YGEN.L Regulatory News (YGEN)

Premaitha Health PLC

Results for the financial year ended 31 March 2015

Manchester, UK - 22 September 2015: Premaitha Health PLC (AIM: NIPT, "Premaitha" or the "Company") announces its results for the financial year ended 31 March 2015, and provides notice of its Annual General Meeting.

Highlights

· Successful reverse takeover of ViaLogy PLC by Premaitha Health Limited, and re-listing on AIM in July 2014, raising £7.2m via a placing and open offer at 11p per share

· Approval of the world's first CE marked diagnostic product, the IONA® test with wide recognition from peers and key opinion leaders

· IONA® test launched in February 2015, on schedule, with first new contracts signed, including St George's Hospital Trust in London

· Patent infringement suit lodged by Illumina, Inc. in March 2015 followed by a robust defence and counterclaim filed by Premaitha

· Revenues of £0.1m (2014: £0.1m) generated from grant income prior to the launch of the IONA® test

· Loss before one-off and non-cash items of £4.9m (2014: £1.5m) reflecting staff costs, product development activities and a £0.5m provision for anticipated litigation costs in the defence of the Illumina claim

· Cash balance at the period end was £2.7m (2014: £0.05m)

· July 2015, post period end, oversubscribed placing to raise £8.0m at 20p per share

· The Company's Annual General Meeting is to be held at 3pm on Tuesday 13 October

David Evans, Chairman of Premaitha, said:

"The Company has achieved a significant amount in a relatively short time. We have listed on AIM, achieved recognition from European regulators for our ground breaking IONA® NIPT test and signed contracts in Europe, including the UK's NHS.

"Our success in winning new contracts is despite the threat of litigation, which we will be defending robustly, and high competition in the NIPT space. However, we will not be deterred from entering the right partnerships where we can make available a better screening method to both healthcare providers and expectant parents.

"In the next year, we expect to see further development of our business with a unique world-class product in a very rapidly expanding market with multi-billion dollar global potential. We have built up an excellent team across technical, operational and commercial disciplines and we will continue market penetration in close collaboration with key opinion leaders and national screening bodies."

-Ends-

Today Premaitha also announced its first non-European partnership with Servicios Genéticos OriGen to provide the IONA® test for pregnant women in Chile and expand the test's reach to meet the growing global demand for NIPT. See separate press release: www.premaitha.com/news/press-releases

Notes to Editors

About Premaitha Health

Premaitha is an innovative molecular diagnostics company employing the latest advances in DNA analysis technology to develop tests for non-invasive prenatal screening (NIPT) and other applications. Premaitha's flagship product, the IONA® test is the first non-invasive in vitro diagnostic product for prenatal screening enabling clinical laboratories to offer CE-marked NIPT in-house for the first time.

The IONA® test estimates the risk of a fetus having Down's syndrome or other serious genetic diseases. The IONA® test has a higher detection rate and lower false positive rate than existing screening tests, giving pregnant women, their families and their doctors greater confidence in the result and reducing the need for unnecessary invasive follow-up tests and the associated anxiety and stress. The IONA® test is a complete diagnostic system that is simple and standardised, enabling Premaitha's clinical laboratory customers to perform the test in their own facilities. This supports Premaitha's strategy of accelerating the broad dissemination of NIPT tests to ensure that their benefits are available to pregnant women everywhere.

Premaitha is listed on the London Stock Exchange (AIM). Its R&D, manufacturing and commercial operation is located at Manchester Science Park, UK. For further information please visit www.premaitha.com or email iona@premaitha.com.

Chairman's Statement

A world-leading molecular diagnostics company is born

I am pleased to be able to report on a successful first nine months of Premaitha Health PLC since July 2014 when we undertook the reverse takeover of ViaLogy PLC and the simultaneous admission to AIM and £7.2m fundraising at 11 pence per share. Post period end in July 2015, we announced the successful further fundraising of £8.0m at a price of 20 pence per share.

The objective of the fundraising was to support the launch of the IONA® non-invasive prenatal test based on the latest DNA sequencing technologies. I am delighted to report that Premaitha has hit its key milestones as promised at the time of the reverse takeover.

We have delivered the world's first CE-marked diagnostic product, signed contracts across Europe, including launching the first NHS test in the UK, and achieved recognition amongst our peers and key opinion leaders. This has all been achieved in a short period of time and is despite wholly opportunistic legal obstacles placed in our path (see principal risks and uncertainties section), which we are robustly defending.

Premaitha is at the forefront of a revolution in prenatal screening which will benefit pregnant women and healthcare professionals. Our intention is to accelerate the roll-out of the IONA® test by working closely with our partners, customers and respective Health Authorities to make it as widely available to pregnant women as possible.

