4BB 4basebio Plc

4basebio PLC
("4basebio", the "Company" or the “Group”)

Half-yearly for the six months ended 30 June 2021

4basebio PLC (AIM: 4BB) (formerly 4basebio UK Societas), the specialist life sciences group focused on exploiting intellectual property in the field of cell and gene therapies and DNA vaccines, announces its unaudited half-yearly results for the six months ended 30 June 2021.

Operational Highlights (including post period end)

• Conversion to PLC status following approval at the Annual General Meeting
• DNA manufacturing facility expected to be completed by year end
• Positive validation studies on use of 4basebio synthetic DNA versus plasmid DNA
• Multiple patent filings across DNA synthesis and nanoparticle delivery technology
• Evaluation and collaboration licence agreements signed with Royal Holloway

Financial Highlights

• Cash balances of £12.1 million at period end
• Cash runway into 2023 before calling on available debt facility
• Loss for the period of £1.7 million (H1 2020 loss:  £0.38 million)
• Net cash outflow from operating activities of £1.7 million  (H1 2020: £0.51 million )

Commenting on the interim results, Dr. Heikki Lanckriet, CEO and CSO, said “We are extremely pleased with the progress achieved during the first half of 2021.  In particular, we are increasingly confident that during the course of 2022 we will be able to manufacture meaningful quantities of DNA for resale.  Initially this will be for research and pre-clinical purposes while we look to secure GMP approvals for our manufacturing suites.  We are also very pleased to confirm that as expected, we intend to be completing those manufacturing suites by the end of 2021.

As we move towards manufacturing capacity, our aim is to work with prospective customers to highlight the benefits of our technologies.  We remain very positive about the commercial prospects of both our synthetic DNA and non-viral vector technology across a range of applications.”

For further enquiries, please contact:

Notes to Editors

4basebio (AIM: 4BB) is a specialist life sciences group focused on therapeutic DNA for cell and gene therapies and DNA vaccines and providing solutions for effective and safe delivery of these DNA based products to patients. It is the intention of the Company to become a market leader in the manufacture and supply of high purity, synthetic DNA for research, therapeutic and pharmacological use and develop non-viral vectors for the efficient delivery of payloads. The immediate objectives of 4bb are to validate and scale its DNA synthesis and advance its collaborations to facilitate the functional validation of its DNA based products and cell and gene delivery solutions.

Chairman’s Statement

Introduction

Following shareholder approval of the Annual General Meeting held on 30 June 2021, the Company subsequently completed its conversion to a PLC from a UK Societas upon its registration at Companies House on 20 July 2021.

The Board is pleased to report that 4basebio continues to make good progress during the first half of the year in validating and commercialising 4basebio DNA and nanoparticle delivery technology.  The Group has established strong R&D groups in both the UK and Spain which have been able to focus on improving and scaling processes surrounding its synthetic DNA manufacture as well as also strengthening its intellectual property, with patent filings across its portfolio.

4basebio has also made excellent progress in validating its DNA, being able to demonstrate strong performance of its synthetic DNA in comparison with plasmid DNA through a number of programmes. 

Also as previously noted, it remains our intention to have DNA manufacturing in place by the end of 2021 with a view to commencing sale of DNA during 2022.  We remain firmly on track to achieve these objectives.  We also continue to explore further commercial applications for our DNA and nanoparticles as outlined below.

Operational Review

As we reported in our 2020 Annual Report, the Group remains pre-revenue and it is focussed on the development of its DNA synthesis and non-viral vector technology.  Both technologies have broad application in gene and cell therapy as well as vaccines.  We see particular opportunities opening up in AAVs (adeno-associated viral vectors) for gene therapy and in-vitro transcription (IVT) for the production of mRNA vaccines.

With the objective of reaching commercial DNA manufacturing as swiftly as possible, the decision was made during H1 to develop both AAV and mRNA research laboratories within our Cambridge facility for the purpose of optimising DNA constructs for use in these applications.  Both labs are now operational with recruitment ongoing and with the near-term objective of being able to place our DNA products into the hands of prospective customers for testing within their own AAV and mRNA systems. 

