TIDMGDR
RNS Number : 4065T
Genedrive PLC
25 March 2021
genedrive plc
("genedrive" or the "Company")
Half Year Report
genedrive plc (LSE: GDR), the near patient molecular diagnostics
company, announces unaudited interim results for the six months to
31 December 2020.
Financial Highlights
-- Total revenue and other income of GBP0.4m (2019: GBP0.6m)
including pathogen detection orders from the US Department of
Defense. COVID-19 headwinds continued to impact the Company's HCV
and DoD commercial operations.
-- Operating loss of GBP2.9m (2019: GBP2.6m)
-- All loan notes converted into ordinary shares in the period, leaving the Company debt free
-- Finance income of GBP3.6m (2019: GBP0.8m costs) on conversion
of loan notes, reverting the Company's position to net assets of
GBP5.3m (30 June 2020: GBP3.3m net liabilities)
-- R&D spend of GBP2.3m (2019: GBP2.3m)
-- Cash of GBP3.8m at 31 December 2020 (30 June 2020: GBP8.2m)
-- Cash of GBP2.8m as of 15 March 2021 with R&D tax credit of GBP1.0m still owing
Operating Highlights (including post period)
-- Cooperation Agreement with Beckman Coulter Life Sciences
("Beckman") for Genedrive 96 SARS-Cov-2 Kit validation with Beckman
extraction chemistry. Moved to commercial distribution agreement
into Europe and USA post period end with first Beckman purchases
(circa $400k) in February 2021
-- Significant opportunity with European MoH remains active and
ongoing and, if successful, could be low double-digit millions of
pounds in revenue
-- COVID-19 headwinds continued to impact the Company's HCV and DoD commercial operations
-- AIHL test, the Genedrive(R) MT-RNR1 ID kit completed
implementation studies in Manchester and Liverpool Hospitals.
Product on track for summer 2021 commercial launch with good Key
Opinion Leader engagement.
-- Regulatory approvals for the 96 SARS-CoV-2 kit still
outstanding with WHO and FDA. Timings are uncertain.
-- New commercial partnership with Mountain Horse Solutions to provide better access to DoD
-- Point of Care ("POC") COVID-19 test still under development
and timelines extended to maintain important product
differentiation characteristics including rapid test results, full
biosafety to users, and extraction free chemistry
David Budd, CEO of genedrive plc, commented:
During 2020 the Company's development focus moved to the global
COVID PCR testing opportunity. While commercial progress has been
slowed by registration requirements, the Company made great strides
in the development of our COVID test portfolio, POC test platform
development, scalable manufacturing capability, and a commercial
distribution arrangement with Beckman Coulter that has the
potential to be significant and lang-term. Much of our focus has
shifted away from low and middle income markets to more western
markets with DoD, AIHL, and COVID, driven by the market dynamics
and restrictions of travel. These markets however work under
standard commercial terms and cycles, and offer more predictable,
and often higher margin commercial opportunities, and we anticipate
this focus will remain for the foreseeable future."
genedrive plc +44 (0)161 989 0245
David Budd: CEO / Matthew Fowler:
CFO
Peel Hunt LLP (Nominated Adviser
and Joint Broker) +44 (0)20 7418 8900
James Steel / Oliver Jackson
finnCap (Joint Broker) +44 (0)20 7220 0500
Geoff Nash / Kate Bannatyne / Alice
Lane
Walbrook PR Ltd (Media & Investor +44 (0)20 7933 8780 or genedrive@walbrookpr.com
Relations)
+44 (0)7980 541 893 / +44 (0)7876
Paul McManus / Anna Dunphy 741 001
About genedrive plc ( http://www.genedriveplc.com )
genedrive plc is a molecular diagnostics company developing and commercialising
a low cost, rapid, versatile, simple to use and robust point of need
molecular diagnostics platform for the diagnosis of infectious diseases
and for use in patient stratification (genotyping), pathogen detection
and other indications. The Company has assays on market for the detection
of HCV, certain military biological targets, and has tests in development
for tuberculosis (mTB). The Company recently released a high throughput
SARS-CoV-2 assay and has in development a Genedrive(R) Point of Care
version of the assay, both based on Genedrive(R) chemistry.
INTERIM MANAGEMENT REPORT
In April 2020 the Company made the strategic decision to refocus
the resources of the business towards COVID-19 testing, a step
driven both by our experience and capability in PCR test
development, and the headwinds we started to see in our on-market
assays as a result of the pandemic. An equity raise in May 2020
generated GBP8.0m to help fund development of a rapid high
throughput test and a longer-term point-of-care test based on the
Genedrive(R) platform. Investments here have started to reap
returns in the first half of 2020/21 and we have seen the emergence
of our first revenues and commercial leads that have the potential
to support the Company over the coming years.
COVID-19
High Throughput Genedrive(R) 96 SARS-COV 2 Kit
genedrive's expertise in lyophilised (freeze-dried and
temperature stable) PCR chemistry provides a unique opportunity for
the Company to service a global market cheaply and easily. Coupled
with the expertise of Cytiva's bead manufacturing, genedrive has
been able to bring a range of high volume, standardised, consistent
quality 96-well plate tests to the market.
The initial Genedrive(R) 96 SARS-COV 2 Kit was launched in the
summer of 2020 on Roche Lightcycler formats and post-launch we
expanded the range of platforms to include the ABI 7500 FAST and
BioRad CFX96. We also made a number of refinements to the product
to incorporate extraction requirements of key customers and to
improve on our data analysis tool, Genedrive(R) Exporter.