Focused strategy underpinned by strong clinical foundations

The Group's strategy is to apply DNA-based technological advances to significant medical challenges, initially by delivering a rapid take-up of DNA-based prenatal screening solutions. We develop, produce and sell molecular diagnostic products and services to prenatal screening and genetics laboratories internationally. These products and services are developed and delivered to the highest quality standards, and are supported by strong clinical studies and collaborations with knowledge leaders in the field.

Highly capable team assembled

We have assembled an exceptional team of leading scientists and experienced professionals in all disciplines at our Manchester headquarters and have started the process of building an outstanding commercial team to generate revenues and support our international client base. At the end of the financial year we employed 29 people and have a network of dedicated consultants.

I would like to thank all of those individuals for their efforts in delivering the impressive achievements to date.

Robust financial position

Financially, the Group is at the early stages of its journey. The recent fundraising in July 2015 demonstrated strong shareholder support for our strategy and has given the Company a sound financial base from which to roll out our commercialisation strategy.

Outlook

Our outlook will continue to be dominated by the pending litigation by Illumina and its actions in the marketplace. This will ultimately be resolved in a Court of Law in the United Kingdom. The earliest likely date for trial proceedings to commence is October 2016. 

The legal process does not work to our advantage in terms of timeliness. In the meantime we have a fight on our hands in the marketplace as our legal adversary can use all of the tools at its disposal to disrupt us in the marketplace. 

The intensity of that activity has increased subsequent to our recent fundraising as the robustness of our position no doubt became apparent. We are here to stay and we have every confidence in our position and we are not prepared to be bullied into submission. It remains the Board's belief that the greatest risk to the downside remains with Illumina as capital markets finally assess this risk properly. 

We intend to take the fight not just through the courts but through ensuring we enter into the right partnerships whereby we can ultimately ensure that both Healthcare providers and expectant parents have a real choice.

We anticipate securing further contracts but their exact timing cannot be determined due to the factors outlined above. The overall value proposition remains undiminished and on a two year time horizon I think subject to a successful resolution of the court action we will be seen to be an attractive asset to those platform players looking for regulatory approved content for their instruments as in the long run in in-vitro Diagnostics content is king.

Chief Executive's Report

Introduction

Recent developments in the science and technology of human genetics have created great potential for improvements in human health. Our goal at Premaitha is to translate these scientific advances into practical solutions which can create real clinical benefit for humankind.

Our first product, the IONA® prenatal screening test, which was launched on schedule in February 2015 employs the most advanced genetic analysis technology to provide a simple, accurate and reliable prenatal screening test result to pregnant women and their families.

Development of the IONA® screening test began in earnest early in 2013 and the on-time delivery of the test to the marketplace is a remarkable achievement by all concerned. This includes the shareholders who supported the AIM combination with ViaLogy PLC in July 2014 as well as the many scientists and commercial, clinical and support staff who have contributed to the launch.

IONA® test development continues as we work to expand and improve the utility of the product. With the launch of the IONA® test the focus of our business has moved from a development stage company to a fully operational manufacturing and commercialisation business with all of the challenges and opportunities this entails.

Strategy

The new generation of prenatal screening tests have impressive clinical performance but, unless they are readily available to pregnant women across the world, these benefits are of little value. With this in mind, our clear strategy is to provide product-based screening solutions to our laboratory customers to enable the rapid dissemination of the technology.

The IONA® test is designed to allow clinical laboratories, even without a background in DNA analysis technology, to offer the new NIPT tests thereby ensuring broad uptake and access to pregnant women. Our products are supported by the provision of screening services to enable our customers to enable testing whilst they build their demand profile and investment cases to offer the service in-house.

We are confident that our model of providing the highest consistent quality products to localised screening laboratories is ideally suited to the needs of the international markets for prenatal screening.

Market development

Premaitha was successful in the UK's first NHS tender to provide NIPT screening at St George's Hospital Trust in London, UK. Since then we have continued to expand our customer base in countries such as Poland and Switzerland. We are currently in negotiations with a number of parties in the UK, mainland Europe and beyond.

The decision to adopt NIPT testing is a complex one for laboratories as it involves significant capital outlay and uncertainty as to how quickly the solution will be adopted by official bodies and patients. The sales process can, therefore, be lengthy. However, we remain confident that ultimately all prenatal screening will include NIPT and that the IONA® test represents the best available solution for pregnant women and the screening clinicians and laboratories who support them.

Product development

The analysis of cell-free DNA is a rapidly evolving field with significant utility not only in prenatal screening but also in other fields of medicine. At Premaitha our product development activities are focused on both improving the existing test and applying our technology to other applications.

