RNS Number:6578B
Tepnel Life Sciences PLC
26 September 2002
FOR IMMEDIATE RELEASE
26 September 2002
Tepnel Life Sciences PLC ('Tepnel' or 'the Company')
Financial Results for the Year Ended 30 June 2002
Tepnel Life Sciences PLC (AIM: TED), the UK-based international life sciences
instrumentation and services company, is pleased to report its financial results
for the year ended 30 June 2002.
Highlights
* Strong growth in sales; 2002 sales of #3.31 million were 88% higher than
2001
* #7.45m (net) raised in July 2001 from a placing and open offer of 40.26
million new ordinary shares, which expanded Tepnel's institutional investor
base
* Admission to the Alternative Investment Market (AIM)
* Formation of Tepnel Scientific Services Ltd (TSS) through the acquisition
of the Medicines Testing Laboratory (MTL) from The Royal Pharmaceutical
Society of Great Britain
* Extended high-throughput genotyping capabilities through purchase of
SNPstreamTM 25K genotyping system and a licence to the proprietary databases
of Orchid Biosciences - Orchid Biosciences has taken a 1.81% stake in Tepnel
* Worldwide launch of the T1000 Plasmid Purification System, Tepnel's first
automated system for DNA purification
* Distributors for T1000 and manual purification kits appointed in key
markets
* Negotiations with potential distributors in North America and other
European countries are on-going
* Growth in sales of Tepnel BioSystems' products and services for
agrigenetics, including allergen-testing kits and toxin immuno-affinity
columns
* Strengthened the Board with the appointment of two new Directors
Post Balance Sheet Events
* Nomura International plc appointed as Nominated Advisor and Broker
Current Trading
The current financial year has started well with group sales after two months of
the new financial year increasing 70% compared to the corresponding period last
year. This rate of growth, although slightly ahead of internal estimates, is
targeted to continue for the current financial year.
Commenting on the results, Peter Raymond, Chairman, said: "The new management
team at Tepnel has done an excellent job over the past 18 months as evidenced by
the strong sales performance in 2001/2002 and the strategic progress that we
have made across all areas of our business. The strong platform that has been
created gives me great confidence in our future growth potential, which is
already being reflected in the current financial year where sales are currently
running 70% ahead of the corresponding period last year."
For Further Information:
Tepnel Life Sciences
Ben Matzilevich, CEO
Gron Ffoulkes-Davies, Finance Director
0161 946 2200
HCC De Facto Group
David Dible / Mark Swallow
020 7496 3300
Notes to Editors
Tepnel Life Sciences is a UK-based international life sciences instrumentation
and services company with a 'tri-polar' strategy focused on providing the
biomedical industry with high-throughput automated DNA purification systems,
manual DNA purification kits and reagents, as well as scientific services for
nucleic acid purification, drug analysis, genotyping and genetically modified
foods.
The Company was founded in 1992 to exploit DNA technology generated at UMIST
(University of Manchester Institute of Science and Technology) and is listed on
the AIM segment of the London Stock Exchange (AIM: TED).
www.tepnel.com
Tepnel Life Sciences PLC ('Tepnel' or 'the Company')
Financial Results for the Year Ended 30 June 2002
CHAIRMAN'S STATEMENT
For Tepnel Life Sciences, the year under review has been one of significant
progress across all aspects of its business. The Company has established a solid
base from which it can move forward rapidly through the implementation of its
tri-polar business strategy. The strength of this platform is already evident
from the very positive start that has been made to the current financial year.
The Company's tri-polar strategy was formulated in 2001 to focus on providing
Tepnel's pharmaceutical customers with automated DNA purification systems, kits
and reagents, and contract bioanalytical services.
The foundations of Tepnel's advance in the year under review were built on the
successful #7.45 million (net) fundraising, which was completed in July 2001.
This fundraising allowed Tepnel to make the acquisition of MTL, which has
considerably strengthened the bioanalytical service offering of Tepnel
Scientific Services.