During the second half of 2021 the product and technology application focus is expanding to include gene editing and cell therapy based applications with the recruitment of relevant expertise underway. 

Alongside the focus on construct optimisation and application research, there is continued development work on the upscaling of DNA production for commercial sale.  With this objective central in our thinking, we have commenced work on our pilot 4,400 square foot clean room installation; and we expect this to be complete by the end of 2021.  This will provide for seven DNA synthesis suites. The facility will then undergo testing and validation with a view to becoming operational during Q1 2022 and with the intention of manufacturing research and pre-clinical grade DNA while working to secure GMP accreditation during the remainder of 2022.

The earmarked capital commitment for this project is about £1.5 million. When fully operational, the theoretical production capacity of this facility, at prevailing market prices is expected to exceed £25 million per annum.

Following consideration of the overall resource requirements for the DNA and nanoparticle sides of the business, it has been decided to expand research laboratory space within the existing Cambridge facility.  As a result, the clean room installation will be located in a separate facility also near Cambridge and four miles from head office. (The Company has secured a lease over this site for a period of 15 years, with suitable break clauses.) The manufacturing suites and associated quality management systems will be operated by a dedicated team, which will work independently in this standalone production facility.

A key consideration in executing on our strategy is the ability to recruit appropriately skilled team members.  The Group is competing for candidates in a rapidly growing market segment but despite these challenges, 4basebio has continued growing its teams, with Group headcount expected to be about 35-40 FTEs by year end.

Alongside these developments, the Group continues to file patent applications relating to further innovation around hpDNA™, osDNA™ and Hermes™ nanoparticles.  We have filed our first two applications protecting the use of Hermes™ nanoparticles for specific applications as well as additional filings protecting hpDNA™ and osDNA™ manufacturing processes and uses.  We believe continued investment in intellectual property is a cornerstone of enhancing the value of the Group’s technology.

As noted earlier, 4basebio also continues to progress its collaboration projects including its project with Royal Holloway focussed on Duchenne muscular dystrophy, with 4basebio screening for an optimised delivery vector.   Whilst the overall project is expected to run for two years; we are pleased to note that certain aspects are progressing more quickly than originally planned.  In particular, 4basebio has made very good progress in in-vitro models in identifying nanoparticles with strong affinity for muscle cells; and we are now progressing to in-vivo models to validate and optimise these particles.

Coronavirus

The impact of COVID-19 on operations has been very modest.  The Group continues to adhere to local COVID protocols in the UK and Spain.

Business outlook

The Group expects to continue investing in its technologies and team members during 2021 and 2022.  Modest non-core revenues are expected at levels consistent with previous periods; ongoing expenditure will continue to be much greater than revenues, with the Group consequently recording a loss for the year.  This is as previously indicated.

During the latter half of the year, 4basebio expects to make several further patent filings and continue with its range of research and development projects, both internally and with collaborators.  The Group also expects to have concluded the physical build out of its clean rooms by the end of 2021, with GMP certification being sought during the course of 2022. 

Financial Review

Comparative information

As explained in note 2 to the interim results, the prior period comparatives for the period ended 30 June  2020 reflect solely the financial performance and position of 4basebio S.L.U.  The results for period ended 31 December 2020 include 4basebio PLC and 4basebio S.L.U. for the whole year and 4basebio PLC’s UK subsidiaries from the date of the spin out, 8 December 2020.  The consolidated balance sheet as at 31 December 2020 includes 4basebio PLC and all subsidiary companies.

The results for the period ended 30 June 2021 and the consolidated balance sheet at that date reflect the consolidated performance and position of 4basebio PLC and all its subsidiary companies

Revenue

Revenue in the first six months of 2021 (“H1 2021”) was £0.18 million (H1 2020: £0.16 million ).  Consistent with previous periods, this reflects legacy revenue streams including kits sales and licence income.

Cost of sales

Cost of sales in H1 2021 was £38k (H1 2020:  £86k).  As noted in the 2020 Annual Report, cost of sales reflects primarily the amortisation on previously capitalised intangible assets linked to kit sales.