During the period we acquired some smaller customers via
distributors, but the focus of the Company has been on securing
larger more strategic opportunities. In January 2021 we announced
that Beckman Coulter Life Sciences ("Beckman") had contracted to be
a distributor across the USA and Europe. This relationship began as
a collaboration to validate the Genedrive(R) PCR kit on the Beckman
Biomek automated workstation using Beckman RNA extraction
chemistry. We completed validation of our kit, and this
distribution agreement gives the Company reason to be optimistic of
the potential Beckman brings in terms of expertise, reach and a new
sales channel into the USA, which we did not have previously. The
first sales to Beckman were completed in February 2021 ($0.4m) to
support an aggressive marketing campaign by Beckman, and we expect
material orders as the Beckman sales activities progress and
customers are acquired for the Genedrive(R) test. In addition we
are still actively engaged in an opportunity with a European
Ministry of Health as we communicated in December 2020. This
remains an active opportunity for genedrive and, if successful, the
total revenue could be low double digit millions (pounds) over a
short period of time with the opportunity for future additional
business as well. We expect to make a significant impact with our
high-throughput test in the opportunities with Beckman or the
European Ministry of Health could be transformational for the
Company.
The strongest headwind on our ability to acquire customers is
the speed of regulatory approvals. We continue to experience delays
in gaining the key regulatory approvals from the FDA, WHO and in
India. In May 2020, approvals were occurring rapidly, but the
urgency of regulatory bodies in granting new approvals has
subsided. There are no confirmed timelines for these processes and
despite lodging our file claims over Summer 2020 we are unable to
affect the speed with which our submissions might get reviewed. In
India our application has been repeatedly frustrated by test
requirements that are neither documented nor communicated to
applicants. Although our application remains on-going but we are
reducing our attention on the market as there appears no certainty
of a positive outcome against unknown requirements. We are
currently importing into the USA while our FDA EUA has been applied
for, which is permitted under FDA regulations. Lack of EUA reduces
the potential customer base but we have proceeded on this basis
with the full support of Beckman. We have obtained regulatory
approval in Europe, in South Africa and Thailand. Performance in
external trials (covering over 200 samples across four sites) has
been very good, and we remain confident in the performance of the
product. The Company has implemented a regular review process of
emerging viral variants, and to date the reported strains have not
adversely affected our assay design.
Point of Care
As the market for COVID-19 testing develop further, we see many
opportunities for deployable and accurate molecular tests at the
point of care ("POC"). Lateral flow tests are being widely deployed
specifically in the UK and we believe the current laboratory based
testing infrastructure will have to be supplemented with on-site
PCR confirmations for many settings. We remain committed to the
future contribution the Genedrive(R) unit can make in POC testing
and to the Company.
In October the Company announced that Genedrive(R) chemistry had
been adapted to detect the SARS-CoV-2 virus direct from saliva,
within 15 minutes for positive samples, and a full negative cycle
taking approximately 20 minutes. Our intention is to develop this
test to full manufacture on the Genedrive(R). Variable behaviour of
external commercial synthetic COVID-19 controls in the POC test
development has resulted in some delay in our release timing.
Despite this technical issue, we have identified complementary
approaches and are focussed on releasing a product in calendar Q2
2021 with differentiated, core performance features based on either
saliva or swabs that we believe will provide competitive advantage.
We continue to plan a two phase release, with the second phase
migrating to bead based chemistry to reduce costs and increase
scalability
While the high throughput COVID testing market size has matured,
decentralised opportunities are evolving rapidly. We believe that
the market need for focussed, accurate rapid testing solutions are
increasing, and that in many cases only molecular POC solutions can
provide the sensitivity needed. Our target product profile remains
extremely attractive and suited to the potential of the
Genedrive(R) platform in occupational, healthcare, or potentially
even school settings.
PATHOGEN DETECTION (DoD)
Orders in the period to the DoD generated revenues of GBP0.3m
(2019: GBP0.3m). This includes orders for Genedrive(R) units from a
new customer within the DoD for evaluation and review. We
understand there is a high level of interest from the potential new
customer (previously indicated a potential of 500 units over three
years) and we had expected to be entering into contract
negotiations and volume discussions in Autumn 2020. Owing to
COVID-19 distraction in the US, we have not seen the timeline
progress as we had expected.
The Company has found liaising commercially with the US DoD
without specialist US representation challenging and so in March
2021 the Company contracted with Mountain Horse Solutions as its
distributor of the Pathogen detection assays in the USA. This
relationship will be an important next step to drive product uptake
with both our existing customer base and with new departments and
branches of the US military. Mountain Horse have existing framework
agreements with the DoD which provide for more rapid order
placement and replenishment without the need for new contracts to
be negotiated, as well has having a breadth of experience and
contacts in the specialised field of CBRNE [1] . We are confident
this new arrangement will help to grow the DoD business and that
Pathogen Detection can make a significant contribution to the
Company in the future.
ANTIBIOTIC INDUCED HEARING LOSS (AIHL)
The AIHL assay is the first use of a Point of Care diagnostics
test in neonatal emergency setting. The assay screens for a genetic
mutation that can cause profound hearing loss following
administration of certain antibiotics. The AIHL assay gives an
accurate result in 27 minutes, allowing clinicians time to
prescribe alternatives antibiotics and avoid the lifelong impacts
to hearing in the estimated 1 in 500 affected by the genetic
defect.
The AHIL assays was CE marked in December 2019 and performance
trials commenced at Manchester University NHS Trusts and
Liverpool's Women's hospital in January 2020. These trials
successfully completed in November 2020 with in excess of 750
babies tested and all valid test results confirmed as 100% accurate
through genetic sequencing. We expect the results of the trial to
be published in clinical papers shortly, but the overall output is
very positive proving the utility of a genetic test in an emergency
setting.
