Announcement PDF RNS Number : 8408W Fusion Antibodies PLC 23 August 2022 The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse (amendment) (EU Exit) Regulations 2019/310 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. Fusion Antibodies plc ("Fusion" or the "Company") Final results Fusion Antibodies plc (AIM: FAB), specialists in pre-clinical antibody discovery, engineering and supply for both therapeutic drug and diagnostic applications, announces its final results for the year ended 31 March 2022. Commercial and operational highlights · Full year revenues increased by 15% to £4.8m (2021: £4.2m) · Loss for the year of £1.2m (2021: loss £2.9m) · Investment in R&D £0.7m (2021: £0.6m) · First success milestones received from clients · Cash position at the year-end £2.0m (2021: £2.7m) Post period end highlights · Appointment of Adrian Kinkaid as CEO in August 2022 Simon Douglas, Chairman of Fusion Antibodies commented: "We are pleased with our overall performance in the year given the challenges that still exist with Covid-19. Our full year revenues increased, and we have strengthened our Board with the additions of Dr Matthew Barker as a Non-Executive Director and more recently, the appointment of Dr Adrian Kinkaid as our new CEO. We are delighted Adrian has come on board and we look forward to fully integrating him into the business. On behalf of the whole team, I would like to thank our shareholders for their continued support, and we feel positive for the next 12 months." Investor briefing Fusion will host an online live presentation open to all investors on Thursday, 1 September 2022 at 11.00am, delivered by Dr Adrian Kinkaid, CEO and James Fair, CFO via the Investor Meet Company platform. The Company is committed to providing an opportunity for all existing and potential investors to hear directly from management on its results whilst additionally providing an update on the business and current trading. Investors can sign up to Investor Meet Company for free and add to meet Fusion Antibodies plc via the following link: https://www.investormeetcompany.com/fusion- antibodies-plc/register-investor Enquiries: Fusion Antibodies plc Simon Douglas, Chairman James Fair, Chief Financial Officer Adrian Kinkaid, Chief Executive Officer www.fusionantibodies.com Via Walbrook PR Allenby Capital Limited James Reeve/Vivek Bhardwaj (Corporate Finance) Tony Quirke (Sales and Corporate Broking) Walbrook PR Anna Dunphy Tel: +44 (0)20 3328 5656 Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com Mob: +44 (0)7876 741 001 About Fusion Antibodies plc Fusion is a Belfast-based Collaborative Research Organisation ("CRO") company, listed on AIM, providing a range of antibody engineering services for the development of antibodies for both therapeutic drug and diagnostic applications. Fusion provides a broad range of services in antibody generation, development, characterisation, optimisation, and small-scale production. These services include antigen expression, purification and sequencing, antibody humanisation using Fusion's proprietary CDRxTM platform and cell line development, producing antibody generating stable cell lines optimised for use downstream by the customer to produce material for clinical trials. Since 2012, the Company has successfully sequenced and expressed over 250 antibodies and successfully completed over 200 humanisation projects for its international customer base, which has included eight of the top 10 global pharmaceutical companies by revenue. At every stage, our client's vision is central to how we work in combining the latest technological advances with cutting edge science. In this work our world-class humanization and antibody optimization platforms harness the power of natural somatic hypermutation (SHM) to ensure the best molecule goes to the clinic. Fusion Antibodies' growth strategy is based on enabling Pharma and Biotech companies get to the clinic more effectively, using molecules with optimized therapeutic profile and enhanced potential for successful development and approval and, ultimately, on speeding up the drug discovery and development process. Fusion's use of SHM to create a fully human antibody library to capture the human antibody repertoire will address a continuing market need in antibody discovery, Fusion Antibodies' emphasis on antibody therapeutics is based on the size and growth rate in the sector, with the market valued at $135.4 billion in 2018 and forecast to surpass $300 billion by 2025, a CAGR of 14.26%. As of May 2021, there were 100 approved antibody therapies on the market and more than 570 antibody therapies in clinical development. Chairman's Statement The last twelve months have seen the effects of the Covid-19 pandemic on both our staff and the business diminish and the vaccination programme has made a significant difference to how we can carry out our business. Northern Ireland has been slower to ease Covid-19 restrictions than other parts of the UK and our business development and financial teams continued to work from home for most of the year. However, the whole team have continued to work well together and shown a level of commitment that I am proud of and something for which I would like to thank them. Availability of some reagents and consumables have occasionally been affected but overall, the Company was able to meet the challenges presented and has demonstrated good growth over the financial period concerned. Revenues increased for FY2022 delivering year on year revenue growth of 15% with revenue of £4.8m for the year marginally above