TIDMPRM
RNS Number : 8520L
Proteome Sciences PLC
24 April 2018
24 April 2018
Proteome Sciences plc
("Proteome Sciences" or the "Company")
Preliminary results for the year ended 31 December 2017
Notice of AGM
The Company is pleased to announce its audited results for the
year ended 31 December 2017.
Highlights:
-- 23% revenue growth to GBP3.38m, underpinned by 79% increase
in sales and royalties attributable to TMT(R) reagents.
-- Appointment of our first Chief Commercial Officer in April
2017 to relaunch the biomarker services business which has led to
the engagement of sales agents in our principal operating
territories.
-- Closure of the London laboratory in June 2017, with
consolidation of all equipment and capabilities at our existing
Frankfurt facility.
-- Relocation of the Company headquarters from Cobham to the
'knowledge quarter' in central London
-- Receipt of Good Clinical Laboratory Practice (GCLP)
accreditation in October 2017 enabling our engagement in clinical
stage contracts.
-- Achievement of research milestone following the presentation
of data from a prospective trial using the Randox Rapid Stroke
Array.
Post year-end:
Extension of our exclusive licence agreement with Thermo
Scientific to include patents relating to a new class of high-plex
TMT(R) reagents.
Jeremy Haigh, Chief Executive Officer of Proteome Sciences plc,
commented:
"2017 was a year of significant change inside the Company with
the successful implementation of numerous strategic initiatives and
steady progress towards our financial goals. With the benefits of a
leaner organisation, a new model for commercial engagement deployed
in both our principal operating territories, and the reassurance of
robust demand for our TMT(R) reagents, we now have the platform
necessary to realise the full value of our proteomic capabilities.
We look forward to strong progress during 2018, particularly growth
in our biomarker services business, and to providing further
updates during the course of the year."
Report and Accounts and Notice of AGM:
Copies of the Annual Report and Accounts together with notice of
the Annual General Meeting ("AGM") will be posted to shareholders
by 27 April 2018 and made available on the Company's website
(www.proteomics.com). The AGM will be held at the offices of
finnCap, 60 New Broad Street, London EC2M 1JJ on 30 May 2018 at
12.00pm.
For further information:
Proteome Sciences plc
Jeremy Haigh, Chief Executive Officer Tel: +44 (0)20 7043 2116
Ian Pike, Chief Scientific Officer
finnCap Limited (Nominated Adviser & Broker)
Geoff Nash/James Thompson (Corporate Tel: +44 (0)20 7220 0500
Finance)
Abigail Wayne (Broking)
About Proteome Sciences plc. (www.proteomics.com)
Proteome Sciences is a leader in applied proteomics offering
high sensitivity, proprietary technologies and workflows for
mapping cell signaling pathways (SysQuant(R) ) and for the
discovery, validation and assay development of protein biomarkers
(TMTcalibrator(TM) ). The company has its headquarters in London,
UK, with laboratory facilities in Frankfurt, Germany from where the
PS Biomarker Services(TM) division provides outsourced proteomics
services and proprietary biomarker assays to biopharmaceutical and
diagnostics companies and to academia.
Proteome Sciences has patented several novel protein biomarkers
for diagnostic and treatment applications in important areas of
human therapeutics such as cancer, stroke and Alzheimer's disease,
and these are available to license.
This announcement contains inside information for the purpose of
Article 7 of EU Regulation 596/2014
Chief Executive Officer's Statement
After a year of significant change inside the company, and
profound economic uncertainty outside, I am pleased to report a
solid 12 months ending 31 December 2017. Revenue increased 23% to
GBP3.38m, including a 79% increase in sales and royalties
attributable to isobaric tandem mass tag (TMT(R) ) reagents. Total
costs reduced by 4.5% to GBP5.43m reflecting the early impact of
consolidating our facilities and restructuring, which itself
generated one-off costs of GBP0.14m from discontinued operations.
Loss before tax was reduced to GBP2.05m but remained higher than
planned. Cash reserves at the year-end were GBP0.91m owing to the
payment of a material R&D tax credit being delayed into
2018.
In the first half of the year we implemented some important
elements of the strategy which had underpinned our fundraise late
in 2016, notably those affecting our physical footprint and
internal capabilities. The decision to integrate all laboratory
equipment and competencies at our existing facility in Frankfurt
was difficult given our UK heritage, and unfortunately resulted in
the redundancy of four staff members, but it has certainly enabled
more efficient resource utilisation and clearer accountabilities.
The associated relocation of the Company headquarters from Cobham
to central London in June has afforded us much greater connectivity
with the UK bioscience community and is a fundamental requirement
for successful partnership and collaboration. I am pleased that the
combination of these two transformational events was achieved with
only minimal cost and business disruption.
Given the critical strategic importance of commercialising our
proteomic services to the future success of the Company, I was
delighted to appoint Richard Dennis as our first Chief Commercial
Officer at the start of April. With a strong background in sales
and marketing, and extensive technical experience gained at several
competitor companies, Richard quickly transformed our commercial
identity and ambition with his focus on face to face selling,
account management, and an established client network across
Europe. His arrival heralded a relaunch of our services business
and inspired a complete review of our commercial practices
resulting in the adoption of an agent-based sales model in our
principal operating territories.
