RNS Number:0834J
Tissue Science Laboratories PLC
24 March 2003
24 March 2003
Preliminary Results for the year ended 31 December 2002
Strong growth in revenues in 2002 - targeting positive operating
cash flow by the end of 2003
Tissue Science Laboratories plc ('TSL'), the medical devices company
specialising in human tissue replacement and repair products derived from
porcine dermis, today announces its Preliminary Results for the year ended 31
December 2002.
Financial Highlights
- Continued strong growth in revenues for 2002, with product sales
increasing by 90% to #3.1m (12 months to 31 December 2001: #1.6m)
- Improved gross margins of 48% (12 months to 31 December 2001: 11%)
- Reduced net loss for the year of #2.3 m (12 months to 31 December
2001: #3.4m including exceptional expenses of #0.4m) - significantly
better than market expectations
- Solid cash position maintained, with cash at the year end of #5.4m
(2001: #8.7m); the Company currently foresees no requirement to seek external
funding before reaching cash generation
- Targeting positive operating cash flow by the end of 2003. Current
trading in line with expectations
Operational Highlights
- Strong growth of urology/gynaecology sales through CR Bard in US and
Europe; Pelvicol now represents annual worldwide sales for CR Bard of $10m
(2001: $5m) - CR Bard to further increase sales force time and spend in 2003
- US marketing operation and commission-only sales force for hernia
market established and expanded - recruitment ongoing and on track to
achieve national US coverage by 1Q 2003. Significant growth opportunity
identified in hernia repair and current demand from surgeons encouraging
- Italian distributor signed-up in 2002; further distribution partner
agreements expected in 2003
- 510k approval received in November 2002 for Permacol Surgical Implant
for treatment of Rotator Cuff injuries of the shoulder. Initial launch in
the UK, with a marketing partner being sought for other territories
- Initial launch of PermacolTM Injection Urethral Bulking Agent in
August 2002 in the UK
- Completion and European regulatory validation achieved in November
2002 for new production facility in Swillington. Product shipped to customers
in the US and Europe
Commenting on the results, Martin Hunt, CEO of TSL, said:
"This was our first full year as a publicly quoted company and has been one of
substantial progress. We have made a significant investment in the business as
planned and as a result, we are seeing the returns through increased revenues
and margins in our core surgical and implant market, the launch of our first
injectable product and the completion and commissioning of our new manufacturing
unit. We continue to build the product platform to support further growth and
we remain on course to achieve profitability without having to return to the
market for external funding."
Enquiries:
TSL plc Tel: 01252 333 002
Martin Hunt, Chief Executive
Financial Dynamics Tel: 020 7831 3113
Melanie Toyne-Sewell / Samantha Robbins
Notes to Editors
Background on TSL
Founded in 1995 with headquarters in Aldershot, Hampshire, TSL has used its
proprietary technology to launch successfully two different formulations of the
product and build a development pipeline that addresses the large and fast
growing surgical implant and woundcare markets. The Company floated in November
2001 and is listed on the Alternative Investment Market.
TSL has a family of products based on the same core technology. Each product
has been adapted, with unique properties, to make it suitable for use in
different applications. PelvicolTM/PermacolTM Surgical Implant (SI) is sold
by Bard in the US and Europe for urology and gynaecology applications;
PermacolTM SI (general surgery) is sold for complex hernia repair in the US and
Europe; PermacolTM SI (ENT, plastic and reconstruction) is sold in Europe for
head and neck applications, with an expected US launch in 2003; PermacolTM
Injection (UBA) is an injectable form of PermacolTM used as a urethral bulking
agent to treat female stress incontinence. Further variations of the sheet and
injectable forms of PermacolTM are being developed for facial augmentation and
reconstruction, and wound therapy applications.
Bard is a trademark of C.R. Bard, Inc. or an affiliate.
Chief Executive's Statement
Review of 2002
The year of 2002, our first full year as an AIM listed company, has been one of
tangible progress for TSL. We have made significant investment in sales and
marketing infrastructure, clinical research and manufacturing capacity as
planned. As a result of this investment, we have increased revenues and margins
in our core surgical implant market, launched our first injectable product and
completed and commissioned our new manufacturing unit in Swillington, Yorkshire.
Strategy & Outlook
Our strategy remains focused on achieving sales growth through the
commercialisation of our core technology by expanding existing product
applications, exploiting new geographical markets and further developing our
product portfolio. We will continue to invest in highly targeted product
development and clinical programmes with a view to delivering further revenue
growth in 2003 and beyond.
We continue to build the platform to support further significant growth in 2003.