Following launch we expect a number of early adopters, including
those involved in the trials, to acquire the test to facilitate
neonate testing and publications such as the recent Government
guidance on the management of specific genetic mutation and their
impact on hearing loss will help build awareness and users. Our
next steps will be to work with key opinion leaders and paediatric
bodies to get the use of the AIHL assays written into best practise
guidance, at which point its adoption should become more standard
across the NHS. In the longer term we will work to build a European
and US market for a product that has equal applicability across the
globe. The product remains on track for commercial launch in Summer
2021 and we expect this assay to be a significant pillar to the
future of the Company.
HEPATITIS C (HCV)
Despite attaining WHO pre-qualified status in May 2020, the HCV
assay has continued to be affected by headwinds associated with
COVID-19. We have seen a continuous stream of activity across our
markets for HCV product, but as healthcare systems and funds are
focused extremely heavily on COVID-19 the activity has not
generated sales and revenues from HCV have been low. Long term we
still see the HCV market as attractive for genedrive and there is
still interest from WHO tenders and in various pockets across the
globe - however meaningful revenues are likely 12 months away from
when COVID-19 is more controlled and health systems able to return
to more normal activities.
FINANCIAL RESULTS
Revenue for the period was GBP0.4m (2019: GBP0.6m). Of total
revenues, the vast majority was related to our pathogen detection
assay sold to the DoD with small additional amounts on HCV, grant
income and some early plate sales of our 96-SARS-COV 2 kit.
Research and development costs were GBP2.3m (2019: GBP2.3m), as we
continued our efforts on development activities for our COVID-19
assays. Administration costs were GBP954k (2019: GBP901k). The
trading loss for the period was GBP2.9m (2019: GBP2.6m).
Financing income of GBP3,552k (2019: GBP765k costs) is the
reduced value of the convertible loan notes issued to Business
Growth Fund ("BGF") of GBP3.9m (2019: GBP246k debit), offset by
normal interest accruals on the long-term liability of GBP310k
(2019: GBP772k). These movements are non-cash and the final issue
of shares to BGF on 16 December 2020 terminated the loan and all
remaining commitments thereunder.
After financing costs, the profit before taxation was GBP0.6m
compared to the prior period loss of GBP3.3m. The profit increases
to GBP1.0m (2019: GBP3.0m loss) after estimating the six-month
taxation credit as GBP370k (2019: GBP290k). The basic income per
share was 1.9p (2019: 8.9p loss per share).
Cash Resources
The operating loss for the period was GBP2.9m (2019: GBP2.6m)
and working capital consumption was GBP1.2m, a contrast to the
prior year (GBP0.1m) as we built stocks and purchased raw materials
related to our 96 SARS-COV 2 Kit . Net cash out-flows from
operations were significantly up at GBP4.1m (2019: GBP1.7m) and as
the R&D tax credit was not received in the period (2019:
GBP971k) the net cash flow from operating activities was also
GBP4.1m.
There were some small investments in capital equipment as we
brought in additional diagnostics analysers to support development
of our 96 SARS-COV 2 Kit. Contingent consideration from
discontinued operations were GBP137k (2019: nil) and we have
GBP122k remaining on the balance sheet .
GBP359k was paid to settle cash interest on the convertible loan
note to BGF (2019: GBPnil), leaving total cash outflows for the
period of GBP4.4m (2019: GBP1.7m). Closing cash was GBP3.8m (2019:
GBP3.5m) but with GBP1.0m owing for the R&D tax credit (2019:
GBPnil owing). The cash balances at 15 March 2021 were GBP2.8m with
approximately GBP1.4m owing on the R&D tax credit and
receivables; the current burn rate without further material
revenues is around GBP0.4m per month.
Balance Sheet
Balance sheet net assets at 31 December 2020 totalled GBP5.3m
(30 June 2020: GBP3.3m net liabilities). The large change on the
net position of the balance sheet in the period is owing to the
consolidated profit of the period of GBP1.0m (2019: GBP3.0m loss)
as well a large positive movement on the conversion of the loan
note. When converted to shares, the liabilities attached to the
loan note were reversed through reserves and this created a credit
of GBP7.6m that was split across the Share Premium and Accumulated
losses.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Company's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Directors do not consider that these principal risks and
uncertainties have changed materially since publication of the
annual report for the year ended 30 June 2020; a more detailed
explanation of the risks for the Company can be found on page 21 of
the annual report.
Going Concern
As detailed in Note 1 to these financial statements, the
Directors have concluded that it is necessary to draw attention to
the revenue and cost forecasts in the business plans and the
uncertainty that surrounds revenues especially in relation to the
Company's Covid assays. In order for the Company to continue as a
going concern, there is a requirement to achieve a certain level of
sales. If an adequate sales level cannot be achieved to support the
Group and Company, the Directors have the options to reduce ongoing
spend and seek additional funds from shareholders or debt
providers. While the Board is confident that it will achieve the
required revenue, and has a successful track record in both
reducing costs and raising funds, there remains uncertainty as to
the level of sales that will be achieved in the forthcoming months,
especially in light of on-going regulatory delays on the
Genedrive(R) 96 SARS CoV-2 test and the delays on the POC product,
in addition to uncertainty around the amount of cost reduction that
may be required and the amount of funding that could be raised from
shareholders or debt providers. This combination of factors
represents a material uncertainty that may cast significant doubt
on the Group and
Company's ability to continue as a going concern. The directors
have reviewed cashflows models of expected revenues and have
sensitized these models for various downsides and based on the
relative likelihood of achieving versus not achieving these
forecasted revenues the Board believe it is appropriate to continue
to adopt the going concern basis of accounting in preparing these
financial statements. These financial statements do not include the
adjustments that would result if the Company was unable to continue
as a going concern.