market expectation. This growth came from a good performance in our transient expression service significantly outperforming on the previous year. The revenue included two milestone payments totalling £300,000 from projects carried out in 2016 and 2018. The loss for the year was £1.2m (FY2021: £2.9m loss) as is explained in the Executive's report on page 10 of the annual report. Our OptimasTM service continues to give us a unique edge in the market. This service covers a range of antibody engineering benefits based on the RAMPTM platform, which encompasses affinity maturation, the potential to optimize the manufacturing efficiency and improve the antibody yield from cell culture thus reducing the overall cost of goods. Additionally, in many cases the overall stability of the antibody can be improved and the immunogenicity reduced, with the opportunity to maximise the efficiency of a client's therapeutic antibody. Although not yet in itself a significant contributor to revenue, this service attracts customers as a powerful option that is available, if required, downstream of our humanization and discovery services. We have begun to position ourselves as more of an outsourced full development partner, collaborating in project planning, and acting as a natural extension of our customer's business, promoting our world class scientific expertise across the range of services which covers the drug development programme from discovery to supply. This change resulted in our first and significant collaborative research and development agreement worth a minimum of $1.83m over a two-year period with a US biotechnology start-up company that has been specifically incorporated to focus on a number of innovative early-stage antibody discovery and development programmes. I see this as the beginning of an exciting partnership where Fusion will provide its discovery and engineering services in relation to the research and development of several pre-determined projects. Should a product be successfully developed, registered and commercialised, the Company will be entitled to both milestone and royalty payments based on a percentage of sales figures of that product. As part of our strategy to grow into more global territories, we entered into a commercial collaboration agreement with Eurofins Discovery (Eurofins), a leading provider of products and services to the drug discovery industry. Fusion will provide comprehensive pre-clinical antibody development services from discovery, engineering and supply to Eurofins' customers. While not expected to have a material impact on the Company's earnings in the short term, we consider that it demonstrates a commitment by both parties to provide world-class scientific expertise and next-generation technology to the market. The formation of the new Scientific Advisory Panel (the "SAP") is an exciting next step to ensure that we remain at the cutting edge of the science involved in antibody drug development. The SAP consists of leading experts to support the Company's research and development across its range of antibody services, and to provide advice regarding emerging science and technology issues and trends. The appointment of these industry experts adds a depth of expertise that will provide Fusion with relevant and informed technical and scientific counsel and broadens our access to a network of clinical and scientific advisors, as well as academic collaborators. I am delighted to welcome them to the team. There have been a number of changes to the Board during the financial year and in the period since the reporting date. In March 2022 Dr Alan Mawson stepped down as a NonExecutive Director and on behalf of the Board, I would like to offer our sincere thanks. Alan has contributed greatly to the Company over many years, both pre and post Fusion's admission to listing on AIM and the Company has benefited a great deal from his wise advice and guidance. Concurrently, I was pleased to announce the appointment of Dr Matthew Baker who joined the Board as a Non-Executive Director. He was, and continues to be, a member of SAP and his extensive experience of the antibody services business, both from a technical and commercial perspective, will be a great benefit to the Company going forward. A search for a new CEO started when we learnt that Dr Richard Jones was moving on to pursue other career opportunities. He added significant value to the Company, both operationally and commercially during his short stay and I wish him well for the future. In July we announced the appointment of Dr Adrian Kinkaid as CEO and he has recently taken up that post. Adrian brings a lot of experience in the life science and biotherapeutics industries and joins at an exciting time as the Company focuses on growing our existing services and finalising our current development programmes, including OptiMALTM . We have continued to invest in improving our current services and in the development of new technologies to further enhance the service offered to our customers. Improvement in our B-cell cloning services have been made and further equipment purchased to deliver the growth in transient expression. The Mammalian Antibody Library Discovery Platform (OptiMALTM ) is an ongoing R&D programme. Since our last report processes to screen and select antibodies have been optimised and work has commenced on extracting neutralising antibodies to oncology targets to build a body of data with a view to establishing commercial relationships for further validation by the end of the financial year. Corporate governance The