With the continuing growth of our TMT(R) reagents business,
through an exclusive licence with Thermo Fisher Scientific, the
Company is now well placed to deliver a hybrid model of product and
service provision which is increasingly favoured in the bioscience
community by customers seeking relationships with organisations
capable of broader engagement.
Like most other sectors in 2017, the life sciences were affected
by uncertainty surrounding Brexit, the unexpected outcome of the US
election and impending tax reforms. The combination of these events
saw many companies adopt a more conservative approach than in
previous years and this caution was particularly evident in
decision making around outsourcing and collaboration. As a small
company trying to establish a services business we were not immune
from the consequences and had to work hard building new
relationships that could generate future revenues. Significant
volatility in foreign exchanges throughout the year affected
non-sterling denominated revenues, as well as those costs
associated with our primary facility in Frankfurt, but the overall
effect on EBITDA was neutral.
Staff turnover was higher than in previous years, in part a
consequence of the dynamic environment in which we operate but also
of a strategic decision to reduce our operating costs through
natural and forced attrition. As we begin 2018 our budgeted
headcount of 29 will be approximately 30% lower than at the start
of 2017. This turnover included the departure in August of our
Finance Director, Geoff Ellis, who had made a significant
contribution to fiscal management and reporting during his
three-year tenure. We are fortunate to have had established
employees, in both Stefan Fuhrmann and Victoria Birse, who were
well qualified to assume the roles of Finance Director and Company
Secretary respectively.
After providing outstanding service and scientific insight over
20 years as a Director of the Company, Prof. William Dawson decided
to stand down in the summer. We thank him for his unique
contribution and are delighted to welcome Dr Ursula Ney to the
Board in his place. Dr Ney's extensive experience of the bioscience
industry in a range of senior positions within both large and small
companies make her ideally suited to a role on the Board at this
pivotal stage in the Company's evolution.
I would like to thank all the staff who worked for Proteome
Sciences during the course of 2017, including those who have since
left the Company, and trust that we can continue to realise the
value of their collective contributions.
Services:
The wholescale repositioning of our proteomic services business
was a basic tenet of the revised corporate strategy, and much of
the year was spent establishing and communicating this. Active
participation in the Alzheimer's Association International
Conference (AAIC), held in London during July, served as an
effective launch platform for this revised sales initiative as well
as demonstrating a more externally focused agenda.
A new commercial model was adopted from August in the critical
US market using United BioChannels (UBC) as our sales agent. UBC
provides us with introductions to prospective new customers and
broad coverage on both US coasts, replacing direct sales staff in
the region. With the prospect of working primarily on a commission
basis, this model represents a more cost-effective approach to
sales generation, and has been replicated in Europe from the start
of 2018 using Cenibra GmbH to access German speaking countries. We
have also partnered with Science Exchange, a US company which
facilitates rapid, no cost engagement of new customers using
pre-negotiated legal agreements, and Scientist.com, a web-based
sales portal. All market support activities have been moved outside
the organisation and will now be purchased as required in
London.
Central to our service provision is the creation of a quality
culture which can reassure prospective customers and provide a
distinctive selling feature. To that end, we were very pleased to
receive Good Clinical Laboratory Practice (GCLP) accreditation in
October, enabling us to compete effectively for clinical stage
contracts which command routinely larger budgets. This, combined
with our existing ISO 9001 recertification, makes our Frankfurt
facility uniquely well qualified to provide mass spectrometric
proteomic services to a broad range of clients; the advantages of
this are becoming increasingly evident through unsolicited
engagement via our website.
Of course, attracting and retaining new business will only
succeed if project execution matches customer expectations of time
and cost as well as quality. The introduction of a dedicated
project management function was a deliberate action to ensure
better cross functional integration, management and communication
of our contract service work; a series of project delivery metrics
has been established to reinforce this.
Progress, in terms of explicit revenue generation, was slow in
the first half of the year as might have been predicted while the
new commercial model was being introduced, but we were encouraged
by the increasing number of active commercial projects during the
second half. Starting from a very low revenue base we saw quarterly
growth from the second quarter onwards in terms of sales and orders
received. The pipeline certainly looks stronger in Q1'18 both for
new customers, interested in proof of concept experiments, and for
existing customers wishing to extend current projects or requesting
targeted assay development in support of forthcoming clinical
trials. These enquiries must now be routinely and quickly converted
into substantive work orders so that we can draw positive
conclusions about the longer-term commercial potential of our
services strategy.
Licences:
Our exclusive licence to provide Thermo Scientific with isobaric
tagging reagents (TMT(R) ) continues to be mutually beneficial.
Strong sales and associated royalty payments have been essential to
our revenue growth and demand increased throughout the year as
TMT(R) reinforced its market leadership position. Cumulative sales
have now exceeded $25m worldwide, a milestone which triggered a
significant additional payment that we received from Thermo
Scientific in the fourth quarter. Scope remains for considerable
further growth as adoption by key opinion leaders spreads to the
wider research community, and key to this will be the introduction
of 'higher plexing' reagents which enable even more efficient
sample analyses. Work to identify such new tags has been conducted
in close association with our partners at Thermo Scientific and we
hope that these improvements will start to become available during
2018.
Data from a prospective trial using the Randox Rapid Stroke
Array were presented at the EuroMedLab meeting in Athens in June.