OUTLOOK
Whilst the speed of commercialisation of the 96 SARS-COV 2 Kit
has been slower than anticipated owing to delays in regulatory
approvals, the post period end contract with Beckman and the
on-going opportunity with a European Ministry of Health provide us
with optimism for the remainder of our financial year. Looking
further ahead the POC potential for Genedrive(R) remains and while
we have focused on refining our solution we are confident that
despite the delays there will be a place in the market for a fast
accurate and deployable solution for PCR testing. Further, we have
taken steps to accelerate the potential of AIHL and the DoD and
also expect near term revenue contribution from these areas.
While cognisant of the need for cash generative revenues the
Board is confident in the strategy to focus on larger commercial
opportunities in the COVID-19 space and expect progression from
this strategy in the coming months, alongside progress with the
commercialization of AIHL, DoD and HCV products.
David Budd
Chief Executive Officer
Dr I Gilham
Chairman
25 March 2021
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2020
Six months Six months
ended ended Year ended
31 December 31 December
2020 2019 30 June 2020
Unaudited Unaudited Audited
Note GBP000 GBP000 GBP000
Revenue & other income (4) 355 627 1,059
Research and development costs (2,332) (2,293) (4,673)
Administrative costs (954) (901) (2,026)
Operating loss (4) (2,931) (2,567) (5,640)
----------- ----------- ------------
Finance costs (5) 3,552 (765) (14,744)
Profit/ (Loss) on ordinary activities
before taxation 621 (3,332) (20,384)
----------- ----------- ------------
Taxation on ordinary activities 370 290 965
Profit/ (Loss) for the financial
year from continuing
operations 991 (3,042) (19,419)
----------- ----------- ------------
Total Comprehensive Income/
(Expense) for the period 991 (3,042) (19,419)
----------- ----------- ------------
Earnings/ (Loss) per share (pence)
from continuing operations
-Basic 1.9p (8.9p) (55.0p)
-Diluted 1.8p (8.9p) (55.0p)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2020
Other Accumulated
Share Capital Reserves Losses Total
GBP000 GBP000 GBP000 GBP000
At 30 June 2019 510 28,112 (31,100) (2,478)
-------------- ---------- ------------ ---------
Share issue - deferred consideration 13 (13) - -
Equity -settled share based
payments - 16 - 16
-------------- ---------- ------------ ---------
Transactions settled directly
in equity 13 3 - 16
-------------- ---------- ------------ ---------
Total comprehensive expense
for the financial period - - (3,042) (3,042)
-------------- ---------- ------------ ---------
At 31 December 2019 523 28,115 (34,142) (5,504)
-------------- ---------- ------------ ---------
Share issue 150 7,383 - 7,533
Share issue - conversion of
GHIF bond 107 7,092 3,777 10,976
Equity -settled share based
payments - 30 - 30
-------------- ---------- ------------ ---------
Transactions settled directly
in equity 257 14,505 3,777 18,555
-------------- ---------- ------------ ---------
Total comprehensive loss for
the financial period - - (16,377) (16,377)
-------------- ---------- ------------ ---------
At 30 June 2020 780 42,620 (46,742) (3,342)
-------------- ---------- ------------ ---------
Share issue - conversion of
BGF bond 167 2,332 5,167 7,666
Equity -settled share-based
payments - 14 - 14
-------------- ---------- ------------ ---------
Transactions settled directly
in equity 167 2,346 5,167 7,680
-------------- ---------- ------------ ---------
Total comprehensive income for
the financial period - - 991 991
-------------- ---------- ------------ ---------
At 31 December 2020 947 44,966 (40,584) 5,329
-------------- ---------- ------------ ---------
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 31 December 2020
31 December 31 December 30 June
2020 2019 2020
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
Non-current assets
Intangible assets - - -
Plant and equipment 432 130 147
Contingent consideration receivable 47 153 47
----------- ----------- ---------
479 283 194
Current assets
Inventories 707 125 413
Trade and other receivables 373 605 398
Contingent consideration receivable 75 106 212
Current tax asset 1,398 300 1,018
Cash and cash equivalents 3,793 3,499 8,218
----------- ----------- ---------
6,346 4,635 10,259
Liabilities
Current liabilities
Deferred income - (77) (67)
Trade and other payables (1,245) (1,052) (2,129)
Lease liabilities (37) - -
----------- ----------- ---------
(1,282) (1,129) (1,217)
Net current assets 5,064 3,506 8,063
Total assets less current liabilities 5,543 3,789 8,257
Non-current liabilities
Lease liabilities (214) - -
Convertible bonds (7) - (9,293) (11,599)
Net assets/ (liabilities) 5,329 (5,504) (3,342)
----------- ----------- ---------
Capital and reserves
Called-up equity share capital
(8) 947 523 780
Other reserves (9) 44,966 28,127 42,620
Retained earnings (40,584) (34,154) (46,742)
----------- ----------- ---------
Total shareholder equity/ (deficit) 5,329 (5,504) (3,342)
----------- ----------- ---------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2020
31 December 2020 31 December 2019 30 June
(unaudited) (unaudited) 2020
(audited)
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ---------------- ---------------- ----------
Cash flows from operating activities
Operating loss for the year (2,931) (2,567) (5,640)
Depreciation and amortisation on non-leased assets 29 33 57
Loss on disposal of fixed assets - 2 -
ATL Research credits (10) (10) (53)
Share - based payment 15 16 32
---------------------------------------------------------------- ---------------- ---------------- ----------
Operating loss before changes in working capital and provisions (2,897) (2,526) (5,604)
Increase in inventories (294) (2) (290)
Decrease/ (increase) in trade and other receivables 25 (49) 158
Decrease in deferred revenue (67) (11) (21)
(Decrease)/ increase in trade and other payables (884) (77) 1,000
---------------------------------------------------------------- ---------------- ---------------- ----------
Net cash outflow from operations (4,117) (2,665) (4,757)
---------------------------------------------------------------- ---------------- ---------------- ----------
Tax received - 971 971
---------------------------------------------------------------- ---------------- ---------------- ----------
Net cash outflow from operating activities (4,117) (1,694) (3,786)
---------------------------------------------------------------- ---------------- ---------------- ----------
Cash flows from investing activities