Another key event for the Company in the last financial year was the launch of
its first automated DNA purification system - the T1000 - and the subsequent
appointment of specialist distributors in key international markets,
particularly Japan, and the consolidation and expansion of its main operations.
Financial Results
Turnover during the year ending 30 June 2002 reached #3.31 million, an increase
of 88% over last year's sales figure of #1.76 million. The increase was due to
both acquisitions and organic growth. Operating losses pre-exceptional items
increased 12% to #3.05 million (2001 - #2.73 million), owing primarily to
increased costs associated with strengthening our organisation in anticipation
of future growth and our continued high level of investment in R&D. The basic
loss per share was 3.0p (2001 - 5.2p).
The #7.45 million raised in July 2001 has enabled the Company to:
* Support the commercialisation of the T1000 and development of subsequent
automated systems for both DNA and RNA purification from various sample
types
* Develop and expand our manual kits product offering
* Acquire the Medicines Testing Laboratory (MTL) in order to expand our
scientific services business for the pharmaceutical industry and academic
and biotechnology research markets
* Expand our sales and marketing activities across all divisions
* Provide working capital for the Group
* Develop its genotyping and large-scale purification services businesses
Tepnel also completed its move to AIM during the period. The move to AIM was
made in order to provide the Company with access to a broader institutional
investor base, as the market is better suited for a company of Tepnel's size and
stage of development.
Board Changes
During the period, Tepnel has further strengthened its Board with the
appointment of two new Directors in March 2002, providing access to the
international experience needed to deliver our strategy.
Marvin Miller, who recently retired as the CEO of Nextran, a US subsidiary of
Baxter International Inc., joined the Board as a Non-Executive Director, along
with Gron Ffoulkes-Davies, who became Group Finance Director.
Post Year-End Events
In September 2002, Tepnel appointed Nomura International plc as Nominated
Advisor and Broker. This appointment is important for Tepnel as Nomura has
significant international expertise in biotechnology and healthcare. The Company
believes that Nomura can play a key role in the next phase of our development
and assist us in achieving our ambitious targets.
Future Prospects
Tepnel Life Sciences has made considerable progress in moving ahead with its
tri-polar strategy of providing pharmaceutical and biotechnology customers with
a comprehensive range of automated DNA purification systems, kits and reagents,
and contract bioanalytical services.
The launch of the new T1000 system, and the subsequently signed distribution
agreements in combination with Tepnel's own direct sales efforts, will allow our
sales team to access over 85% of the available world market for our most
important products. This puts the Company in a truly competitive global position
in the rapidly growing market for DNA purification and analysis.
Similarly, the initiatives that we have taken in the UK to extend our service
capabilities better position the Company to participate in the rapidly growing
market for outsourced scientific services from pharmaceutical, biotechnology,
healthcare and agrigenetics companies.
Looking ahead, we believe that by continuing to invest in both the sales
capability and new product development needed to deliver our tri-polar strategy,
we will be able to generate considerable value for our shareholders.
Furthermore, Tepnel is constantly on the look out for strategic M&A
opportunities that will enable it to better pursue its strategy on an
international basis.
In the current financial year, Tepnel expects to drive its growth by achieving
the following important targets:
* Launch of T2000, a new automated system for the purification of DNA
from solid tissues
* Profitability and cash generation from Tepnel BioSystems and Tepnel
Scientific Services business divisions as a result of their enhanced product and
service offerings
Current Trading
The current financial year has started well with group sales after two months of
the new financial year increasing 70% compared to the corresponding period last
year. This rate of growth, although slightly ahead of internal estimates, is
targeted to continue for the current financial year.
Peter Raymond
Chairman
OPERATIONAL REVIEW
Tepnel's tri-polar strategy is designed to maximise sales generated from each
customer account, as it combines the sale of automated systems, manual kits and
reagents, and contract bioanalytical services. This strategy enables Tepnel to
take advantage of cross-selling opportunities, as companies and research
laboratories that buy one of our products or services are potential customers
for others. This integrated approach provides our customers with complete
solutions, on a cost-effective basis.