The array, which incorporated some of our biomarkers, showed
excellent performance in identifying stroke from mimic conditions
and healthy controls, and in differentiating between ischaemic and
haemorrhagic strokes. These data were sufficient to trigger an
important contractual milestone with Randox which was announced on
30 June and, more critically, to suggest the utility of a future
diagnostic including stroke biomarkers covered by our intellectual
property (IP). Given the global incidence of stroke, and the
therapeutic liability associated with inaccurate clinical
diagnosis, the market opportunity for such a diagnostic is
considerable. However, a clinical validation study being supported
by Randox, and necessary for their CE (Conformité Européene) marked
application, will now take longer than originally communicated
owing largely to the speed of patient recruitment; a timeline has
yet to be set but is expected to extend into 2019.
Research:
The focus on service provision has inevitably constrained our
own primary research activities as we aggressively manage finite
resources, but we remain indisputably a science-based company with
a commitment to research through partnerships and collaboration. We
have retained a strong interest in neurodegeneration and oncology,
continuing our investment in commercial assay development which is
relevant to these therapeutic areas (e.g. Clusterin Glycoform;
Tryptophan Metabolite) and reflects recent customer feedback for
services which can be readily converted into standard GCLP tools
for use in clinical trials.
Our IP portfolio remains central to the Company's valuation but
continues to be the subject of review; deliberate rationalisation
has been a goal over the last 18 months and the number of patent
families and, importantly, the cost of their maintenance is now
more in line with the expectations and resources of a company our
size.
Outlook:
With the benefits of a leaner organisation, a new model for
commercial engagement now fully deployed in both our principal
operating territories, and the reassurance of robust and increasing
demand for our TMT(R) reagents, we have the platform necessary to
realise the full value of our proteomic capabilities. The recent
extension of our exclusive license agreement with Thermo
Scientific, to include patents relating to a new class of
higher-plex TMT reagents currently under development, affords us
further optimism.
I am conscious, however, that much remains to be done and that
sentiment towards the Company will depend on positive news from our
services business in the first half of 2018. As we continue to
expand our range of enabling technologies we are confident that our
long-term commitment to proteomics, combined with a renewed focus
on the speed, cost and quality of our service delivery, will enable
us to remain competitive in a dynamic market which increasingly
encourages companies with broader service platforms than our
own.
Our goals are heavily focused on service revenue growth and
establishing enduring partnerships and collaborations. Customer
engagement showed genuine signs of improvement late in 2017, with
an unprecedented number of unsolicited contacts and this has
continued into 2018 with booked orders in the first quarter worth
GBP0.33m, up 37% on the same period in 2017.
Quantitative proteomics is essential for translating knowledge
about the genetic basis of disease into practical, targeted
therapeutics. Its place in the rapidly evolving world of drug
discovery and development is undeniable, and its relevance to
future transformative technologies, such as those based on
artificial intelligence, assured. We remain committed to that
future.
I would like to thank our shareholders for their continued
support and look forward to communicating further progress and
significant revenue growth during 2018.
Strategic Report
Review of the Business:
The principal activities of the Group involve protein biomarker
research and development. As a leader in applied proteomics we use
high sensitivity proprietary techniques to detect and characterise
differentially expressed proteins in biological samples for
diagnostic, prognostic and therapeutic applications. In addition,
we invented and developed the technology for TMT(R) , and
manufacture these small, protein-reactive chemical reagents under
exclusive license to Thermo Scientific for multiplex quantitative
proteomics.
Proteome Sciences is a leading provider of contract research
services for the identification, validation and application of
protein biomarkers. Our clients are predominantly pharmaceutical
companies, but we also perform services for other sectors including
academic research. While we have several well-established workflows
that meet the needs of many customers, we retain our science-led
business focus, developing new analytical methods and data analysis
tools to provide greater flexibility in the types of studies we can
deliver. Our contract service offering remains centred on mass
spectrometry-based proteomics, and this is becoming more widely
implemented in drug development projects as the pharmaceutical
industry seeks to expand biological knowledge beyond genomics.
These services are fully aligned with the drug development process,
can be used in support of clinical trials and in vitro diagnostics,
and include proprietary bioinformatics capabilities.
There were significant organisational developments in 2017
affecting what we do, where we do it and how we generate commercial
contracts, all of which had positive impacts during the second half
of the year. Closure of the UK research laboratory simplified
project delivery and increased efficiency, leading to improved
delivery times which are important for our customers. Equally,
attainment of GCLP certification in October provides an additional
source of business from targeted proteomics in the context of
clinical trial support for our pharmaceutical clients; this has led
to several new projects initiating in 2018.
The main research focus of the Group continues to be directed
towards neurodegenerative and oncological diseases. While the
increasing number of commercial projects inevitably affected the
extent of our internal research, we have made progress in
developing a Clusterin Glycoform Assay, for the assessment of
Alzheimer's disease status, and a Tryptophan Metabolite Assay which
has utility in assessing tumour growth and may serve as an
important tool for monitoring immuno-oncology drug treatment. We
have also implemented a substantially improved method for blood
sample analysis, providing unparalleled coverage of low abundant
proteins which, when combined with TMTcalibrator(TM), allowed us to
quantify over 8,000 blood proteins and identify key disease-related
biomarkers for one of our customers.