Finance income 4 10 13
Finance costs- (15) - (15)
Receipt of contingent consideration 137 - -
Acquisition of plant and equipment and intangible assets (61) (1) (40)
Net cash inflow/ (outflow) from investing activities 65 9 (42)
---------------------------------------------------------------- ---------------- ---------------- ----------
Cash flows from financing activities
Proceeds from share issue - - 7,546
Cash paid to settle convertible bonds (359) - (685)
---------------------------------------------------------------- ---------------- ---------------- ----------
Net (outflow)/ inflow from financing activities (359) - 6,861
---------------------------------------------------------------- ---------------- ---------------- ----------
Net (decrease)/ Increase in cash equivalents (4,411) (1,685) 3,033
Effects of exchange rate changes on cash and cash equivalents (14) - 1
Cash and cash equivalents at beginning of period/ year 8,218 5,184 5,814
Cash and cash equivalents at end of period/ year 3,793 3,499 8,218
---------------------------------------------------------------- ---------------- ---------------- ----------
Analysis of net funds
Cash at bank and in hand 3,793 3,499 8,218
---------------------------------------------------------------- ---------------- ---------------- ----------
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
1. General information
genedrive plc ('the Company') and its subsidiaries (together
'the Group') is a molecular diagnostics business developing and
commercialising a low cost, rapid, versatile, simple to use and
robust point of need diagnostics platform for the diagnosis of
infectious diseases and for use in patient stratification
(genotyping), pathogen detection and other indications. The Company
is a limited liability company incorporated and domiciled in the
UK. The address of its registered office is 48 Grafton Street,
Manchester, M13 9XX. The Company has its listing on AIM.
The financial information for the period ended 31 December 2020
and similarly the period ended 31 December 2019 has been neither
audited nor reviewed by the auditor. The financial information for
the year ended 30 June 2020 has been based on information in the
audited financial statements for that period. The interim financial
statements for the period ended 31 December 2020 do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the year ended 30 June
2020 has been delivered to the Registrar of Companies, the accounts
had an unqualified audit opinion and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006 but did
include a reference to a material uncertainty that might cast
significant doubt over the Group's ability to continue as a going
concern, to which the auditor drew attention by way of
emphasis.
These interim financial statements were approved by the Board of
Directors on 25 March 2021.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods represented in
these consolidated financial statements.
2. Significant accounting policies
Basis of accounting
The consolidated interim financial statements consolidate those
of the Company and its subsidiaries (together referred to as the
"Group"). They are presented in pounds sterling and all values are
rounded to the nearest one thousand pounds (GBPk) except where
otherwise indicated.
Subsidiaries are entities controlled by the Group. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases. Transactions between Group companies are
eliminated on consolidation.
Going concern:
The financial statements have been prepared on a going concern
basis. The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the strategic report and Chairman's statement in the
Annual Report and financial statements for the period ended 30 June
2020.
The Financial Reporting Council issued "Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies" in 2009,
and "Guidance on the Going Concern Basis of Accounting and
Reporting on Solvency and Liquidity Risks" in 2016. The Directors
have considered these when preparing the interim financial
statements.
The Directors have concluded that it is necessary to draw
attention to the revenue and costs forecasts in the business plans
and the uncertainty that surrounds revenues especially in relation
to the Company's Covid assays. In order for the Company to continue
as a going concern, there is a requirement to achieve a certain
level of sales and there is a level of uncertainty surrounding
these sales especially in relation to the Covid assays. If an
adequate sales level cannot be achieved to support the Group and
Company, the Directors have the options to reduce ongoing spend or
seek additional funding from shareholders. While the Board is
confident that it will achieve the required revenue, and has a
successful track record in both cutting costs and raising funds,
there remains uncertainty as to the level of sales that will be
achieved, the amount of cost reduction that may be required and the
amount of funding that could be raised from shareholders. This
combination of factors represents material uncertainty that may
cast significant doubt on the Group and Company's ability to
continue as a going concern.
In arriving at these conclusions the Directors have:
-- Reviewed cash flow forecasts extending to 30 April 2022.
These cashflows included a number of various outcomes as part of
scenario modelling.
-- Considered a base scenario using the Directors best estimates
of costs and revenues in the current financial year to 30 June 2021
and beyond.
-- Sensitized the revenue in the base case scenario down by 55%
and assumed that the Directors take some cost reduction steps in
terms of projects and investment programmes, but without affecting
headcount.
-- Reviewed an extreme downside scenario in which there were no
new revenues in the forecast period and that included both
headcount and non-headcount cost reductions that are within the
Company's control.
The base and sensitized cash flow forecasts do not include any
mitigating factors available to management in terms of reducing the
headcount of the business - which is a significant cost driver. In
all scenarios there remains the option for the Company to raise
additional funds from shareholders or debt providers, a path where
the Group has a successful recent track record
The majority of the cashflow models indicate that the Company
can trade throughout the period to 30 April 2022. However the
headroom under the extreme downside scenario is not significant and
indicates that the Company would have to raise additional funds to
continue as a going concern to April 2022.