long-term success of the business and delivery on strategy depends on good corporate governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code as explained more fully in the Governance Report. Current trading Despite a second uniquely challenging year due to the pandemic, we continued to see growth and invest further in our core scientific based services. Our commitment to new R&D projects was maintained and OptiMALTM remains on track to deliver initial revenues in the current financial year. The Covid-19 pandemic did not have a material impact on operations as the Company implemented procedures to protect our laboratory services. Again, my thanks to all the staff who, as a team, were committed to maintaining the full operations of the Company though either working from home or, for those in the laboratories, working flexible hours in controlled conditions. I would also like to thank the shareholders for their continued support. Post year end trading has been in line with expectations. While conditions in the UK have improved significantly, there remains considerable uncertainty from current global macro conditions. Challenges remain for much of our international customer base, but the Board believe the Company has the expertise to meet these challenges and capitalise on opportunities as we have done over the past year. Dr Simon Douglas Chairman 22 August 2022 Executive report and operations review FY 2022 was a second year of business with challenges and restrictions for all of us due to the COVID-19 pandemic. The Company delivered 15% revenue growth in the year and continued to invest for growth and increased investment in R&D by 14%. As a result of the ongoing investment strategy, the Company continues to return losses which reduced this year to £1.2m (FY2021: £2.9m loss for the year). Despite the challenges throughout the year, the Company's staff were able to win a new major client contract which contributed to delivery on the financial performance, and to enter into a commercial collaboration with Eurofins Discovery. Once again, we recognise and thank the staff who worked through the challenges to enable our clients to advance their discovery and development projects and to progress our pipeline of projects. Included in the year's results are two milestones totalling £300,000. These arise from our clients' successes: one humanisation project performed in 2018 was successfully commercialised, and one project performed in 2016 which has commenced clinical trials. Client success is a clear demonstration of the value of the work done by the Company for clients developing the drugs of the future. Business review The Company's revenue for the financial year to 31 March 2022 grew by 15% vs FY2021 to £4.8m which was marginally ahead of market expectations. Growth was seen in both H1 and H2 of FY2022 compared to the comparable periods in FY2021. This growth has come from the expansion of our existing services in discovery, engineering and supply, as well as recognition of two milestone receipts. We see increasing interest in the RAMPTM technology service platform which represents a key driver of growth for the business and was a major factor in winning new business in the year. We are pleased to report that the Company saw continued growth in our key geographical markets, in particular in North America which represented 42% of revenues and with an increasing number of key client accounts. Our main Asia Pacific markets such as Japan, India and Korea, where we have appointed distributors, continue to be impacted by the global pandemic, although client relationships and opportunities are increasing and the appointment of distributors in earlier years has counteracted the lack of travel to those countries from the UK. Certain customer projects involve a significant level of contribution from Fusion to the development programme or the intellectual property. When this occurs, we seek to enter into a collaboration agreement structure which will enable Fusion to access the downstream value of the services and share in the commercial success. This will further enable Fusion to unlock the intrinsic value that our service platforms provide to our clients and generate additional shareholder value. During the year the Company entered into such an agreement with a US based biotech company with a structure of milestone success payments and royalties in addition to fee for service-based contract value. We continued to drive investment and innovation to improve our current services and develop new technologies to further enhance the service offered to our customers. Investment in R&D increased by 14% to £699,000. Improvements in our B-cell cloning services have been made and further equipment has been purchased to create more capacity, and hence deliver growth, for transient expression. Our humanisation and RAMPTM procedures are beginning to benefit from improved computer-based design selection. We strongly believe that the Mammalian Antibody Library Discovery Platform (OptiMALTM ) represents a key future driver of growth for the business, and is an ongoing R&D programme. There are several key steps in the OptiMALTM programme including design; DNA synthesis, cloning, expression, screening and lead selection. Since our last report we have completed the process development of all of the steps, in particular, processes to screen and select antibodies have been optimised using a combination of a new magnetic bead system and single cell sorting. The synthesis of the core Library oligo mix is outsourced and has been continually