We have sufficient cash resources at December 2002 and remain on course to
achieve profitability and cash generation without the requirement for further
external funding.
Financial Review
The Company increased its product sales by 90% to #3.1m (2001: #1.6m) with
significant growth being achieved both in existing market sectors, principally
urology/gynaecology, and through the development of new applications for
PermacolTM sheet implant in the field of general surgery for hernia repair. Our
commission-based sales team in the USA was established in June and expanded in
the second half of the year. The team has made a significant contribution to
revenue growth in the year with sales of #0.4m (2001: nil). A further milestone
was reached with the launch of PermacolTM Injection for the treatment of female
stress incontinence in the last quarter of the year.
Gross margins improved to 48% (2001: 11%) reflecting our move from sub-contract
to in-house manufacturing and the volume and sales mix benefits arising from the
launch of larger sizes of PermacolTM surgical implant.
Research and development expenditure of #1.4m (2001: #1.3m) was incurred in the
year in respect of the clinical trial for PermacolTM Injection UBA and other
product development activities. Administrative expenses increased largely due to
increased investment in marketing of #0.7m (2001: #0.4m), reflecting the
development of our business in the US and as a result of higher insurance
premiums of #0.4m (2001: #0.1m). Net losses were #2.3m (2001: #3.4m including
exceptional expenses of #0.4m).
The second half of 2002 saw a steady weakening of the US dollar, a threat to our
dollar revenue streams. The Board took steps to protect revenues by hedging a
proportion of US dollar currency exposure.
The basic loss per ordinary share of 10.5p compares to a loss per ordinary share
of 25.6p for 2001.
The Company retained a solid cash position as at December 2002 of #5.4m (2001:
#8.7m).
Overall, results were broadly in line with our revised forecasts in terms of
total revenues and significantly better than expected in terms of retained
losses and the Company's cash position.
Operational Review
Sales and Marketing
Revenues for PermacolTM Surgical implant have grown strongly in 2002 and our
strategy is to market this product either directly or through marketing or
distribution partners according to the market and the surgical application being
addressed. The current marketing position for PermacolTM Surgical Implant can be
summarised as follows:
PermacolTM Surgical Implant Marketing 2002/2003:
Application Market Regulatory Route to Market
Status
Urology/Gynaecology Worldwide 510K Marketing partner - CR Bard Inc*
General/Hernia UK CE Mark Direct UK sales team
General/Hernia Europe CE Mark National level distributors for main European markets
General/Hernia US 510K Direct 'commission only' US sales teams
Cranio/Maxillo Facial TBA 510K Marketing partner - TBA
Orthopaedic TBA 510K Marketing partner - TBA
*Marketed as 'Pelvicol'
PermacolTM Surgical Implant
- Urology/Gynaecology - CR Bard Inc
CR Bard has worldwide rights to the sheet form of our technology in the field of
urology and gynaecology where it is used for pelvic floor repair and in the
treatment of incontinence. Following the launch in Europe in 2000 and in the US
in 2001, sales of PelvicolTM have grown strongly. In 2002, CR Bard's European
and US operations recorded in-market sales growth of 114% and 100% respectively.
The PelvicolTM brand now represents annual sales for Bard of $10m (2001:
$5m). In 2002, total revenues to TSL on sales of PelvicolTM increased to #2.3m
(2001: #1.4m). To support further sales growth and market penetration, Bard has
increased both sales force time and marketing spend on PelvicolTM for 2003. As
announced in January, we have signed an agreement with Bard to develop a new
product in this field, for launch in the second half of 2003.
- General Surgery - Hernia Repair
Our direct sales and marketing team has been selling PermacolTM Surgical Implant
in the UK since 1998 and has enjoyed considerable success in the field of hernia
repair. With this in mind and in the absence of a marketing partner offering us
synergy in general surgery, we launched our commission-only sales team in the US
in June 2002, initially deploying 6 representatives. This team promotes
PermacolTM for difficult and recurrent hernias where traditional mesh is either
not indicated or has to be removed. The size of this market sector is estimated
at $120m pa. The response from US general surgeons has been very positive and,
as a result, we have built our team up more quickly than originally envisaged to
35 representatives by the end of 2002. From a zero base, we achieved US sales of
$0.6m in 2002, with particular success from larger sizes of PermacolTM in
response to demand from surgeons. We plan further recruitment and we
anticipate continued sales growth in this key target market in 2003.