There are not believed to be any contingent liabilities which
could result in a significant impact on these cashflows if they
were to crystallise.
Based on the relative likelihood of achieving versus not
achieving the cashflow models, the Board believe it is appropriate
to continue to adopt the going concern basis of accounting in
preparing these interim financial statements. These interim
financial statements do not include the adjustments that would
result if the Company was unable to continue as a going
concern.
New accounting standards adopted in the period
There have been no new accounting standards adopted in the
period that have had a material impact on the financial
statements.
Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation were the same as those
that applied to the consolidated financial statements for the year
ended 30 June 2020, with the exception of changes in estimates that
are required in:
- determining the provision for taxation; and
- valuing the conversion of the GHIF and BGF convertible
loans.
Revenue recognition
a. Product sales
Sales of goods are recognised when all the performance
obligations have been completed and when the Group entity has no
continuing managerial involvement nor effective control over the
goods. The transfer of control of goods can pass at various points
depending on the shipping terms of the contract with the customer,
they can be at collection from a premises or delivery to the
relevant port or customer designated premises. Where items are sold
with a right of return, accumulated experience is used to estimate
and provide for such returns at the time of sale.
b. Collaboration and licensing revenue
Contractually agreed upfront payments and similar non-refundable
payments in respect of collaboration or licence agreements which
are not directly related to ongoing research activity are recorded
as deferred income and recognised as revenue over the anticipated
duration of the agreement. Where the anticipated duration of the
agreement is modified, the period over which revenue is recognised
is also modified.
Non-refundable milestone and other payments that are linked to
the achievement of significant and substantive technological or
regulatory hurdles in the research and development process are
recognised as revenue upon the achievement of the specified
milestones.
Income which is related to ongoing research activity is
recognised as the research activity is undertaken, in accordance
with the contract. Activity is measured based on progress and
milestones and not cost.
c. Other income - development grant funding
Income receivable in the form of Government grants to fund
product development is recognised as development grant funding over
the periods in which the Group recognises, as expenses, the related
eligible costs which the grants are intended to compensate and when
there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the income will be received.
Government grants whose primary condition is that the Group should
purchase or otherwise acquire non-current assets are recognised as
deferred revenue in the Consolidated Balance Sheet and transferred
to the Consolidated Statement of Comprehensive Income on a
systematic and rational basis over the useful lives of the related
assets.
Research and development
Research expenditure is written off as it is incurred.
Development expenditure is written off as it incurred up to the
point of technical and commercial validation. Thereafter, costs
that are measurable and attributable to the project are carried
forwards as intangible assets subject to meeting certain
criteria.
Intangible assets
Intangible assets are stated at cost less accumulated
amortisation and any accumulated impairment losses. Amortisation is
calculated so as to write off the cost of an intangible asset, less
its estimated residual value, over the useful economic life of that
asset. All intangible assets are subject to impairment review and
amortisation in each financial reporting period. In assessing value
in use, the estimated future cash flows are discounted to their net
present values using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to that asset.
Right of use asset
A right-of-use asset is recognised at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before the commencement
date net of any lease incentives received and any initial direct
costs incurred
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the Group expects to
obtain ownership of the leased asset at the end of the lease term,
the depreciation is over its estimated useful life. Right-of use
assets are subject to impairment or adjusted for any remeasurement
of lease liabilities.
The Group has elected not to recognise a right-of-use asset and
corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on
these assets are expensed to profit or loss as incurred
Foreign currencies
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet
date. Non-monetary items carried at fair value and denominated in
foreign currencies are retranslated at the rates prevailing on the
date when fair value is determined.
Exchange differences arising on the settlement of monetary items
and on the retranslation of monetary items are taken to the
Consolidated Statement of Comprehensive Income. Exchange
differences arising on non-monetary items, carried at fair value,
are included in the income statement, except for such non-monetary
items in respect of which gains and losses are recorded in equity
.
Share-based payments
The Group issues equity settled and cash-settled share-based
payments to certain employees (including directors). Equity settled
share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity
settled share-based payments is expensed on a straight-line basis
over the vesting period, together with a corresponding increase in
equity, based upon the Group's estimate of the shares that will
eventually vest.
Fair value is measured using the Black-Scholes pricing model.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Where the terms of an equity settled transaction are modified,
as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in
the value of the transaction as a result of the modification, as
measured at the date of modification.
Where an equity settled transaction is cancelled, it is treated
as if it had vested on the date of the cancellation, and any
expense not yet recognised for the transaction is recognised
immediately. However, if a new transaction is substituted for the
cancelled transaction, and designated as a replacement transaction
on the date that it is granted, the cancelled and new transactions
are treated as if they were a modification of the original
transaction, as described in the previous paragraph.
Cash settled share based payments are fair valued at the date
services are delivered. A liability is created on the balance sheet
for the value received. Until the liability is settled, the fair
value is adjusted at each accounting period with changes reported
in the profit and loss for that period.
Financial instruments (including convertible bonds)
Financial instruments are classified and accounted for,
according to the substance of the contractual arrangement, as
either financial assets, financial liabilities or equity
instruments. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities.
As disclosed in note 19, the Company has in issue a convertible
bond which is a compound instrument comprising a liability
component, or debt host, and an equity derivative component.
On initial recognition, convertible bonds are recorded at fair
value net of issue costs. The initial fair value of the debt host
is determined using the market interest rate applied by a market
participant for an equivalent non-convertible debt instrument.
Subsequent to initial recognition, the debt host is recorded using
the effective interest method until extinguished on conversion or
maturity of the bonds.
The amortisation of the debt host and the interest payable in
each accounting period is expensed as a finance cost.