improved. The latest version has additional mutational hotspots to increase diversity. Work has been successful on extracting spiked-in control antibodies to model oncology targets to build a body of data with a view to further optimisation. This work is continuing post year end with a view to establishing commercial relationships for further validation by the end of the financial year. The year also saw the first meeting of a Scientific Advisory Panel of industry experts and thought leaders in the field of antibody discovery and services. The Panel is expected to meet up to four times a year to guide the direction of future R&D in the Company. As reported in October 2020, the Company received grants from Invest Northern Ireland to support Fusion's COVID-19 Discovery programme as part of the NI COVID-19 Antibody Development Alliance (NICADA) a collaboration between Fusion and Queen's University Belfast with an aim to develop and test antibodies to assist in tackling the COVID-19 pandemic. A portion of the grant was used to support the OptiMALTM programme and to reinforce the work being performed at Fusion to produce fully human antibodies targeting the SARS-CoV-2 virus which could be used in therapeutic and diagnostic applications. The collaboration was initially for a period of one year but was extended to April 2022. The project did not produce any antibodies for further development and commercialisation but provided useful material and insight in the ongoing OptiMALTM development programme. Supply chain disruption from the UK's departure from the European Union and the COVID-19 pandemic continued throughout the year. As a result, the quantity and value of consumable stock held by the Company has been increased further in the year. The Company's revenues arising from exports to EU countries increased to £1.4m, representing 29% of total revenues. The Company continues to monitor potential risks and opportunities arising as negotiations with the EU continue, particularly in respect of the Northern Ireland Protocol. We also continue to develop other export markets to mitigate risks of overexposure to any one geographical market. As pandemic restrictions around the world were eased the industry as a whole saw an increase in staff turnover as individuals sought new opportunities. The departure of a few employees during the year presented challenges but also an opportunity to strengthen our team with new talent bringing fresh ideas and experience. We are very grateful for the commitment, dedication and resilience shown by our staff over the last two years. Post year end events · Appointment of Adrian Kincaid as CEO in August 2022 Financial Results The Company has continued to build on the revenue growth in the second half of FY2021 with revenue growth seen in both H1 and H2 relative to the comparable period in the previous year. Full year revenues for the year in total were up 15% to £4.8m (FY2021: £4.2m). The EBITDA loss for the year was £0.6m (FY2021: £0.5m loss) (see note 27). However, excluding the R&D expenditure of £0.7m, EBITDA for the year was marginally positive. The loss before tax was similar at £1.3m (FY2021: £1.3m loss). The Company held current net assets of £3.1m at 31 March 2022 (2021: £3.7m) which mainly comprised inventories and cash and cash equivalents. The Company ended the year with £2.0m of cash and cash equivalents, having used £0.3m of cash in operations during the year, invested £0.3m in property, plant and equipment and £0.1m servicing assetbased borrowings. This cash level puts the Company in a strong position to progress plans for growth in existing services in FY2023. The Company's full results are set out in the financial statements included with this report. Key performance indicators The key performance indicators (KPIs) regularly reviewed by the Board are: KPI Revenue change year on year FY2022 15% FY2021 7% EBITDA (£0.6m) (£0.5m) Cash used in operations (£0.3m) (£1.1m) Corporate strategy The Company continues to grow by following the existing Corporate Strategy of investing for growth through market development and the introduction of new services developed in-house. Fusion is at a key value inflection point in its evolution. The Company has world class and cutting-edge Antibody Discovery, Engineering and Supply technology platforms with the potential to generate significant future shareholder value. The Company's vision is to move into the next phase of its evolution as a commercially successful antibody service provider with a diversified range of technology platforms to enable our customers in pharma and biotech to identify and commercialise antibodies more cost effectively, more rapidly, with a higher probability of success and with a more competitive profile. Outlook Post year end trading has been in line with expectations. While conditions in the UK have improved significantly, there remains considerable uncertainty from current global macro conditions. Challenges remain for much of our international customer base, but the Board believe the Company has the expertise to meet these challenges and capitalise on opportunities as we have done over the past year. Richard Buick James Fair Chief Scientific Officer Chief Financial Officer 22 August 2022 Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 March 2022 2022 2021 Note £'000 £'000 4,799 4,165 Cost of sales (2,333) (2,141) Gross profit 2,466 2,024 Other operating income 30 194 Administrative expenses (3,821) (3,467) Revenue 4 Operating loss 5 (1,325) (1,249) Finance income Finance expense Loss before tax 8 8 