- Cranio/Maxillo Facial - Head and Neck
The TSL sales team in the UK has sold PermacolTM into the head and neck field
since 1998 and has demonstrated the benefits of the technology in a range of
surgical procedures. Since being awarded a 510k regulatory approval for the US
market in January 2002, our strategy has been to identify an appropriate
marketing partner for PermacolTM Surgical Implant in this field, worth an
estimated $60m pa. Discussions with potential partners are ongoing and we
remain confident that the right deal for TSL will be completed in the short to
medium term. Whilst our preference is for a marketing partner to be appointed,
in the event that a distribution deal is not completed in the above time frame,
our strategy, as stated in the interim results, will be to market PermacolTM in
this field directly via our commission-based sales team in the US.
- Orthopaedic - Rotator Cuff Repair
In November, we announced the award of another 510k approval for PermacolTM
Surgical Implant for the treatment of rotator cuff injuries of the shoulder.
This condition is a common occurrence with age or overuse, and as a result of
sporting injuries. Severe cases can require surgical intervention and repair.
In the US, there are some 300,000 rotator cuff injuries every year, 15% of which
suffer from post surgical tearing. We estimate that the immediate target market
in the US for TSL is worth between $45m and $70m per annum. Our sales team in
the UK have been targeting this surgical procedure with success during 2002, and
we are actively seeking a marketing partner to exploit this opportunity in the
US and other key markets.
- PermacolTM Injection - Urethral Bulking Agent
In August, we announced the limited European launch of our first injectable
product for the treatment of female stress incontinence, an area of significant
unmet medical need. Marketed directly in the UK by our sales team, our first
sales of this product were made by the year-end. Our strategy is to focus sales
and marketing resource on this area in the coming year and we will rollout the
product into the core European markets as distributors are identified and
signed.
The key market for this product will, however, be the USA with an estimated 7.7m
sufferers of this condition. Our current clinical activity is expected to
support US regulatory submission in 2003 for product approval anticipated in
2004.
Clinical Programmes
- PermacolTM Injection (Urethral Bulking Agent)
Patient recruitment for this major clinical trial was completed in June. A
twelve-month period of patient follow-up will result in a submission to the FDA
for a PMA (Pre-Marketing Approval) by the end of 2003 with product approval
anticipated in late 2004.
- Pilot clinical studies
Utilising our in-house resource, we continue to conduct our own pilot studies
and to work with surgeons in assessing our technology for particular
applications. During 2002, several such studies have been completed and
submitted for publication in peer review journals. This is a highly cost
effective way to generate clinical data and we will continue to invest in this
area in 2003.
Research
Whilst TSL is principally focused on development at this stage in its evolution,
we also have research programmes running in academic institutions, for which we
have secured Government grants. We have a SMART award from the DTI to
investigate the growth of cells in our collagen matrix, and a MedLINK award from
the NHS, in conjunction with Northwick Park Institute for Medical Research,
looking at how such cellular infiltration could be applied to wound care
products. We expect to be in a position to review the technical outcome and
commercial potential of these programmes in late 2003.
Regulatory
During the year, we have been active in making regulatory submissions to gain
access to new markets such as Canada, Australia, and Korea. Once gained, these
approvals will represent a useful extension to the marketing potential of our
products.
Manufacturing
2002 saw a major step forward for TSL with the completion and regulatory
validation of our new production facility at Swillington, Yorkshire. Building
and fit-out was completed on budget and the operation has been designed to meet
FDA requirements, accepted as being the most rigorous medical device approval
standards. European regulatory validation of the facility was completed in
November when qualification of the production unit to the new ISO 9000 2000
standard was achieved. The first shipment of product from the facility has now
been delivered to customers. This represents a commendable achievement for our
manufacturing, regulatory and quality assurance teams and we thank them for
their considerable endeavours in the year.
Staff
The year saw further investment in the TSL team, particularly in the areas of
marketing, new product development and manufacturing. We are delighted with the
progress made during the year, which has only been made possible by our ability
to attract and retain high calibre staff. On behalf of the Board, I thank the
entire TSL team for their continuing efforts and look forward to further success
in the coming year.
Current Trading and Outlook
In September we updated the financial markets with our expectations for our
business in 2003, with full year revenue growth in 2003 expected at a comparable
rate to that achieved in 2002. I am pleased to report that current trading
remains in line with these expectations.
Martin Hunt
Chief Executive Officer
Tissue Science Laboratories plc
Consolidated Profit & Loss Accounts for the Year Ended 31 December 2002
Year Ended Year Ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
TURNOVER: 3,167 1,706
Cost of Sales (1,651) (1,512)
Gross Profit 1,516 194
Selling & Distribution costs (644) (302)
Administrative Expenses
Research and development costs (1,397) (1,293)
Other administrative expenses (2,287) (1,522)
Exceptional administrative expenses - (184)
Total administrative expenses (3,684) (2,999)
Operating Loss (2,812) (3,107)
Interest Receivable 217 28
Interest Payable & similar charges
Bank & finance lease interest (20) (54)
Exceptional finance costs - (239)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,615) (3,372)
______ ______
Tax on ordinary activities 285 -
RETAINED LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,330) (3,372)
______ ______
Basic loss per ordinary share (pence) 10.5 25.6
All amounts relate to continuing operations.