The complexity of our commercial projects is generally
increasing, and we are seeing growth in repeat business from
several clients although more work is clearly required for us to
become established as a preferred supplier. One of the key drivers
for customers in 2017 was our strong technical competence and the
ability to perform sophisticated, bespoke projects.
Progress During 2017:
Biomarker Services
Revenue from Biomarker Services decreased by GBP0.35m to
GBP0.90m in 2017. However, the slow start to the year, inevitably
affected by the reorganisation of our research and sales
organisations, was followed by sustained quarterly growth which is
continuing into 2018 with booked orders in the first quarter worth
GBP0.33m. Progress in the sale of targeted assays was also slower
than anticipated due to delays in development of the Clusterin
Glycoform and Tryptophan Metabolite assays. While the development
of these assays progresses well, we do not anticipate their
availability within the certified GCLP laboratory until the second
half of 2018.
We completed the Alzheimer's disease diagnostic assay validation
project for Genting TauRx Diagnostics Centre with final results
delivered in December. No further work relating to a companion
diagnostic discovery project has yet been approved.
The majority of projects completed in 2017 utilised our core
technologies of SysQuant(R) , TMTcalibrator(TM) and TMT(R) MS3.
However, we also saw a growing demand for the development of
targeted mass spectrometry assays for use in clinical trials. This
was in part driven by our GCLP certification, the result of a
considerable effort in 2017, and we are one of very few companies
now able to offer this for protein mass spectrometry. This is a
critical development for the Company and provides access to an
additional client base which currently has few other options.
Building a New Commercial Process
As our market presence is becoming more widely recognised, we
undertook a review of our sales and marketing processes and
introduced a new commercial strategy in the middle of 2017
following the appointment of Richard Dennis as Chief Commercial
Officer. The most significant change has been a switch from
internal direct sales resources to the appointment of locally
deployed, commission-based sales agents which we use as 'lead
finders' for the Company. Currently we are using agents in the US
and central Europe, territories which collectively represent around
80% of the global market for proteomic research services. Once
leads have been identified by these agents, they are turned over to
Proteome Sciences and we handle the face-to-face (or more often
remote, e-based) meetings, presentations, webinars and technical
discussions.
Our aim is to sell an analytical contract through which we first
work with a client to establish their research needs, then develop
a specific protocol, and finally perform proteomic studies on a fee
for service basis using samples that they send us. Internal lines
of communication that facilitate the transition from sales agent to
company are now well established, alongside metrics to ensure this
strategy is working. During 2017 we have worked on our response
times, both to incoming project enquiries and to the submission of
an agreed work contract back to the client. Overall project
delivery time is also monitored, and we routinely deliver results
on time and within budget. This certainly makes us a more
professional service provider in the eyes of the client, who is
rightly focused on time, cost and quality, and enables us to
support ongoing clinical trials. Such opportunities demand reliable
project delivery but have the advantage of predictably higher
budgets.
The interface between internal research and the sales function
has also been strengthened to ensure we are able to respond to
changes in market demand for specific technologies. This is well
illustrated by the timely introduction of a Super Depletion
TMTcalibrator(TM) workflow (described below) as the market for
blood biomarker discovery projects is experiencing a
renaissance.
In addition to improving our sales process we have also started
to re-engineer our marketing efforts. Through our US and European
sales agents we have greater opportunity for regular mailshots and
press releases, with a wider distribution network. We have also
revamped our strategy for attending exhibitions and scientific
meetings with a streamlined stand design and flexible, tailored
literature appropriate to each event. Initial feedback is positive
and has already provided a number of new projects and requests for
proposals.
Such front-line changes have resulted in a significantly more
efficient sales and marketing capability, better aligned with
functional delivery, and demonstrating quarter by quarter revenue
growth since the middle of 2017.
Taking Tissue to the Periphery
Proteomics research involves identifying blood biomarkers that
reflect disease processes occurring in tissues and demonstrating
how diseased tissue responds to drug treatment. Historically, these
discovery efforts have studied blood protein expression independent
of the relevant diseased tissue, thereby often failing in their
primary objective. More recently we have introduced
TMTcalibrator(TM) where the use of TMT(R) 10plex reagents allows
tissue and blood samples to be combined, enhancing the detection
rate of disease-related biomarkers.
In 2017 we extended the utility of TMTcalibrator(TM) by
introducing a more powerful method for removing high and medium
abundant blood proteins prior to analysis. Working with one of our
clients, we applied the combined Super Depletion TMTcalibrator(TM)
workflow to identify putative blood biomarkers of disease response
to treatment. This study demonstrated unparalleled coverage of the
plasma proteome and identified several potential new biomarkers
related to the client's area of therapeutic interest. Compared to
standard methods, Super Depletion alone increased coverage from
around 1,500 to over 4,000 plasma proteins. With the enhanced
sensitivity of TMTcalibrator(TM) a further two-fold increase was
achieved, with over 8,000 plasma proteins quantified, including
many not previously reported in plasma proteomics studies. Data
from this study are scheduled for presentation at an international
conference in May 2018.