To support this strategy, Tepnel is creating global channels to market through
which it will sell all its products and services. This distribution network will
use both local distributors and direct sales as appropriate.
Tepnel Life Sciences (TLS)
Automated Systems for Nucleic Acid Purification - T1000
One of the key events for Tepnel during the reporting period was the worldwide
launch of its first automated DNA purification system, the T1000 system for
plasmid DNA purification. The T1000, which is targeted at both academic and
research laboratories within the pharmaceutical and biotechnology industries,
has been developed for the automated purification of plasmid DNA from bacteria.
This cost-effective and dedicated system has a number of advantages over other
products currently available on the market, including DNA yield, DNA purity,
ability to process up to 96 samples in approximately two hours, and complete '
walk away' automation of the sample purification process.
Feedback to-date on the system's performance has exceeded expectations and has
resulted in a number of favourable articles in key industry publications such as
Medical Laboratory World, Laboratory News, International Labmate and
International Biotechnology Laboratory.
In terms of distribution, we believe that in the UK we have both the capability
and the customer base to market our automated systems directly. At present the
product is being evaluated at a number of key reference sites in the UK, and we
expect sales to start to increase rapidly once this trial period has been
completed. In overseas markets our strategy is to seek a local partner, which
can bring its own contacts and knowledge of the local market to the sales
effort.
Since the worldwide launch of the T1000 in December 2001, Tepnel has signed
three distribution agreements in key international markets. The Company's first
agreement was with Takara Biomedical Co., Ltd, a division of Japan's Takara
Shuzo Co., Ltd, and covers the marketing of the T1000, associated consumables
and Tepnel's Nucleon(R) manual DNA purification products in Japan, China, Taiwan
and South Korea.
Under the terms of this multiple-year distribution agreement, Takara Biomedical
has purchased a number of T1000 systems and has committed to on-going purchases
for additional instruments. As well as the T1000, Takara Biomedical will also
distribute Tepnel's Nucleon(R) manual DNA purification products as well as
future automated systems.
Takara Biomedical has recently placed an order with Tepnel for additional
instruments and associated products.
Subsequent and similarly structured agreements for the T1000 have also been
signed during the period with specialist distributors in France and Denmark.
Negotiations with potential distributors in North America and other European
territories are progressing and we are optimistic of announcing the appointment
of new partners in these markets in due course.
The Company is continuing to develop new applications for its T1000 system,
which should enhance its market appeal. New applications include PCR clean-up,
BAC purification, genomic DNA purification from plants and other eukaryotic
cells, and genomic DNA purification from small blood volumes.
New Automated Systems in Development - T2000
Tepnel has been actively developing new automated systems from the purification
of genomic DNA from specific and commonly used tissue samples. A new system,
currently called the T2000, is being developed for the extraction and recovery
of high yields of intact genomic DNA from a range of solid tissues. This new
system is based on Tepnel's patented Nucleon(R) chemistry and discussions are
on-going with major international pharmaceutical companies for collaboration and
development of this exciting new system. Sales of T2000 systems and reagents are
anticipated in the current financial year.
The Company is also planning to develop a T2000 system specifically for the
purification of DNA from blood samples (up to 10ml). Extensive market research
on the key requirements of such a system has been completed and full development
work is expected to start before the end of 2002.
Manual Kits for Nucleic Acid Purification
As a key element of our tri-polar strategy, Tepnel is continuing to develop and
expand its Nucleon(R) range of manual DNA purification kits. Tepnel Life
Sciences currently has 14 Nucleon(R) DNA extraction and purification kits on the
market, which can be used for work with blood, cultured cells, plant, soft/hard
tissue and yeast. In 2002, the Company introduced its first chloroform-free
Nucleon(R) kits. These kits do not use any organic solvents or generate any
chlorinated waste by-products, thereby eliminating any concerns and costs
related to the use and disposal of chloroform. Additional kits and applications
are currently under development. Tepnel sells these kits directly in the UK and
through a global distribution agreement with Amersham Pharmacia Biotech to the
international life sciences research market.