Selling and administration expenses

Selling, general and administrative expenses were a combined £1.2 million in H1 2021 (H1 2020: £0.24 million ). Prior period expenses reflect the expenditure in 4basebio S.L.U. only, while the current period includes the now significantly larger UK operations. 

Research and development

Overall research and development expenditure for H1 2021 was £0.86 million (H1 2020: £0.28 million ), of which £0.23 million was capitalised in the period (H1 2020: £0.14 million ).  Overall expenditure increased due to the expansion of the UK team which commenced late 2020 and remains ongoing.  Capitalised expenditure relates to platform research undertaken in Spain.

Tax

Tax represents R&D tax credits expected to be recovered in relation to expenditure during the first half of the year.

Balance sheet

Non-current assets increased to £2.5 million at 30 June 2021 from £2.3 million at 31 December 2020; this related to fixed asset additions in the UK.   Current assets fell to £12.8 million at 30 June 2021 from £15.5 million at 31 December 2020, due primarily to cash outflows during the first half of 2021.  As a result, closing cash balances at 30 June 2021 stood at £12.1 million (31 December 2020: £15 million).

Current liabilities decreased to £0.64 million at 30 June 2021 from £0.83 million at 31 December 2020 due to the repayment of softloans in the first part of the year.    Long term financial liabilities reduced due to reclassification of softloans from long term to short term liabilities.  As a result, overall long term liabilities stood at £1.3 million as at 30 June 2021 (31 December 2020: £1.5 million). Other long term liabilities represent deferred grant income in Spain.

Share Capital at both 30 June 2021 and 31 December 2020 reflects the capital contributions arising from the spin out process as explained in the Annual Report for 2020 and note 2 to the interim results.

Cash flow

Net cash outflows from operations were £1.7 million for the six months ended 30 June 2021 (period ended 30 June 2020: outflow of £0.53 million ).  This reflects the step change in operations between the periods as presented in the profit and loss account; in particular the upscaling of UK operations.   Operating cash outflows for the current period also include £360 thousand relating to the AIM listing in February 2021.

Cash outflows from investing reflect planned investments in capital expenditure across the group and capitalised development expenditure in 4basebio S.L.U..

Cashflows from financing for the period ended 30 June 2021 reflect Spanish softloan repayments, while the prior period shows net cash inflows from the then parent 4basebio AG (now 2Invest AG).  The large cash inflow for the year ended 31 December 2020 reflects the spin out process accounting as explained in the 2020 Annual Report.

Exchange differences for the period represent changes in the British pound value of cash balances held in foreign currency, almost entirely euro denominated.

Tim McCarthy
Chairman
30 September 2021

Consolidated statement of profit or loss and other comprehensive income
for the six months ended 30 June 2021

All of the loss for each period is from continuing operations.

Consolidated statement of financial position
  30 June 2021

Consolidated statement of changes in equity
for the six months ended 30 June 2021

Consolidated statement of cash flows
  for the six months ended 30 June 2021

Notes to the financial statements
For the six months ended 30 June 2021

1.General information

4basebio PLC, formerly known as 4basebio UK Societas, is registered in England and Wales as a public limited company since 20 July 2021. Prior to that date it was registered as a United Kingdom Societas under the name 4basebio UK Societas. The conversion to a public limited company occurred following shareholder approval of the conversion at its Annual General Meeting held on 30 June 2021.  With the conversion, the name of the Company changed to 4basebio PLC.

The Company is domiciled in England and the registered office of the Company is 25 Norman Way, Over, Cambridge, CB24 5QE.  4basebio PLC is the parent of a group of companies.  The group structure remains the same as that shown in the Company’s financial statements for the year ended 31 December 2020.  The Group focusses on life sciences and in particular the development of synthetic DNA and nanoparticles suitable for inclusion in, or delivery of, therapeutic payloads for cell or gene therapies and gene vaccines.

The interim report was approved by the board of directors on 29 September 2021.