Equity derivatives embedded in the convertible instruments which
are required to be recorded as financial liabilities are initially
recognised at fair value. At each reporting date, the fair values
of the derivative are reassessed by management. Where there is no
market for such derivatives, the Company uses option pricing models
to measure the fair value.
The amortisation of the debt host, interest payable in the
period and gains or losses on the fair value of the derivative are
disclosed with finance income and costs detailed in note 5.
3. Revenue
Income receivable in the form of Government grants to fund
product development is recognised as development grant funding when
the related eligible costs are incurred and recognised, GBPnil
(2019: GBP0.3m).
4. Operating segments
Diagnostic Segment Administrative Total
Costs
Six months ended 31 December 2020 GBP'000 GBP'000 GBP'000
Revenue and other income 355 - 355
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Segment EBITDA (1,818) (911) (2,729)
Less depreciation and amortisation (159) (43) (202)
Operating loss (1,977) (954) (2,931)
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Net Finance income 3,552
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Profit on ordinary activities before
taxation 621
Taxation
Loss for the financial 370
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Profit for the financial period 991
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Diagnostic Segment Administrative Total
Costs
Six months ended 31 December 2019 GBP'000 GBP'000 GBP'000
Revenue and other income 627 - 627
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Segment EBITDA (1,650) (884) (2,534)
Less depreciation and amortisation (16) (17) (33)
Operating loss (1,666) (901) (2,567)
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Net Finance costs (765)
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Loss on ordinary activities before taxation (3,332)
Taxation
Loss for the financial 290
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Loss for the financial period (3,042)
-------------------------------------------- ----- ---- ------------------- --------------- ---------
Diagnostic Segment Administrative Total
Costs
Twelve months ended 30 June 2020 GBP'000 GBP'000 GBP'000
Revenue and other income 1,059 - 1,059
--------------------------------------------------------- ------------------- --------------- -----------
Segment EBITDA (3,584) (1,999) (5,583)
Less depreciation and amortisation (30) (27) (57)
Operating loss (3,614) (2,026) (5,640)
--------------------------------------------------------- ------------------- --------------- -----------
Net Finance costs (14,744)
--------------------------------------------------------- ------------------- --------------- -----------
Loss on ordinary activities before taxation (20,384)
Taxation 965
Loss for the financial 63
--------------------------------------------------------- ------------------- --------------- -----------
Loss for the financial period (19,419)
--------------------------------------------------------- ------------------- --------------- -----------
5. Net Finance income/ (costs)
31 December cember 31 December cember 30 June
2020 2019 2020
GBP000 GBP000 GBP000
----------------------------------------------------------------- ------------------- ------------------- ---------
Net interest income on bank deposits 4 10 13
Movement in fair value of derivative embedded in convertible
bond 3,864 (246) (13,807)
Finance cost of convertible bond measured at amortised cost (290) (810) (808)
Finance lease costs (26) - -
Foreign exchange movement in convertible bond - 281 (142)
3,552 (765) (14,744)
----------------------------------------------------------------- ------------------- ------------------- ---------
6. Earnings per share
The basic earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders for the year by the
weighted average number of ordinary shares in issue during the
year. The weighted average number of shares in issue during the
period was 53,348,586 (2019: 34,100,566 ). Potentially dilutive
options, after proceeds from conversion, add 1,289,692 shares to
basic weighted average number of shares in issue (2019: nil).
7. Convertible Bonds
GHIF GHIF BGF BGF Total Total
Host Derivative Host Derivative Host Derivative Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 June 2019 6,048 143 2,150 177 8,198 320 8,518
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Finance cost 620 - 180 - 800 - 800
Amortisation of arrangement
fees - - 10 - 10 - 10
Movement in fair value
of embedded derivative - 88 - 158 - 246 246
Foreign exchange movement
(GHIF) (281) - - - (281) - (281)
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Balance at 31 December
2019 6,387 231 2,340 335 8,727 566 9,293
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Finance cost (133) - 105 - (28) - (28)
Amortisation of arrangement
fees - - 26 - 26 - 26
Arrangement costs - - (15) - (15) - (15)
Movement in fair value
of embedded derivative - 4,753 - 8,808 - 13,561 13,561
Foreign exchange movement
(GHIF) 423 - - - 423 - 423
Balance prior to settlement 6,677 4,984 2,456 9,143 9,133 14,127 23,260
Payment of cash at settlement
date (685) - - - (685) - (685)
Conversion to shares at
settlement date (5,992) (4.984) - - (5,992) (4,984) (10,976)
Balance at June 2020 - - 2,456 9,143 2,456 9,143 11,599
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Finance cost - - 189 - 189 - 189
Amortisation of arrangement
fees - - 101 - 101 - 101
Movement in fair value
of embedded derivative - - - (3,864) - (3,864) (3,864)
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Balance prior to settlement - - 2,746 5,279 2,746 5,279 8,025
Payment of cash at settlement
date - - (359) - (359) - (359)
Conversion to shares at
settlement date - - (2,387) (5,279) (2,387) (5,279) (7,666)
Balance at 31 December
2020 - - - - - - -
------------------------------- --------- ------------ --------- ------------ --------- ------------ ---------
Global Health Investment Fund 1 LLC (GHIF)
On 21 July 2014, the Company entered into a Collaboration and
Convertible Bond Purchase Agreement ('Agreement') with the Global
Health Investment Fund 1 LLC ('GHIF'). The purpose of the Agreement
was to fund the Company's development, production and
commercialisation of Genedrive(R) to address Global Health
Challenges and achieve Global Health Objectives. Further, as part
of the Agreement, GHIF and the Company entered into a Global Access
Commitment.