Contract Services
In October 2001, we extended our potential service offering downstream of DNA
purification to the field of genotyping through the purchase of a SNPstreamTM
25K genotyping system and database licence from Orchid Biosciences. We are
collaborating with Orchid to market these genotyping services alongside our own
nucleic acid purification (NAP) service for use in the clinical phase of the
drug development process throughout the UK and Ireland.
In the reporting period, Tepnel also expanded its contract NAP service
capability following the move of its head office facilities. The lab has since
been audited by large pharma companies and CROs and has now been working at full
capacity for the past few months. In addition to work in the human healthcare
area there is the potential to develop our NAP services business for veterinary
applications.
Tepnel Scientific Services (TSS)
In the reporting period, Tepnel took a number of important strategic initiatives
to position itself at the forefront of the growing market for the outsourcing of
bioanalytical services. Demand for these services is coming from both major
pharmaceutical and biotechnology companies.
In July 2001, Tepnel acquired the Medicines Testing Laboratory (MTL) and
successfully merged it with our existing BioAnalytical Services business to
create Tepnel Scientific Services Ltd (TSS). Not only does MTL bring significant
turnover to the Tepnel Group, it also expands the range of analytical chemistry
and microbiological services that we can offer to the pharmaceutical,
biotechnology and healthcare industries.
TSS has been restructured and consolidated within the Tepnel Group during the
year, giving rise to #415,000 of exceptional costs. TSS is now poised for growth
and is targeted to make a profit contribution to the Group in the current
financial year.
During the year, TSS was awarded a #600,000 grant from the Scottish Executive to
assist with the consolidation and relocation of its Edinburgh and Glasgow
facilities to a purpose-built facility in Livingston. The project is currently
being evaluated and is expected to commence in the current financial year.
Tepnel BioSystems (TBS)
Tepnel BioSystems has also made progress during the period. This is the result
of several factors, including:
* the rapid growth of allergen testing in food. This market growth has
been driven by increasing consumer and governmental concerns over food quality;
and
* an increase in contract analytical work as the increasing trend
towards outsourcing in food and other industries gathers pace
The company has expanded sales of its BioKits range of DNA-based food-testing
kits for the detection of genetically modified organisms (GMOs) and meat species
identification. Additional BioKits for fish and crustacean species
identification are due to be launched during the current financial year.
TBS' BioGenetix network of testing laboratories continues to increase, with a
number of European laboratories expected to come on stream in the next few
months. New products that test for EU-approved and non-approved GMOs, and for
sesame and milk allergens in food, have been launched. TBS continues to develop
new test kits for additional GMOs, other allergens such as those from peanut and
eggs, and mycotoxins.
TBS was awarded a SPUR grant of #106,000 in December 2001 by the National
Assembly for Wales, to support the development of rapid allergen-test kits,
using lateral flow technology as used in over-the-counter home pregnancy test
kits.
In January 2002, TBS became exclusive UK distributor for the world-renowned
range of mycotoxin and microbiology test kits produced by VICAM (Boston, MA,
USA).
Future Outlook
In 2001/2002 Tepnel made significant progress across all aspects of its business
as is evident from the positive start that has been made to the current
financial year. A key element of this progress has been the strengthening of the
product and service offerings of TSS and TBS, both of which are targeted to be
profitable and cash-generative in 2002/2003. This solid platform is crucial to
Tepnel achieving its goal of moving into overall profitability as rapidly as
possible.
In the current financial year, we also expect to see increasing revenues from
our automated DNA purification systems, T1000 and T2000, as well as our extended
range of Nucleon(R) manual kits as a result of the increased sales capability
that we now have in position to support these products.