The three main programmes we have running are:

· Throughput, cost and convenience - a coordinated set of projects designed to make the IONA® test even more attractive to our laboratory customers by increasing throughput whilst reducing costs

· Clinical content - a parallel project to extend the range of prenatal conditions analysed in response to input from leading clinicians and learned societies

· New applications - an early stage project to assess the feasibility of applying IONA® technology to the detection of cell free DNA primarily in the area of cancer detection

In addition to these new developments we are also extending the availability of the IONA® test by performing registration studies to allow us to sell the product in territories in Asia and the Americas.

Geographical footprint

Premaitha is based on Manchester Science Park which adjoins the University of Manchester, a leading UK research institution which is internationally recognised for breakthrough technological innovations.

This environment, and the ready access to a talented pool of scientists and other specialisms, is a natural home for us and is the base for our future expansion. We are also building an international organisation with commercial and client support representatives across Europe and, in due course, internationally.

Technical support

Critical to Premaitha's proposition to customers is our ability to offer training and technical support to laboratories that may not be familiar with the technology used in the IONA® test. To support this activity, we opened a new training suite in Manchester and we have recruited an experienced technical support team.

Clinical laboratory

We have established a laboratory to perform IONA® testing to support client demonstrations and to act as an enabling resource for customers who are installing the IONA® workflow in their own facilities or are building sample volumes with their downstream clinical partners. This laboratory is now CQC accredited as a demonstration of our commitment to quality.

Supply chain

Premaitha has assembled a scalable supply chain with best-in-class partners in the fields of NGS instrumentation, assay development, bioinformatics development and diagnostics manufacture. These partners are aligned culturally and operationally to fulfil the potential we aim to achieve with the IONA® prenatal screening test.

Outlook

The main challenge that Premaitha faces is to rapidly expand our business in the face of strong competition from other players in the prenatal screening field. We are confident that our product is world-class, as are our sales and technical support teams, but we do not underestimate the level of effort needed to achieve our goal of becoming a leading global provider of prenatal screening products.

One significant favourable factor is our choice of analysis and sequencing platforms. All NIPT tests rely on next generation sequencing or analysis to produce the data for accurate test reports. Premaitha has a unique platform offering which allows us to align our interests with those of our platform providers, in that a customer for the IONA® test is also a customer for them. In the coming year we will aim to expand and strengthen these relationships.

The ongoing patent case with Illumina is certainly not helpful with regards to the development of our business but we remain confident in the strength of our position and see this as only a temporary setback. Furthermore, as we expand our business internationally there are many territories where the patent landscape is very different to the UK.

As we enter the next year of development of our business we find ourselves with a unique world-class product in a very rapidly expanding market with multi-billion dollar global potential. Couple this with our experienced technical, operational and commercial teams and the prospects for the future look bright. We look forward to continued market penetration in collaboration with key clinical thought leaders and national screening bodies.

CFO's statement

Income statement

Premaitha launched its first product, the IONA® non-invasive prenatal test in February 2015 and therefore had limited revenues of £132,267 (2014: £102,500) related to grant income received.

General and administrative expenses of £4,968,129 (2014: £1,628,624) were principally incurred on research and development expenditure, associated staff costs and a provision for anticipated litigation costs of £500,000 (2014: £nil) in the defence of the Illumina claim discussed in the Chairman and Chief Executive Officer's report.

There is a resultant operating loss before one-off and non-cash items of £4,835,862 (2014: £1,526,124).

One-off and non-cash items

In July 2014, Premaitha Health Ltd reversed into ViaLogy PLC, an AIM-listed cash shell which became Premaitha Health PLC. The re-listing on AIM and associated fundraising exercise incurred costs of £738,604 (2014: £nil), including a share-based payment charge of £56,385 and there is a deemed cost of the reverse acquisition of £964,967 (2014: £nil). In addition, there is a non-cash item in the form of a share-based payment charge of £345,769 (2014: £nil).

Finance income

During the period the Group earned interest of £88,005 (2014: £nil) on its cash balances.

Taxation

The loss on ordinary activities before taxation of £6,797,197 (2014: £1,526,124) generated a tax loss, the benefit of which will not be recognised until we can be more certain of recoverability.

Foreign exchange

The Group made a gain of £19,558 (2014: £nil) on translation of its foreign subsidiaries to the presentational currency.

Loss per share

The total comprehensive loss of £6,777,639 (2014: £1,565,669) represents a loss per share of 4.0 pence (2014: 4.0 pence).

Balance sheet

At the balance sheet date the Group had total assets of £5,646,481 (2014: £937,025) comprising property, plant and equipment of £1,347,280 (2014: £436,380), R&D tax credits due of £800,454 (2014: £254,259) and current assets - principally cash - of £3,498,747 (2014: £246,386). Cash and cash equivalents at the end of the period was £2,709,355 (2014: £49,850).