On 23 June 2016, the Company and GHIF entered into a Deed of
Amendment & Restatement of the Agreement, which came into
effect on 11 July 2016. The principal effects of the Deed of
Amendment were to extend the maturity of the GHIF Bond by two years
to 21 July 2021. To split the GHIF Bond into two tranches: the
first tranche of US$2m has a Conversion Price of GBP1.50 per
Ordinary Share and the second tranche of US$6m has a Conversion
Price remaining at GBP4.89 per Ordinary Share.
During the year to 30 June 2019, the Company entered into a
second deed of amendment with the Global Health Investment Fund 1
LLC that became effective on the 10 December 2018. The principal
effects of the Deed of Amendment were extend the maturity date from
December 2021 to December 2023 and change the Conversion Prices on
the two tranches from 150p to 28.75p and from 480p to 150p.
On 6 June 2020, GHIF exercised its rights to convert tranches 1
and 2 simultaneously. Under the terms of the conversion, GHIF was
allotted and issued 7,100,000 new ordinary shares, which was the
capped number of shares which can be issued under the convertible
bond, and was also be paid approximately GBP685k in cash reflecting
the balance of accrued interest owed, in full satisfaction of the
obligations of the Company under the convertible bond. As part of
the conversion, GHIF has entered into a lock-in and orderly
marketing agreement with Peel Hunt LLP, the Company's Nominated
Adviser and Joint Broker. Under this arrangement 5,100,000 of the
GHIF shares are subject to an orderly marketing agreement until 30
June 2021 and the remaining 2,000,000 GHIF shares will not be sold
prior to 30 June 2021 (subject to various carve outs).
The derivative was measured at fair value at 31 December 2019
and at the settlement date using a Quanto Option Valuation model
which takes account of the multicurrency aspects of the convertible
bond. Changes in fair value were recorded in profit and loss.
Business Growth Fund (BGF)
The Company entered into an agreement with the BGF that became
effective on the 10 December 2018. Under the terms of the agreement
BGF and the Company entered into a convertible loan arrangement.
The main terms of the convertible loan note were a conversion price
of 28.75p, interest on the loan of 7% payable quarterly and a
maturity date of June 2025. The loan note came with a conditional
GBP1m subscription to the Company's December 2018 fund raise.
On 30 September 2020, BGF exercised its right to convert
GBP1,000,000 of its GBP2,500,000 Loan Note instrument into new
ordinary shares of 1.5p each in the Company. Under the conversion
BGF was allotted and issued 4,478,681 new ordinary shares and was
paid approximately GBP134,000 in accrued interest owed on this
tranche of the loan.
On 16 December 2020, BGF exercised its right to convert the
remaining GBP1,500,000 of its GBP2,500,000 Loan Note instrument
into new ordinary shares of 1.5p each in the Company. Under the
conversion BGF was allotted and issued 6,718,022 new ordinary
shares and was paid approximately GBP226,000 in accrued interest
owed on this tranche of the loan.
The derivative was measured at fair value at 31 December 2019,
30 June 2020 and at the settlement dates using a Black-Scholes
pricing mode and changes in fair value were recorded in profit and
loss.
8. Share capital
Allotted, issued and fully paid:
No GBP'000
---------------------------------- ----------- ----------
Balance at 30 June 2019 34,000,506 510
----------------------------------- ----------- ----------
Shares issued 869,565 13
----------------------------------- ----------- ----------
Balance at 31 December 2019 34,870,071 523
----------------------------------- ----------- ----------
Share issue 10,000,000 150
Share issue- equity settled
share based payments 16,000 -
Share issue - conversion of
GHIF bond 7,100,000 107
----------------------------------- ----------- ----------
Balance at 30 June 2019 51,986,071 780
----------------------------------- ----------- ----------
Share issue- equity settled
share based payments 9,711 -
Share issue - conversion of
BGF loan note 4,478,681 67
Share issue - conversion of
BGF loan note 6,718,022 100
----------------------------------- ----------- ----------
Balance at 31 December 2020 63,192,485 947
----------------------------------- ----------- ----------
On 10 December 2021 the Company will issue 500,000 shares in
genedrive plc to the former owner of Visible Genomics as part of a
Deed of Amendment agreed in December 2018 to the Visible Genomics
Sale and Purchase Agreement.
9. Other Reserves
Employee
Share Shares Share Share Reverse
Premium to be Incentive Options Acquisitions
Account issued Plan Reserve Reserve Reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 30 June 2019 29,003 315 (196) 1,486 (2,496) 28,112
--------- -------- -------------- --------- -------------- -----------
Issue of shares 187 (200) - - - (13)
Equity -settled share
based payments - - - 16 - 16
--------- -------- -------------- --------- -------------- -----------
Transactions settled
directly in equity - - - 16 - 16
--------- -------- -------------- --------- -------------- -----------
At 31 December 2019 29,190 115 (196) 1,502 (2,496) 28,115
--------- -------- -------------- --------- -------------- -----------
Share issue 7,383 - - - - 7,383
Share issue - conversion
of GHIF bond 7,092 - - - - 7,092
Equity settled share-based
payments 14 - - 16 - 30
--------- -------- -------------- --------- -------------- -----------
At 30 June 2020 43,679 115 (196) 1,518 (2,496) 42,620
--------- -------- -------------- --------- -------------- -----------
Share issue - conversion
of BGF loan note 2,332 - - - - 2,332
Equity settled share-based
payments 7 - (7) 14 - 14
At 31 December 2020 46,018 115 (203) 1,532 (2,496) 44,966
--------- -------- -------------- --------- -------------- -----------
[1] Chemical Biological Radiological Nuclear and Explosive
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IR EAPDLAESFEFA
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