FINANCIAL REVIEW
Results
Turnover during the reporting period of #3.31 million was up 88% on income for
the previous year. This represents another year of extremely good sales growth
for the Group (2001 turnover was 56% higher than that in 2000). Second half
sales of #1.89 million were 33% higher than the first half (#1.42 million).
Gross profit increased by 86% in 2002 to #1.56 million (2001 - #0.84 million).
Operating losses pre-exceptional items for the year increased by 12% from #2.73
million in 2001 to #3.05 million in 2002. This increase is primarily a result of
increased administrative and sales and marketing costs incurred during the
period associated with strengthening our organisation in anticipation of future
growth.
Tepnel continued to invest significant resources in research and development,
and in 2002, R&D expenses dropped by only 3.8% to #1.98 million. This slight
decline was due to the timing of completion of the development of the T1000
system, which was launched in December 2001, and the commencement of development
of the new T2000 automated systems for the purification of genomic DNA from
specific and commonly used tissues samples.
Exceptional costs of #552,000 were incurred during the year, of which a
significant element related to non-recurring redundancy and restructuring costs
following the acquisition of the Medicines Testing Laboratory (MTL).
During the year, the Company received R&D tax credits totaling #350,000 in
respect of the years ended 30 June 2000 and 2001. A further #254,000 has been
accrued in respect of the year ended 30 June 2002.
The loss for the financial year was #2.83 million (2001 - #2.69 million loss).
The basic loss per share was 3.0p (2001 - 5.2p)
Acquisitions
In July 2001, Tepnel completed the acquisition of the MTL business from The
Royal Pharmaceutical Society of Great Britain. This acquisition brought a
significant level of turnover to the Group and is expected to play a key role in
the Company's move towards profitability, as well as increasing its portfolio of
scientific services.
MTL has now been successfully incorporated into Tepnel Scientific Services.
During the year, TSS was awarded a #600,000 grant from the Scottish Executive to
assist with the consolidation and relocation of its Edinburgh and Glasgow
facilities to a purpose-built facility in Livingston. The project to currently
being evaluated and is expected to commence during the current financial year.
Funding
Also in July 2001, the Company successfully completed a fully underwritten
placing and open offer and raised #7.45 million net of expenses from the issue
of 40.26 million new ordinary shares at 20p per share.
These funds have been allocated through the year to supporting our tri-polar
business strategy. More specifically, funds have been used to support the
commercialisation of the T1000 and development of subsequent automated systems
for both DNA and RNA purification from various tissue samples; for developing
and expanding our manual kits product offering; and expanding our contract
scientific services offering.
During the reporting period, Tepnel issued shares as part of two strategic
corporate transactions. In October 2001, Tepnel issued 1,757,444 shares to
Orchid Biosciences Inc. as part of our strategic deal in the field of SNP
genotyping; and in June 2002, 1,414,393 new shares were issued to the Japanese
company Precision Systems Science (PSS) in return for gaining access to its
Magtration(R) technology.
At the end of the reporting period, the Company had total cash of #3.3 million.
This level of cash resources is sufficient for Tepnel to achieve its target of
profitability.
Gron Ffoulkes-Davies
Group Finance Director
Consolidated Profit and Loss Account for the year ended 30 June 2002
Continuing operations
Note Acquisitions Total Total
2002 2002 2002 2001
#'000 #'000 #'000 #'000
Turnover 2,006 1,301 3,307 1,759
Cost of sales (1,040) (712) (1,752) (923)
________ ________ ________ ________
Gross profit 966 589 1,555 836
Research and development 1,976 - 1,976 2,055
Sales and marketing 854 138 992 908
Other administrative expenses 989 652 1,641 606
Exceptional items 4 137 415 552 -
________ ________ ________ ________
Total administrative expenses 3,956 1,205 5,161 3,569
________ ________ ________ ________
Operating loss (2,990) (616) (3,606) (2,733)
======== ========
Interest receivable 181 69
Interest payable (11) (29)
________ ________
Loss on ordinary activities
before taxation (3,436) (2,693)
Taxation 604 -
________ ________
Loss for the financial year (2,832) (2,693)
======== ========
Loss per share 5 3.0p 5.2p
======== ========
Diluted loss per share 5 3.0p 5.2p
======== ========
The Group's activities for the year relate to continuing operations.