Intelligent Insights
In addition to substantial gains in protein coverage obtained
through our internal development efforts, we have further refined
our bioinformatics tools to deliver better biological insights for
customers. During the process of GCLP accreditation we had to
validate our computational methods, affording us the opportunity to
improve the speed and efficiency of processing. As a result, our
modular bioinformatics workflow can process mass spectrometry data
and perform detailed analyses of underlying biological pathways
with fewer user interactions; this provides fast-track access to
new drug targets and biomarkers.
Previously communicated plans to establish a bioinformatics
business unit remain part of our longer-term strategy but have not
yet been realised in the face of implementing other more immediate
initiatives.
Tandem Mass Tags(R)
Sales of TMT(R) continued to show strong growth with revenues
increasing by GBP1.10m to GBP2.48m, although this included a
one-time sales milestone of GBP0.58m. Growth continues to be driven
both by established users and the adoption of TMT(R) by new
research groups. There was also an increase in the licensing of
commercial TMT(R) users and we anticipate this adding sales value
in 2018. In order to meet this growing demand, we started making an
additional batch of standard TMT(R) 10plex reagents and this effort
will be completed in the second quarter of 2018. We retain
sufficient stocks to meet Thermo Scientific's requirements until
then.
Development of higher plexing-rate tags continued in 2017 with
promising results obtained from a prototype set of four tags. We
have started synthesis of the remaining 12 tags required to deliver
the full set of 16plex reagents and expect these to be available
later in 2018. Patents covering these new reagents have been filed
in the key commercial jurisdictions and we continue to prosecute
them to ensure their earliest issuance.
Internal Research Activities
With an increased focus on commercial projects, efforts to
attain GCLP certification and closure of the UK research
laboratory, we have reduced the scale of our internal disease
biomarker research. Our programs in Alzheimer's disease and liver
cancer have reached a level of maturity where external groups can
develop the evidence for utility of our patented biomarkers.
Our research programs in amyotrophic lateral sclerosis (ALS)
have also been concluded and results are being prepared for
publication. Through these projects we have gained new insights
into potential disease mechanisms and peripheral biomarkers that
may aid the management of this disease in the future.
External evaluation of our CK1d inhibitors in a new therapeutic
indication was concluded in 2017 but the compounds were not found
to be suitable. We continue to explore partners for their use in
Alzheimer's disease and other neurodegenerative conditions.
Patent Applications and Proprietary Rights
We continue to manage our portfolio of patents to maximise its
short, medium and longer-term value. Sixteen patents were granted
in 2017 relating to nine separate families. We also filed 11 new
patents relating to four families covering new panels of
Alzheimer's disease biomarkers and casein kinase inhibitors. A
further 151 individual cases from 33 families have either expired
or been allowed to lapse as they no longer offered economic
value.
Financial Review:
Results and Dividends
The loss after tax for the year was GBP2.50m (2016: GBP2.28m).
The directors do not recommend the payment of a dividend (2016:
Nil). The Group results are stated in the Consolidated Income
Statement and reviewed in the Chief Executive Officer's Statement
and this Strategic Report.
Key Performance Indicators (KPI's)
(i) The directors consider that revenue and loss before tax are
KPI's in measuring Group performance; the profile of the Group is
changing as a result of the licensing agreements that have already
been entered into and as other commercial agreements and contracts
are concluded. The performance of the group is set out in the Chief
Executive Officer's Statement.
(ii) In a small business with a high proportion of
well-qualified and experienced staff, the rate of staff turnover is
seen as an important KPI. In FY2017 three members of staff
resigned, including the Finance Director. The three resignees were
not replaced as a cost containment measure and their
responsibilities were redistributed within the organisation. In
addition, four members of staff were made redundant as a
consequence of the closure of the London laboratory, and two
long-term contractors based in the US were not re-engaged in
advance of changes to the commercialisation model.
(iii) The directors believe that a further important KPI is the
Group's rate of cash expenditure and its effect on Group cash
resources. Net cash outflows from operating activities for FY2017
were GBP1.70m (2016: GBP1.99m). Further details of cash flows in
2017 are set out in the Group's Consolidated Cash Flow
Statement.
(iv) As a commercially oriented business, service-based contract
revenues should increase in absolute terms as well as a proportion
of total group revenues; however, this was not the case in 2017
(GBP0.90m; 27% vs GBP1.25m; 46% in 2016) while a new business model
was being implemented. In these changing circumstances the average
value of our service contracts is unlikely to provide a reliable
measure of business performance as we had previously suggested.
However, repeat business should indicate a level of customer
satisfaction and in 2017, 50% of our new contracts (42% by value)
were from existing clients compared with 42% (35% by value) in
2016.
(v) As the company establishes a primary contract research
business a reliance on service-based metrics will reflect our focus
on the time, cost and predictability of delivery. Response times
for client inquiries and contract submissions, as well as overall
project delivery timelines, are relevant here. However, given the
fundamental change in our commercialisation model during 2017 these
KPI's have no adequate baseline or comparator from previous years
and will therefore be a focus for the future.
Financial Performance
Compared to the previous year our revenues showed strong growth.
Revenue for the twelve-month period ended 31 December 2017
increased 23% to GBP3.38m (2016: GBP2.74m).
