RNS Number:3300S
Tepnel Life Sciences PLC
11 October 2000
TEPNEL LIFE SCIENCES PLC ("TEPNEL")
www.tepnel.com
Tepnel's business is the commercialisation of enabling DNA technologies,
primarily for the use in life science research, clinical and food testing and
the development of automated systems for these processes. In support of our
core business, we are expanding our revenue generating operations both
organically and through synergistic acquisitions.
Highlights
* Plasmid DNA purification instrument close to commercialisation;
* Successful integration of Nucleon businesses purchased during the year;
* Launch of the first, and only, rapid gluten test available to both
industrial and home users;
* Strategy of developing and selling complementary services used for DNA
analysis continues to reinforce profit generation;
* Six fold increase in group turnover to #1.13 million (1999: #0.17
million);
* Operating losses have fallen 23 per cent to #1.9 million (1999: #2.6
million);
* Solid cash position through December 2001, leaving the Company in strong
financial position and with important flexibility during key period of
commercial development.
Commenting on the results, Peter Raymond, Chairman of Tepnel Life Sciences,
said:
" We are very pleased with Tepnel's progress in 2000. The Company has made
positive, steady progress. Sales have grown, losses and expenses have been
reduced and our portfolio of products and services continues to expand. With
shareholder funds under prudent management and our DNA automation instrument
close to commercialisation, Tepnel is poised for significant growth."
Enquiries:
Hudson Sandler 020-7796-4133
Piers Hooper
Jessica Rouleau
CHAIRMAN'S STATEMENT
Tepnel Life Sciences ("the Company")
Preliminary Results - 2000
Introduction
Once again, I am pleased to be able to report that Tepnel has made positive,
steady progress for the year ending June 30, 2000. Sales have grown, losses
and expenses have been reduced and the portfolio of products and services
continues to expand. Our strategy of developing and selling complementary
products and services, used for DNA analysis, has continued to reinforce the
Company's ability to boost profit generation and shareholder value. During
the last 10 months, Tepnel entered into a #2.2 million convertible secured
loan facility and placed 2,090,909 new ordinary shares, raising #2.3 million.
To date, the Company has not needed to draw down on the loan facility, leaving
it in a strong financial position and providing important flexibility during
this key period of commercial development. With shareholder funds under
prudent management and our first DNA purification instrument close to
commercialisation, Tepnel is poised for a significant leap forward.
Financial Results
Turnover has reached #1.13 million, a six fold increase over last year's sales
of #0.17 million. Operating losses have fallen from #2.6 million in 1999 to
#2.0 million this year, a decrease of 23 per cent. Working capital is
sufficient to achieve our current objectives and together with the #2.2m loan
facility, negotiated in December 1999, will fund the Company through to
December 2001. The basic loss per share for the year ending 30 June 2000 has
decreased from 4.9p per share in 1999, to 3.9p per share.
Strategies
We continue to focus on three business areas: the development and
commercialisation of automated DNA systems, the provision of contract services
and the sale of manual reagents/development of intellectual property.
Automation is clearly the principal driver of our business going forward.
However, the exploitation of Tepnel's intellectual property and the sale of
reagents provide important additional sources of growth and revenue. Our
integrated strategy of providing complete solutions, ranging from laboratory
services and kits through to automated instrumentation, enables us to provide
a wider selection of products and services to our customers, on a more cost-
effective basis. The expertise we have developed across the range of DNA
products and services gives us technical credibility and a strong basis for
growth in all the group's activities. This growth will continue in part due to
the success of the Human Genome project.
A. Automation
Current Projects: The markets for which we are developing our automated DNA
purification machines are growing strongly. It is estimated that the global
market for clinical DNA diagnostics is currently in the region of USD900
million and growing at about 20 per cent a year. The Life Science research
market is currently in the order of USD300 million and is growing almost as
fast as the clinical market, at about 15 per cent a year. There is huge
potential in these markets and given the advantages offered by Tepnel's
automated systems, this part of the business has excellent prospects going
forward.
To realise the potential of our systems it is essential that we select the
right partner(s) who are committed to developing sales in the target market.
During the last year we have been working closely with a number of potential
partners regarding the system for plasmid purification and have developed a
short list of global companies who meet our criteria. This interaction with
the leading companies in the Life Sciences market ensures that our system will
meet the needs of target users.
Our most advanced prototype system for plasmid purification and an early
prototype for purifying genomic DNA from whole blood were exhibited at the
American Association of Clinical Chemistry, in July 2000 in the US. The
technical data we presented on the performance of DNA purified on both systems
in downstream applications generated a great deal of interest from potential
commercial partners, global distributors and end-users.