All recognised gains and losses are included above.
Consolidated Balance Sheet as at 30 June 2002
2002 2001
#'000 #'000
Fixed assets
Intangible assets 1,783 1,574
Tangible assets 1,471 548
________ ________
3,254 2,122
Current assets
Stocks 840 450
Debtors - due within one year 1,411 720
Investments 20 20
Cash at bank and in hand 3,299 352
________ ________
5,570 1,542
Creditors: amounts falling due within one year 1,478 1,938
________ ________
Net current assets/(liabilities) 4,092 (396)
Creditors: amounts falling due greater than one year 14 21
________ ________
Total assets less current liabilities 7,332 1,705
======== ========
Capital and reserves
Called up share capital 973 520
Share premium account 26,578 18,572
Profit and loss account (20,219) (17,387)
________ ________
Equity shareholders' funds 7,332 1,705
======== ========
Consolidated cash flow statement for the year ended 30 June 2002
Reconciliation of operating loss to net cash outflow from operating activities
2002 2001
#'000 #'000
Operating loss (3,606) (2,733)
Depreciation 267 158
Amortisation 62 48
Increase in stocks (288) (94)
Increase in debtors (437) (228)
Increase in creditors 550 261
Profit on disposal of fixed assets (4) -
________ ________
Net cash outflow from operating activities (3,456) (2,588)
======== ========
Consolidated cash flow statement
2002 2001
#'000 #'000
Net cash outflow from operating activities (3,456) (2,588)
Return on investments 170 40
Corporation tax refund 350 -
Capital expenditure (794) (131)
Acquisitions (275) -
________ ________
Net cash outflow before financing (4,005) (2,679)
Management of liquid resources (2,802) 1,608
Financing 6,952 994
________ ________
Increase/(decrease) in cash 145 (77)
======== ========
Reconciliation of net cash flow to movements in net funds
2002 2001
#'000 #'000
Increase/(decrease) in cash 145 (77)
Cash inflow/(outflow) from short term deposits 2,802 (1,608)
Cash outflow from decrease in lease financing 17 6
Repayment of/new convertible loan 1,000 (1,000)
________ ________
Change in net funds resulting from cash flow 3,964 (2,679)
New finance leases (6) (30)
Net (debt)/funds at beginning of year (686) 2,023
________ ________
Net funds/(debt) at end of year 3,272 (686)
======== ========
Notes to the Accounts
1. Nature of the Financial Information
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 2001 has been based on the statutory
accounts of Tepnel Life Sciences PLC for the year to 30 June 2001. 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 2001 statutory accounts. The auditors
have not yet reported on the accounts for the year ended 30 June 2002. 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. All business divisions contribute to central administrative expenses and it
is not considered practicable to analyse operating profits, losses or net
assets, by business segment.
4. The following items were regarded as exceptional during the year ended 30
June 2002:
2002
#'000
Redundancy costs 470
Costs relating to restructuring and relocation costs 82
________
552
========
The exceptional costs above include a significant element, which relates to
non-recurring redundancy and re-structuring costs incurred within the group
after the acquisition of the Medicines Testing Laboratory (MTL) from the Royal
Pharmaceutical Society of Great Britain.
5. The basis loss per share has been calculated on the weighted average of
shares in issue during the year, namely 93,123,901 (2001 - 51,988,999) and
losses of #2,832,000 (2001 - #2,693,000). In both years there is no material
difference between the basic loss per share and the diluted loss per share.
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
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