-- Sales and services revenue rose 28% to GBP3.38m (2016:
GBP2.64m). This is comprised of two revenue streams: TMT(R) and
Biomarker Services. TMT(R) revenues increased by 79% through a mix
of increased sales of TMT(R) tags and a marked increase in the
associated royalty and milestone payments due from our exclusive
distribution partner Thermo Scientific. Biomarker Services revenue
declined by 28%, due to the restructuring of the sales
organisation.
-- Grant services were GBPNil (2016: GBP0.11m).
The loss before tax was GBP2.05m (2016: GBP2.94m).
As the recoverable assets of the company are significantly lower
than the valuation of non-current assets due to the reduced market
capitalisation, an impairment charge has been applied for a third
consecutive year.
Owing to the changing nature of our services business, with a
stronger focus on commercial activities, we have not recognised an
R&D tax credit for 2017 which marks a change in accounting
practice from previous years.
Costs and Available Cash
The Group maintained a positive cash balance in 2017 and
continues to seek improved cash flows from commercial income
streams. Despite the rise in revenues, our operating costs have
largely been contained.
-- Administrative expenses in 2017 were GBP4.01m (2016:
GBP4.24m). This is a decrease of 5.4%, representing cost savings
following the relocation of the UK Laboratory. The full benefit of
this consolidation will take effect from 2018 onwards.
-- Staff costs for the year stayed the same as 2016 due to
redundancy payments resulting from the closure of the UK
Laboratory; consequently, these costs are expected to reduce in
2018.
-- Property costs of GBP0.3m were in line with previous years.
-- Other overheads decreased by GBP0.23m as a result of cost
containment initiatives driven by a review of patent
obligations.
-- Finance costs arise as a result of interest due to the
Non-Executive Chairman, Christopher Pearce, from his loan to the
company. Costs of GBP0.25m are in line with the prior year.
-- Loss after tax for 2017 was GBP2.50m (2016: GBP2.28m). The
net cash outflow from operating activities was GBP1.70m (2016:
GBP1.99m). Cash at the year-end was GBP0.91m (2016: GBP2.88m).
Principal Risks and Uncertainties:
Commercialisation Activities
It is uncertain whether our range of contract proteomic services
will be purchased in sufficient quantity for the Group ultimately
to be successful in the commercial market. Progress in 2017 was
initially slow after the complete revision of our service offering,
but interest and orders were increasing by the end of the year.
Management of Risk: The Group has sought to manage this risk by
recruiting a Chief Commercial Officer with extensive experience of
sales and marketing in the sector, revising the overall
commercialisation strategy in accordance with a niche contract
services business, and utilising commission-based sales agents in
the principal territories of the US and Europe.
Dependence on Key Personnel
The Group depends on its ability to attract and retain a limited
number of highly qualified managerial and scientific personnel, the
competition for whom is intense. While the Group has entered into
conventional employment arrangements with key personnel aimed at
securing their services for minimum terms, their retention cannot
be guaranteed as evidenced by three resignations during 2017.
Management of Risk: The Group has a policy of organising its
work so that projects are not dependent on any one individual, and
the appointment of a full time Project Manager is intended to align
the availability of limited functional resources more directly with
customer commitments. Staff retention is also sought through
annual, role-based reviews of remuneration packages, performance
related bonus payments, and the opportunity for share option
grants.
Licensing Arrangements
The Group intends to continue sub-licensing new discoveries and
products to third parties, but there can be no assurance that such
licensing arrangements will be successful.
Management of Risk: The Group manages this risk by a thorough
assessment of the scientific and commercial feasibility of proposed
research projects which is conducted by an experienced management
team. Risk has also been reduced by decreasing the overall number
of research projects and distributing available resources.
Competition and Technology
The international bioscience sector is subject to rapid and
substantial technological change. There can be no assurance that
developments by others will not render the Group's service
offerings and research activities obsolete or otherwise
uncompetitive. Proteomics remains a growth area attracting new
companies with increasingly broad and varied capabilities.
Management of Risk: The Group employs highly experienced
research scientists and senior managerial staff who monitor
developments in technology that might affect the viability of its
service business or research capability. This is achieved through
access to scientific publications, attendance at conferences and
collaboration with other organisations.
Patent Applications and Proprietary Rights
The Group seeks patent protection for identified protein
biomarkers which may be of diagnostic, prognostic or therapeutic
value, for its protein-reactive, chemical mass tags, and for its
other proprietary technologies. The successful commercialisation of
such biomarkers, chemical tags and proteomic workflows is likely to
depend on the establishment of such patent protection. However,
there is no assurance that the Group's pending applications will
result in the grant of patents, that the scope of protection
offered by any patents will be as intended, or whether any such
patents will ultimately be upheld by a court of competent
jurisdiction as valid in the event of a legal challenge. If the
Group fails to obtain patents for its technology and is required to
rely on unpatented proprietary technology, no assurance can be
given that the Group can meaningfully protect its rights.
Management of Risk: The Group has an experienced patent
capability which has established controls to avoid the release of
patentable material before it has filed patent applications.
Moreover, maintenance of the existing patent portfolio is subject
to biannual review in order to ensure that its ongoing cost is
proportional to its perceived value.