We are currently pursuing distinct commercialisation strategies for the two
automated systems. Given the differences in the target markets, this approach
will ensure that we realise the full value of the technologies we have
developed. For the plasmid system, which targets the life science research
market, we are talking to distribution partners, who have access to the
relevant market segments. Manual plasmid purification is well established and
customer requirements for our automated system will not vary widely. The
clinical/Pharma market, for which we are developing the blood system, is, in
contrast, a market with a number of sub-segments, many of which present a
significant opportunity for our technology. In order to serve the range of
clinical/pharma customer needs, we will select co-development partners and
discussions with potential companies are underway. A co-developer with an in
depth knowledge of the market's sub-segments will be able to contribute to the
final system specifications required by customers.
In addition to on-going work on the commercialisation of the automated
systems, we have been working with our partners to enhance the design of the
plasmid system. We have added a shaker, bringing one more level of
automation to the system. Tepnel's fully automated system will process 96
samples in less than two hours, with no human intervention required at any
point during the process. In addition to the obvious advantages provided by
its processing ability, other competitive advantages of our system include;
the full integration of instrumentation, consumables and software; the ability
to simply process any number of samples between 1 and 96; and the opportunity
for customers to order from a single supplier, including the provision of any
required technical and sales support. Finally, the size and weight of the
unit will be significantly less than competitors', making it attractive to
researchers for whom bench space and flexibility is always an issue. In
addition, because of the manual touch screen approach a separate PC is not
required further reducing the cost and space requirements.
B. Services:
This year we have also emphasised the development of a DNA service capability
as a key aspect of our strategy to build our reputation and technical
credibility with larger customers. This approach will, in turn, expand the
potential customer base for our higher margin automated products. The DNA
purification service, launched in January 2000, is steadily building its
reputation through the processing of customer's samples and responding to
their specific requirements. Although out-sourcing of this work is not yet
widespread, excellent market opportunities exist to grow this part of the
business.
In addition a service to detect the presence of genetically modified organisms
in food was launched at the end of the year.
C. Manual Reagents and IP Development:
i) Nucleon Kits: Following the acquisition of the Nucleon Business in March
2000 manufacturing, sales and marketing have been successfully transferred and
integrated into the Manchester site. A sales operation has also been
established in the UK, providing Tepnel with direct access to Nucleic Acid
Purification customers. International sales are provided by Amersham Pharmacia
Biotech.
ii) Food Testing: The integration of our food testing businesses, purchased
last year, has been very successful. We continue to innovate and expand the
products and services we offer our customers. In this regard, we recently
launched the first, and only, rapid gluten test available to both industrial
and home users, for use by Coeliac disease suffers (A disease resulting from
an intolerance to wheat products). In addition, we expect to add further food
identification tests to our portfolio over the next year.
iii) Development of Intellectual Property: The value of our intellectual
property portfolio continues to increase as we are granted patents in the US
and Europe. During the year, the European patent for DARAS detection
technology was granted and other patents relating to our automation projects
were filed.
Acquisitions
The group has made two acquisitions during the year: magnetic bead technology
from Nuclyx and the Nucleon Kit Business/Analytical Contract Services from
Genesys Biotech. Our acquisition strategy is focused on companies that provide
us with access to enabling technologies (e.g. magnetic beads) or to customers
and ready channels to market. As a result of these acquisitions, we believe
we will be able to leverage our enlarged customer base, offering automation,
contract services and manual reagents. All of these acquisitions have been
successfully integrated and should make profit contributions in 2001.
We continue to consider acquisitions that fit these criteria and provide us
with these important synergies.
5 Future Prospects
Tepnel continues to make good progress towards its financial and commercial
goals. Our strategy, which builds on the synergies between our products and
services, leaves us in an excellent position to take advantage of the
significant growth in the markets we serve. Tepnel aims to be a major player
in automated systems for DNA analysis supported by contract services and
manual reagents for the life sciences research, clinical/Pharma and food
testing markets.
Consolidated profit and loss account
For the year ended 30 June 2000
2000 1999
#'000 #'000 #'000 #'000
Turnover 1,130 174
Cost of Sales (646) (59)
------ ------
Gross Profit 484 115
Research and Development (1,103) (1,553)
Sales and Marketing (570) (531)
Administrative Expenses (828) (667)
Total administrative expenses (2,501) (2,751)
------- -------
Operating Loss (2,017) (2,636)
Interest Payable (2) -
Interest Receivable 74 260
------- -------
Loss on ordinary activities
before taxation (1,945) (2,376)
Taxation - -
Loss for the financial year (1,945) (2,376)
Basic loss per share 3.9p 4.9p
Fully diluted loss per share 3.9p 4.9p
The Group's activities for the year relate to continuing operations and
include all recognised gains and losses.
