, which increase with revenue.

The commission costs were $290k (2015: $100k), which as a percentage of sales was therefore 32.5% (2015: 27.0%). Guidance for full year margin and commission percentage remain at c.80% and c.37.5% respectively.

OrthopaedicsThe costs incurred of £1,300k (2015: £1,050k) consisted primarily of clinical trial costs as both OrthoPure™ XM and OrthoPure™ XT moved through the human trial phase. The costs were in line with our expectations and previous guidance. We expect to see the first revenue from this division in H117 following commercialisation of OrthoPure™ XT.

CardiacThe results for this segment are not material during this period. However, the joint venture, GBM-V, set up earlier in the year remains on track to launch CardioPure™ heart valves in Germany during 2017.

CentralOperation costs are mainly incurred centrally and are in general not allocated to individual operating units. Costs remained flat over the period at £1,406k (2015: £1,417k).

Accounting reference date changeAs noted previously the Group has changed its accounting reference date to 31 December. The next reporting period will therefore be for the 11 months to 31 December 2016.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the six months to 31 July 2016

The loss for the period arises from the Group's continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the six months to 31 July 2016

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

As at 31 July 2016

Approved by the Board and authorised for issue on 12 October 2016

John Samuel

Chairman

Ian JeffersonChief Financial Officer

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

For the six months ended 31 July 2016

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

For the six months ended 31 July 2016

1) Basis of preparation

The interim financial information set out in this statement for the six months ended 31 July 2016 and the comparative figures for the six months ended 31 July 2015 are unaudited. This information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

The comparative figures for the financial year ended 31 January 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

This interim statement, which is neither audited nor reviewed, has been prepared in accordance with the measurement and recognition criteria of Adopted IFRSs. It does not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 January 2016. It does not comply with IAS 34 "Interim Financial Reporting" as is permissible under the rules of the AIM Market ("AIM").

The financial information has been prepared on a going concern basis and is presented in sterling to the nearest £'000.

The preparation of financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual events ultimately may differ from those estimates.

The interim financial information does not include all financial risk management information and disclosures required in annual financial statements. There have been no significant changes in any risk or risk management policies since 31 January 2016. The principal risks and uncertainties are largely unchanged and are as disclosed in the Annual Report for the year ended 31 January 2016.

The accounting policies applied in preparing these interim financial statements are the same as those applied in the preparation of the annual financial statements for the year ended 31 January 2016, as described in those financial statements other than standards, amendments and interpretations which became effective after 1 February 2016 and were adopted by the Group. These have had no significant impact on the Group's profit for the period or equity. The Board approved these interim financial statements on 12 October 2016.

2) Significant accounting policies

The condensed consolidated financial statements have been prepared under the historical cost convention in accordance with International Financial Reporting Standards as adopted by the European Union.

The accounting policies adopted are consistent with those followed in the preparation of the audited financial statements of Tissue Regenix Group Plc for the year ended 31 January 2016 and are disclosed in those statements.

3) Segmental reporting

Operating segments

The Group is organised into Cardiac, Wound Care and Orthopaedics divisions for internal management, reporting and decision-making, based on the nature of the products of the Group's businesses. Managers have been appointed within these divisions, who report to the board. These are the reportable operating segments in accordance with IFRS8 "Operating Segments". The Directors recognise that the operations of the Group are dynamic and therefore this position will be monitored as the Group develops. In accordance with IFRS8, the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker. The Group has identified the Board of Directors as the Chief Operating Decision Maker as it is responsible for the allocation of resources to the operating segments and assessing their performance.

Central overheads, which primarily relate to operations of the Group function, are not allocated to the business units.

The following table provides disclosure of the Group's revenue by geographical market based on location of the customer:

4) Taxation

The Group has accumulated losses available to carry forward against future trading profits. No deferred tax asset has been recognised in respect of tax losses.

5) Loss per share (basic and diluted)

Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period excluding own shares held jointly by the Tissue Regenix Employee Share Trust and certain employees. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares.

The Company has issued employees options over 29,376,332 ordinary shares and there are 16,940,386 jointly owned shares which are potentially dilutive. There is, however, no dilutive effect of these issued options as there is a loss for each of the periods concerned.

6) Share capital

7) Movement in retained earnings and reserve for own shares

8. Interim financial report

A copy of this interim report will be distributed to shareholders and is also available on the Company's website at www.tissueregenix.com.