Consolidated income statement
For the year ended 31 December 2017
Note Year ended Year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Revenue
Sales and services 3,378 2,636
Grant services _______2 108
Revenue- total 3,380 2,744
Cost of sales (1,180) (1,196)
_______ _______
Gross profit 2,200 1,548
Administrative expenses (4,008) (4,235)
_______ _______
Operating loss (1,808) (2,687)
Finance income 1 1
Finance costs (246) (257)
_______ _______
Loss before taxation (2,053) (2,943)
Tax (444) 663
_______ _______
Loss for the period attributable
to shareholders of the company (2,497) (2,280)
_______ _______
Loss per share
Basic and diluted 3 (0.85p) (0.96p)
_______ ________
Consolidated statement of comprehensive income
For the year ended 31 December 2017
Year ended Year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Loss for the year (2,497) (2,280)
_________ __________
Other comprehensive income
for the year
Exchange differences on translation
of foreign operations 37 84
_______ _________
Loss and total comprehensive expense
for the year (2,460) (2,196)
__________ __________
Consolidated balance sheet
As at 31 December 2017
2017 2016
GBP'000 GBP'000
Non-current assets
Goodwill 4,218 4,218
Property, plant and equipment 281 592
_________ __________
4,499 4,810
__________ __________
Current assets
Inventories 946 600
Trade and other receivables 1,124 1,406
Cash and cash equivalents 908 2,884
__________ __________
2,978 4,890
__________ __________
Total assets 7,477 9,700
__________ __________
Current liabilities
Trade and other payables (726) (662)
Short-term borrowings (8,946) (8,700)
__________ __________
(9,672) (9,362)
__________ __________
Net current liabilities (6,694) (4,472)
__________ __________
Non-current liabilities
Hire purchase payables - (166)
Long-term provisions (363) (361)
(363) (527)
__________ __________
Total liabilities (10,035) (9.889)
__________ __________
Net liabilities (2,558) (189)
__________ __________
Equity
Share capital 2,952 2,943
Share premium account 51,466 51,451
Share-based payment reserve 3,503 3,436
Merger reserve 10,755 10,755
Translation reserve (67) (104)
Retained loss (71,167) (68,670)
Non-controlling interests - -
__________ __________
Total equity (deficit) (2,558) (189)
__________ __________
Consolidated statement of changes in equity
For the year ended 31 December 2017
Share Share Equity
Share premium based attributable Non- Total
capital account payment Translation Merger Retained to owners Controlling (deficit)
reserve reserve reserve loss of the interest
parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 2,280 48,986 3,402 (188) 10,755 (66,390) (1,155) - (1,155)
Loss for the
year - - - - - (2,280) (2,280) - (2,280)
Exchange
differences
on
translation
of foreign
operations - - - 84 - - 84 - 84
Loss and total
comprehensive
income for
the
year - - - 84 - (2,280) (2,196) - (2,196)
--------------- ----------- ------------ ----------- ------------- ------------ ------------ ------------- ------------- -----------
Issue of share
capital 663 2,650 - - - - 3,313 - 3,313
Share issue
expenses - (185) - - - - (185) - (185)
Credit to
equity
for
share-based
payment - - 34 - - - 34 - 34
__________ ___________ __________ ________ ___________ ___________ ___________ ___________ __________
At 31 December
2016 2,943 51,451 3,436 (104) 10,755 (68,670) (189) - (189)
__________ ___________ __________ _______ ___________ ________ ________ ________ __________
_ ___ ___ ___
Consolidated statement of changes in equity
For the year ended 31 December 2017
Share Share Equity
Share premium based attributable Non- Total
capital account payment Translation Merger Retained to owners Controlling (deficit)
reserve reserve reserve loss of the interest
parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2017 2,943 51,451 3,436 (104) 10,755 (68,670) (189) - (189)
Loss for the
year - - - - - (2,497) (2,497) - (2,497)
Exchange
differences
on
translation
of foreign
operations - - - 37 - - 37 - 37
--------------- ----------- ------------ ----------- ------------- ------------ ------------ ------------- ------------- -----------
Loss and total
comprehensive
income for
the
year - - - 37 - (2,497) (2,460) - (2,460)
--------------- ----------- ------------ ----------- ------------- ------------ ------------ ------------- ------------- -----------
Issue of share
capital 9 15 - - - - 24 - 24
Share issue
expenses - - - - - - - - -
Credit to
equity
for
share-based
payment - - 67 - - - 67 - 67
__________ ___________ __________ ________ ___________ ___________ ___________ ___________ __________
At 31 December
2017 2,952 51,466 3,503 (67) 10,755 (71,167) (2,558) - (2,558)
__________ ________ ______ ________ ___________ ___ ___ ________ ___ ________ __________
___ ____ ________
Consolidated cash flow statement
For the year ended 31 December 2017
Group Group
Year ended Year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Operating loss (2,053) (2,943)
Adjustments for:
Net finance costs 245 257
Depreciation of property, plant
and equipment 332 553
Share-based payment expense 67 34
Operating cash flows before
movements in Working capital (1,409) (2,099)
(Increase) / Decrease in inventories (346) (309)
(Increase) / Decrease in receivables (63) (183)
Increase / (Decrease) in payables 118 (144)
Increase / (Decrease) in provisions 2 85
__________ __________
Cash used in operations (1,698) (2,650)
Tax refunded - 656
__________ __________
Net cash outflow from operating
activities (1,698) (1,994)
__________ __________
Cash flows from investing activities
Purchases of property, plant
and equipment (23) (33)
Interest received 1 1
__________ __________
Net cash outflow from investing
activities (22) (32)
__________ __________
Financing activities
Proceeds on issue of shares 23 3,313
Share issue costs - (185)
Repayment of HP creditors (220) (220)
__________ __________
Net cash inflow from financing
activities (197) 2,908
__________ __________
Net (decrease)/increase in
cash and cash equivalents (1,917) 882
Cash and cash equivalents at
beginning of year 2,884 1,808
Foreign exchange differences (59) 194
__________ __________
Cash and cash equivalents at
end of year 908 2,884
__________ __________
Notes to the Financial Information
1. Basis of Preparation
The financial information set out in this document does not
constitute the Company's statutory accounts for the years ended 31
December 2016 or 31 December 2017. Statutory accounts for the years
ended 31 December 2016 and 31 December 2017, which were approved by
the Directors on 23 April 2018, have been reported on by the
Independent Auditor. The Independent Auditors' reports on the
accounts for the year ended 31 December 2017 and the year ended 31
December 2016 were unqualified and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006. However, while
the year ended 31 December 2016 did not draw attention to any
matters by way of emphasis, the audit report for the year ended 31
December 2017 contained a statement in respect of uncertainty over
going concern, further details are included in Note 2 below.