Total equity was £3,896,197 (2014: negative £1,557,388) with the accumulated deficit being offset by the reverse acquisition, AIM listing and fundraising exercise in July 2014.

Liabilities were £1,750,284 (2014: £2,494,413), principally in the form of trade and other payables.

Cashflow

The Group had an opening cash position of £49,850 (2014: £nil) and generated a surplus of £2,659,505 (2014: £49,850).

During the period the Group had a negative cash flow from operating activities of £5,973,222 (2014: negative £1,695,463). Investing activities generated a surplus of £149,023 (2014: negative £521,300) with the ViaLogy PLC residual cash position offsetting purchases of property, plant and equipment. The July 2014 fundraising exercise generated a financing surplus of £7,536,579 (2014: £2,041,608).

Dividends

No dividend is recommended (2014: £nil) due to the early stage nature of the Group.

Capital management

The Board's objective is to maintain a balance sheet that is both efficient at delivering long-term shareholder value and also safeguards the Group's financial position in light of variable economic cycles and the principal risks and uncertainties outlined in this report. As at 31 March 2015 the Group had cash of £2,709,355 (2014: £49,850) with no borrowings (2014: £2,038,133). The Board continues to monitor its balance sheet to ensure it has an adequate capital structure.

Post-balance sheet events

After the balance sheet date the Group filed a robust defence against the Illumina litigation claim as described elsewhere in this report.

The Group also undertook a successful share placement exercise to raise £8,000,000 before commissions and fees. The funds were raised to support the commercial expansion of the IONA® test, the in-house clinical laboratory service offering and for continued development of the IONA® product itself.

Key performance indicators (KPIs)

The Board recognises the importance of KPIs in driving appropriate behaviours and enabling the monitoring of Group performance. For the current financial year the primary KPIs were an on-time launch of the IONA® test and net cash balances. The launch of the IONA® test was achieved on time in February 2015 and cash at the period end was £2,709,355 (2014: £49,850). Going forward the Board will develop appropriate KPIs to drive the commercialisation of the IONA® test, and to ensure robust net cash balances.

Consolidated income statement for the period ended 31 March 2015

Consolidated statement of changes in equity

Consolidated statement of financial position as at 31 March 2015

Consolidated statement of cash flows

Notes to the accounts

1. Basis of preparation

This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), including IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out in the Annual Report published today.

These policies have been consistently applied.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Those areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial information are set out in the Annual Report published today.

2. Loss for the period before taxation

3. Taxation on profits from ordinary activities

The Research and development tax credit of £800,454 (2014:£254,259) is shown as a deduction against general administrative expenses.

The Group is required to estimate the income tax in each of the jurisdictions in which it operates. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different accounting and tax treatments. These temporary differences result in deferred tax assets or liabilities which are included within the statement of financial position. Deferred tax assets and liabilities are measured using substantially enacted tax rates expected to apply when the temporary differences reverse. Management judgement is required to determine the total provision for income tax. Amounts accrued are based on management's interpretation of country specific tax law and the likelihood of settlement.

Factors that may affect future tax charges

The Group has estimated trading losses of £2,463,894 (2014: £829,565), estimated excess management fees of £5,251,864 (2014: £nil) and capital losses of £1,934,399 (£nil).

The tax losses have resulted in a deferred tax asset of approximately £1,930,031 (2014: £165,913) which has not been recognised as it is uncertain the future taxable profits will be sufficient to utilise the losses.

ViaLogy LLC may be entitled to further tax losses. The maximum amount of losses available is $6,000,000, however this is subject to an annual limitation which is estimated at $250,000 per year. At the reporting date the accrued potential losses claimable are estimated at $2,000,000 (2014: $1,750,000). The losses disclosed in relation to the US have not been agreed with the US taxation authorities and thus are the best estimate of management as at 31 March 2015.

4. Loss per share

Basic

Basic loss per share is calculated by dividing the loss after tax attributable to the equity holders of the parent company for the period of £6,797,197 (2014: loss £1,565,669) by the weighted average number of ordinary shares in issue during the period 151,891,657 (2014:37,950,675).

Diluted

Diluted earnings per share dilute the basic earnings per share to take into account share options and warrants. The calculation includes the weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive share operations and warrants into ordinary shares. 30,488,332 options (2014: nil) have been excluded from this calculation as the effect would be anti-dilutive.

5. Distribution of the Annual Report and Notice of AGM

A copy of the 2015 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 3pm on Tuesday 13 October at the Dalton Room, The Innovation Centre, University of Manchester, 46-48 Grafton Street, Manchester M13 9XX, will be sent to all shareholders in the next few days. Further copies will be available to the public on the Company's website, www.premaitha.com.