The Company trades on London Stock Exchange’s AIM market, having been admitted on 17 February 2021.  The international securities number (ISIN) number for its AIM traded shares changed on 29 July 2021 to GB00BLD8ZL39 reflecting the conversion to a PLC; its ticker symbol is 4bb.l.

2.Significant accounting policies

Basis of preparation

As set out in the Company’s annual report and financial statements for the year ended 31 December 2020, the directors considered the circumstances giving rise to the formation of the Group and relevant guidance in IFRS 3.B13 to IFRS 3.B17, and concluded that the combination, on 8 December 2020, in which the Company issued 8,622,231 shares to the shareholders of its former parent entity as consideration for the spin-off assets comprising shareholdings in 4basebio S.L.U. and 4basebio Limited (now 4basebio U.K. Limited), should be treated as a continuation of 4basebio S.L.U. at historic book values for the purposes of the Company’s statutory financial statements.

Therefore, this consolidated interim financial information for the six months ended 30 June 2021 is in substance the continuation of the financial information of 4basebio S.L.U. The consolidated financial information for the six months ended 30 June 2021 comprises the results of 4basebio S.L.U., 4basebio UK Limited, 4basebio Discovery Limited and 4basebio PLC for the full period presented. The financial information for the comparative period ended 30 June 2020 precedes the date of the combination and, consequently, reflects the results and position of 4basebio S.L.U.  This financial information does not constitute statutory accounts but has been prepared under IFRS and in accordance with the group accounting policies disclosed in the Company’s statutory financial statements for the year ended 31 December 2020, as well as the share based payments accounting policy described below.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Statement of Comprehensive Income over the vesting period. The fair value is measured at the date of grant and spread over the period during which the employees become unconditionally entitled to the options. The fair value of options granted under the share option schemes is measured using a probability adjusted Black Scholes model.  Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. The estimated probability of market vesting conditions is factored into the fair value of the options granted. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting period.

Significant judgments

The significant judgments made in relation to the financial statements are further set out below.

Going concern

The directors have, at the time of approving the interim report, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Internally?generated intangible assets – research and development expenditure

Development expenditure is capitalised when the conditions referred to in Note 2 of the Company's 2020 annual report are met. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

3.Foreign currencies

The functional currency of the Group is British Pounds.

The principal currency rate of the Group other than the British Pounds is the euro which has developed as follows in relation to the equivalent of one pound (GBP/£):

4.Revenues

5.Income taxes

The Group anticipates claiming R&D tax credits in both the UK and Spain in relation to the year ended 31 December 2021.  The quantum of such claims for the first half of the year is estimated at £197 thousand.

The tax loss carry forwards for which no deferred tax assets were recognised across the Group amounted to approximately £10.8 million (31 December 2020: £10.0 million).

6.Loss per share

7.Intangible assets

8.Property, plant and equipment

9.Cash and cash equivalents

10.Equity

The share capital of 4basebio PLC as of 30 June 2021 and 31 December 2020 amounts to a total of €12,317,473 divided into 12,317,473.  These are all registered ordinary shares. There are no shares with special rights or other restrictions on voting rights.

Share-based payments

During the period, 542,000 options to subscribe for shares in the Company were granted to employees with an exercise price of £1.18 per share and a further 42,500 options to subscribe for shares in the Company were granted to employees with an exercise price of £3.65 per share.

The options vest partially on grant and then periodically over four years, subject to market and non-market facing performance conditions.  A share-based payments charge is recognised as an expense in the profit or loss over the vesting period, taking account of the estimated number of shares that will vest and the probability of achieving market facing vesting conditions. The fair value of awards granted in the period was measured at the date of grant using a probability adjusted Black–Scholes option pricing model. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. The estimated probability of market vesting conditions being met is factored into the fair value of the options granted.

A share-based payments charge of £35,000 has been expensed in the period with a corresponding amount recognised in equity based on fair values of between £0.23 and £1.44 per option, as at the dates of grant.

11.Events after the reporting period

Conversion to public limited company

On 20 July 2021 the Company was formally converted from a UK Societas to a public limited company, following the approval of shareholders at the Annual General Meeting of 30 June 2021.