Statutory accounts for the year ended 31 December 2016 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2017 will be delivered to the Registrar
of Companies in due course and will be posted to shareholders
shortly, and thereafter will be available from the Company's
registered office at Hamilton House, Mabledon Place, London WC1H
9BB and from the Company's website
http://www.proteomics.com/investors.
The financial information contained in these preliminary results
has been prepared using the recognition and measurement principles
of International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs). The accounting
policies adopted in these preliminary results have been
consistently applied to all the years presented and are consistent
with the policies used in the preparation of the financial
statements for the year ended 31 December 2016. New standards,
amendments and interpretations to existing standards, which have
been adopted by the Group for the year ended 31 December 2017, have
not been listed since they have no material impact on the financial
information.
2. Liquidity and Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the CEO statement and Strategic Report and the
financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Group's Annual
Report.
The Group's financial statements have been prepared on the going
concern basis, which remains reliant on the Group achieving an
adequate level of sales in order to maintain sufficient working
capital to support its activities. If sales are not in line with
cash flow forecasts then additional funding will be required. The
Directors have reviewed the Group's going concern position taking
account of current business activities, budgeted performance and
the factors likely to affect its future development, are set out in
the Annual Report, and include the Group's objectives, policies and
processes for managing its working capital, its financial risk
management objectives and its exposure to credit and liquidity
risks.
The Directors have prepared cash flow forecasts covering a
period of at least 12 months from the date of approval of the
financial statements, which foresees that the Group will be able to
operate within its existing working capital facilities, however the
timeline required to close sales contracts and the order value of
individual sales continues to vary considerably, which constrain
the ability to accurately predict revenue performance. Furthermore,
certain of the Group's products are still in the research and
development phase and as such the Directors consider that costs
could exceed income in the short term. The Directors intend that
the Group will continue to pursue its sales strategy and focus its
operational plans on the importance of achieving sustained positive
cash flow generation.
The Group is also dependent on the unsecured loan facility
provided by the Chairman of the Group, which under the terms of the
facility is repayable on demand. The Directors have received
confirmation from the Chairman that he has no intention of seeking
its repayment, with the facility continuing to be made available to
the Group, on the existing terms for at least 12 months from the
date of approval of these financial statements.
As such, there is a risk that the group's working capital may
prove insufficient to cover both operating activities and the
repayment of its debt facilities. In such circumstances, the group
would be obliged to seek additional funding through a placement of
shares or source other funding.
The directors have concluded that the circumstances set forth
above represent a material uncertainty, which may cast significant
doubt about the Company and Group's ability to continue as going
concerns. However, they believe that taken, as a whole, the factors
described above enable the Company and Group to continue as a going
concern for the foreseeable future. The financial statements do not
include the adjustments that would be required if the Company and
the Group were unable to continue as a going concern.
3. Loss per Share from Continuing Operations
The calculations of basic and diluted loss per ordinary share
are based on the following losses and numbers of shares.
2017 2016
GBP'000 GBP'000
Loss for the financial year (2,497) (2,280)
__ ______ __ ______
2017 2016
Number of Number of
shares shares
Weighted average number of ordinary shares
for the purposes of calculating basic earnings
per share: 295,182,056 236,451,654
In 2017 and 2016 the loss attributed to ordinary shareholders
and weighted average number of ordinary shares for the purpose of
calculating the diluted earnings per ordinary share are identical
to those used for basic earnings per ordinary share. This is
because the exercise of share options that are out of the money
would have the effect of reducing the loss per ordinary share and
is therefore not dilutive under the terms of the International
Financial Reporting Standard 33.
4. Cautionary Statement on Forward-looking Statements
Proteome Sciences ('the Group') has made forward-looking
statements in this preliminary announcement. The Group considers
any statements that are not historical facts as "forward-looking
statements". They relate to events and trends that are subject to
risk and uncertainty that may cause actual results and the
financial performance of the Group to differ materially from those
contained in any forward-looking statement. These statements are
made in good faith based on information available to them and such
statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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