There were no recognised gains and losses for the current or preceding period
other than those included in the profit and loss account.
No dividend has been paid or is payable in either the current or prior periods.
Tissue Science Laboratories plc
Consolidated Balance Sheet as at 31 December 2002
Year Ended Year Ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
Fixed Assets
Tangible assets 1,576 857
Current Assets
Stocks 386 172
Debtors 1,005 875
Cash at bank and in hand 5,445 8,711
6,836 9,758
Creditors: amounts falling due within one year (1,824) (1,925)
NET CURRENT ASSETS 5,012 7,833
Total assets less current liabilities 6,588 8,690
Creditors: amounts falling due after more than one year (346) (176)
NET ASSETS 6,242 8,514
______ ______
CAPITAL & RESERVES
Called up share capital 2,212 2,212
Share premium account 12,477 12,477
Shares to be issued 104 46
Merger reserve 545 545
Profit & loss account (9,096) (6,766)
EQUITY SHAREHOLDERS' FUNDS 6,242 8,514
______ ______
Tissue Science Laboratories plc
Consolidated Cash Flow Statement for the year ended 31 December 2002
Year Ended Year Ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
Net cash outflow from operating activities (2,889) (2,274)
Returns on investment and servicing of Finance 195 (265)
Taxation 285 -
Capital expenditure & financial investment (1,018) (626)
Cash outflow before use of liquid resources & financing (3,426) (3,165)
Financing
Net cash inflow from financing 205 11,720
(Decrease)/increase in cash in the period (3,222) 8,555
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS
(Decrease)/increase in cash in the period (3,222) 8,555
Cash (inflow) from movement in debt & lease financing (205) (249)
Change in net funds resulting from cash flows (3,427) 8,306
New finance leases (19) -
Currency translation difference (43) (5)
Movement in net funds in the period (3,489) 8,301
Net funds brought forward 8,435 134
Net funds carried forward 4,946 8,435
Tissue Science Laboratories plc
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2002 or for the year
ended 31 December 2001, but is derived from those accounts. Statutory accounts
for the year ended 31 December 2001 have been delivered to the Registrar of
Companies and those for the year ended 31 December 2002 will be delivered
following the Company's annual general meeting. The auditors have reported on
those accounts; their reports were unqualified and did not contain statements
under s237(2) of (3) Companies Act 1985.
The financial statements for the year ended 31 December 2002 have been prepared
after taking into account the financial reporting standard FRS 19, Deferred tax.
The adoption of FRS 19 has had no impact on the Company's financial statements.
The accounting policies adopted are consistent with those adopted in the
previous period except for the application of FRS 19.
2. TURNOVER
Year ended Year ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
A geographical analysis of turnover by destination is as follows:
United Kingdom 383 183
Europe 634 221
USA 2,150 1,302
3,167 1,706
______ ______
An analysis of turnover by class of business is as follows:
Product sales 3,105 1,636
Milestone income 62 70
3,167 1,706
______ ______
3. EXCEPTIONAL ITEMS
Year ended Year ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
Administrative expenses
Patent cost written off - 130
Flotation costs not chargeable to share premium account - 54
- 184
Interest payable and similar charges
Costs associated with obtaining bridging loan finance - 239
4. LOSS PER SHARE
Year ended Year ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
Loss per ordinary share has been calculated based on the weighted average
number of ordinary shares in issue during the period
Loss for the period (2,330) (3,372)
Basic loss attributable to ordinary shareholders (2,330) (3,372)
Weighted average number of ordinary shares 22,119,338 13,161,477
Loss per share 10.5p 25.6p
5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Year ended Year ended
31 December 31 December
2002 2001
(Audited) (Audited)
#000s #000s
______ ______
Operating loss (2,812) (3,107)
Depreciation and impairment of tangible fixed assets 322 297
(Increase) in debtors (127) (716)
(Increase) in stocks (213) (115)
(Decrease)/increase in creditors (157) 1,316
Profit on disposal of fixed assets (4)
Foreign exchange loss/gain 43 5
Shares to be issued 59 46
(2,889) (2,274)
This information is provided by RNS
The company news service from the London Stock Exchange
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