Consolidated Balance Sheet
At 30 June 2000
2000 1999
#'000 #'000 #'000 #'000
Fixed Assets
Intangible assets 1,622 1,091
Tangible assets 545 350
----- -----
2,167 1,441
Current Assets
Stocks 356 451
Debtors and prepayments 492 279
Investments 20 25
Cash at bank and in hand 2,037 2,064
----- -----
2,905 2,819
Creditors : amounts
falling
due within one year 674 531
----- -----
Net current assets 2,231 2,288
----- -----
Total assets less
current liabilities 4,398 3,729
----- -----
Capital and reserves
Called up share capital 520 488
Share premium account 18,572 15,990
Profit and loss account (14,694) (12,749)
------ ------
Shareholders funds 4,398 3,729
All items under capital and reserves are equity
Consolidated Cash Flow Statement
For the year ended 30 June 2000 2000 1999
#'000 #'000
Reconciliation of operating loss to
net cash flow from operating activities
Operating Loss (2,017) (2,636)
Depreciation 196 159
Amortisation 33 1
Provision against current asset investments 5 -
Decrease in stocks 138 186
(Increase) / decrease in debtors (213) 86
Increase / (decrease) in creditors 129 (64)
Profit on disposal of fixed assets (5) (2)
------ -------
Net cash outflow from operating
activities (1,734) (2,270)
------- -------
Consolidated cash flow statement
Net cash outflow from operating
activities (1,734) (2,270)
Returns on investments 72 260
Acquisitions (431) (1,052)
Investing activities (292) 33
Net cash outflow before financing (2,385) (3,029)
Management of liquid resources 396 2,999
Financing 2,358 10
----- -----
Increase / (decrease) in cash 369 (20)
----- -----
Reconciliation of net cash flow to
movements in net funds
Increase / (decrease) in cash 369 (20)
Cash inflow from short term deposits (396) (2,999)
Cash outflow from decrease in lease financing 6 -
------ -------
Change in net funds resulting from cash flow (21) (3,019)
New finance leases (20) -
Net funds at the beginning of year 2,064 5,083
------ ------
Net funds at the end of year 2,023 2,064
------ ------
Notes:
1. Nature of Preliminary Announcement
The financial information supporting the preliminary announcement
relating to Tepnel Life Sciences PLC does not constitute statutory
accounts as defined by Section 240 of the Companies Act 1985. The
abridged comparative financial information for the year to 30 June 1999
has been based on the statutory accounts of Tepnel Life Sciences PLC for
the year to 30 June 1999. These accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
The preliminary financial statements have been prepared on the basis of
the accounting policies set out in the Group's 1999 statutory accounts.
The auditors have not yet reported on the accounts for the year ended 30
June 2000. The statutory accounts for the year will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
2. The Directors do not recommend the payment of a dividend.
3. The turnover for the year to 30 June 2000 includes #119,231 relating to
acquisitions. Tepnel BioSystems Limited which acquired BioKits food
diagnostics and laboratory services businesses in the previous financial
year contributed #889,837 to turnover.
All business divisions contribute to central administrative expenses and
it is not considered practicable to analyse operating profits or losses
by business segment.
4. The basic loss per share has been calculated on the average number of
shares in issue during
the year, namely 49,943,395 (1999 - 48,794,379) and losses of #1,945,000
(1999 - #2,376,000).
In both years the diluted loss per share is the same as the basic loss
per share.
5. Acquisitions
On 10 August 1999 Tepnel Life Sciences PLC acquired the assets, goodwill
and know-how related to novel magnetic bead technology developed by
Nuclyx Ltd for a total consideration of #350,000. #100,000 of this sum
was payable immediately and the balance satisfied by granting a #250,000
secured convertible loan note. The loan note was converted into ordinary
shares in December 1999 at an exercise price of 25p.
On 18 March 2000 the Company acquired, from Genesys Biotech Ltd, the
trade, assets and goodwill of two businesses specialising in the DNA
purification market - Nucleon BioSciences and Nucleon Analytical. The
total consideration was #300,000, paid in cash, plus a maximum of 300,000
share options, exercisable at a price of 100p, conditional on meeting
agreed sales targets.
6. On 8 December 1999 the Company entered into a 2-year term convertible
loan facility of #2.2million provided by BF Finance Ltd. The facility
will be secured on the Company's intellectual property rights. The
facility will be repayable in whole or in part by the Company at any time
prior to 31 December 2001. If the loan has not been repaid prior to 31
December 2001, BF Finance Ltd will be entitled to demand repayment of the
facility in whole or in part and/or to convert the outstanding amount of
the facility into Ordinary Shares at a price equal to the greater of 100p
per share and the average price on the four Fridays preceding the date of
conversion less 15%. Interest will be payable at the rate of 12% per
annum on the amounts drawn down. In consideration for the provision of
the facility, the Company agreed to grant share options enabling BF
Finance Ltd to subscribe for 2.2 million Ordinary shares. 1.1million of
these options are exercisable at a price of 100p per share
and the remaining 1.1 million at a price of 48p.
7. On 16 March 2000 2,090,909 Ordinary Shares of 1p each were placed at a
price of 110p to raise #2,300,000 to provide additional working capital.
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