1 (9) (1,333) 3 (18) (1,264) Income tax credit/(charge) 10 133 (1,635) Loss for the financial year (1,200) (2,899) Total comprehensive expense for the year (1,200) (2,899) Pence Pence (4.6) (11.4) Loss per share Basic 11 Statement of Financial Position As at 31 March 2022 Assets Non-current assets Intangible assets Property, plant and equipment Current assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents 2022 £'000 2021 £'000 12 13 633 633 2 1,123 1,125 16 17 585 1,517 131 2,049 4,282 4,915 480 1,440 99 2,686 4,705 5,830 18 1,142 833 Notes Total assets Liabilities Current liabilities Trade and other payables Borrowings 19 66 1,208 163 996 3,074 3,709 19 3 67 20 20 23 20 87 Total liabilities 1,231 1,083 Net assets 3,684 4,747 1,040 7,647 (5,003) 3,684 1,024 7,547 (3,824) 4,747 Net current assets Non-current liabilities Borrowings Provisions for other liabilities and charges Equity Called up share capital Share premium reserve Accumulated losses Total equity 22 Simon Douglas James Fair Director Director Registered in Northern Ireland, number NI039740 Statement of Changes in Equity For the year ended 31 March 2022 At 1 April 2020 Loss and total comprehensive expense for the year Issue of share capital Cost of issuing share capital Share options - value of employee services Total transactions with owners, recognised directly in equity At 31 March 2021 At 1 April 2021 Loss and total comprehensive expense for the year Issue of share capital Share options - value of employee services Total transactions with Share premium reserve £'000 Accumulated losses £'000 Total equity £'000 4,872 (944) 4,812 - - (2,899) (2,899) 140 - 2,879 (204) - 3,019 (204) - - 19 19 140 2,675 19 2,834 1,024 7,547 (3,824) 4,747 1,024 7,547 (3,824) 4,747 - - (1,200) (1,200) 16 100 - 116 - - 21 21 Called up share capital £'000 884 owners, recognised directly in equity At 31 March 2022 16 100 21 137 1,040 7,647 (5,003) 3,684 Statement of Cash Flows For the year ended 31 March 2022 2022 £'000 Cash flows from operating activities Loss for the year Adjustments for: Share based payment expense Depreciation Amortisation of intangible assets Finance income Finance costs Income tax (credit)/charge Increase in inventories Increase in trade and other receivables Increase in trade and other payables Cash used in operations Income tax received Net cash used in operating activities 2021 £'000 (1,200) (2,899) 21 749 2 (1) 9 (133) (105) (77) 309 (426) 101 (325) 19 712 2 (3) 18 1,635 (140) (553) 5 (1,204) 68 (1,136) Cash flows from investing activities Purchase of property, plant and equipment Finance income - interest received Net cash used in investing activities (258) 1 (257) (365) 3 (362) Cash flows from financing activities Proceeds from issue of share capital net of transaction costs Proceeds from new borrowings Repayment of borrowings Finance costs - interest paid Net cash (used in)/generated from financing activities 116 (162) (9) (55) 2,815 14 (164) (18) 2,647 Net (decrease)/increase in cash and cash equivalents (637) 1,149 Cash and cash equivalents at the beginning of the year 2,686 1,537 Cash and cash equivalents at the end of the year 2,049 2,686 Notes to the Financial Statements For the year ended 31 March 2022 1 General information Fusion Antibodies plc is a company incorporated and domiciled in the United Kingdom, and is registered in Northern Ireland having its registered office at Marlborough House, 30 Victoria Street, Belfast BT1 3GG. The principal activity of the Company is the research, development and manufacture of recombinant proteins and antibodies, particularly in the areas of cancer and infectious diseases. 2 Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated. Basis of preparation The financial information included in this preliminary announcement does not constitute statutory accounts of the Company for the years ended 31 March 2022 and 31 March 2021 but is derived from those accounts. Statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts: their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The financial statements have been prepared on the historical cost convention, modified to include certain financial instruments at fair value. The financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £1,000. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Fusion Antibodies plc transitioned to UK-adopted International Accounting Standards in its financial statements on 1 April 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The financial statements of Fusion Antibodies plc have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. International Financial Reporting Standards The following new accounting standards, amendments and/or interpretations have been published and have been considered by the Company but are not expected to have a material impact on the financial statements in the current or future reporting periods and on the foreseeable future transactions: Amendment to IFRS 16 Leases Covid 19 - related rent concessions (effective 1 April 2021) Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 (effective date 1 January 2021) Amendments to IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform - phase 2 (effective 1 January 2021) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. Going concern The Company has returned a loss of £1,200,000 for the year and at the year-end had net current assets of £3,074,000 including £2,049,000 of cash and cash equivalents. The Company was able to remain open and operational throughout the period of most stringent Government restrictions. The Company c