Premaitha Health PLC

("Premaitha," the "Company" or the "Group")

Full year results to 31 March 2017 and half-year trading update

Manchester, UK - 29 September 2017: Premaitha (AIM: NIPT), a leading international molecular diagnostics group focused on non-invasive prenatal testing ("NIPT"), announces its full year results for the twelve months ended 31 March 2017; and provides an update on trading performance in the current financial year to date. 

Financial highlights

·     Revenues increased by 26% to £3.1m (2016: £2.5m), including one month contribution from Yourgene Bioscience ("Yourgene"), which was acquired in March 2017

-  Revenues increased by 48% excluding a non-recurring 2016 equipment sale

·     Gross profit increased by 83% to £1.3m (2016: £0.7m)

·     Gross margin improved to 42% (2016: 29%) due to benefits of scale and reduced product costs

·     General administrative expenses increased by 8% to £7.1m (2016: £6.6m), before separately disclosed exceptional items

·     Operating loss reduced by 37% to £7.6m (2016: £12.0m)

·     Cash of £1.3m at 31 March 2017 (31 March 2016: £5.3m)

-  Additional US$5.0m loan funding secured from Thermo Fisher in July 2017

Operational highlights

·     Test volumes increased by 41% to over 24,000 (2016: over 17,000) in second full year since its commercialisation

·     Completed the acquisition of Yourgene in March 2017, a significant provider of NIPT in Asia

-  Post-period end, in June 2017, Premaitha launched SAGE^TM, an advanced NIPT analysis solution available through Yourgene, significantly expanding Premaitha's addressable market

·     Successful expansion of geographic footprint, with Premaitha now commanding a significant distribution network across Europe, the Middle East, India and the Far East

·     In July 2017, the legal proceedings in connection with the patent infringement suits filed by Illumina were heard in the English High Court - judgment expected in Q4 2017

·     Genoma SA, Premaitha's Swiss customer, was placed into bankruptcy in May 2017 with an outstanding debt to Premaitha of £0.8m

Premaitha is actively pursuing options to recover the debt or equivalent assets

Trading update

·     Six month revenues to 30 September 2017 are expected to be up by approximately 75% to £2.6m (H1 2016: £1.5m)

·     Test volumes for the first half are expected to be in excess of 22,000, demonstrating significant momentum (H1 2016: 11,000 tests; full year to March 2017: 24,000 tests)

-  First half test volumes, excluding Yourgene, are up 140% to c.15,000 tests (H1 2016: 6,000 tests - excluding Genoma)

·     Continued geographic diversification, significantly reducing the proportion of revenues from regions with intellectual property exposure

-  Recently announced launch into South Africa and the award of Good Manufacturing Practice in Brazil

·     Strong focus on achieving positive cashflows through sales ramp-up, implementing cost-per-test efficiencies and overhead cost control

Adam Reynolds, Non-executive Chairman of Premaitha Health, commented:

"I am delighted with the commercial progress made by Premaitha in the last financial year. This is reflected in both growing revenues and increasing test volumes.

"The Company is also making significant strides in its geographic and product diversification strategy which we believe will ensure that, whatever the outcome of the UK intellectual property disputes, Premaitha is developing a business that will succeed in what will inevitably become a huge global market for non-invasive prenatal testing.

"While the UK litigation remains a distraction, Premaitha's strong technology, growing international commercial footprint, support from Thermo Fisher and dedicated global team, place us extremely well for continued growth. In the current financial year the Company has already delivered some record sales months and has already almost exceeded the total test volumes for the whole of the previous financial year."

A copy of the 2017 Annual Report and Accounts has been uploaded to the Company's website at www.premaitha.com. 

For shareholders who have opted to received printed copies of the Annual report and Accounts, these are being posted today. 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

About Premaitha

Premaitha is an international molecular diagnostics group which uses the latest advances in DNA analysis technology to develop safer, faster and regulatory approved genetic screening tests. The Group's primary focus is on non-invasive prenatal tests (NIPT) for pregnant women - an emerging, multi-billion dollar global market.

Premaitha's IONA® test was launched in 2015 as the first CE-IVD NIPT test in Europe. It enables laboratories and healthcare practitioners to offer a complete CE-marked NIPT system in-house. The IONA® test is performed on a maternal blood sample - which contains traces of fetal DNA - and estimates the risk of a fetus being affected with Down's syndrome or other genetic conditions.

Unlike existing prenatal screening methods, due to its high level of accuracy, the IONA® test can significantly reduce the number of women subjected to unnecessary invasive follow up diagnostic procedures, such as amniocentesis, which are costly, resource intensive and carry a risk of miscarriage.

In March 2017, Premaitha acquired Yourgene Bioscience, a specialist next generation sequencing and bioinformatics company based in Taiwan, with its own NIPT screening test that operates on the same Thermo Fisher next-generation sequencing platform as Premaitha's IONA® test. Yourgene brings significant benefits to the Group through expanded market access in Asia - the world's fastest growing NIPT market - as well as opportunities for cross-selling and the ability to jointly develop expanded test content both within NIPT and beyond.

Premaitha is headquartered in Manchester, England, with Yourgene offices in Taipei and Singapore. Its shares trade on the AIM market of the London Stock Exchange (AIM: NIPT). For further information, please visit www.premaitha.com. Follow us on twitter @PremaithaHealth.

Chairman's Statement

Premaitha's acquisition of Yourgene in March 2017 has created a leading international molecular diagnostics group of scale. The acquisition was highly complementary and the integration of Yourgene is progressing extremely well. The additional geographic reach of Yourgene opens up new channels to market for Premaitha's products, broadens the range of products available across all regions and adds significant capabilities to the Group.

The ongoing intellectual property dispute with Illumina continues to impact our share price and in many respects overshadows the impressive progress the Group is making. The litigation remains a significant  distraction and uncertainty for the business, but we continue to strive to de-risk the Group through international expansion and product diversification, as well as mounting a very strong and multi-faceted defence.

Commercial progress

In the last year, the Group has continued to expand its international presence into Asia, the Middle East and Southern Europe, whilst building on its strong bases in the UK and France. We have also focused on developing our product suite, launching the myNIPT® portal and SAGE^TM prenatal screening solution while we continue to develop the IONA® test. We are making significant strides in leveraging Yourgene's customer base across South East Asia and India to accelerate the Group's growth trajectory.

Litigation

The legal context in which we operate continues to be challenging, with Illumina and Sequenom aggressively pursuing market dominance against ourselves, some of our customers and also our competitors. The UK trial has now concluded and we await the Court's ruling in Q4 2017. The EU's Competition Commission is looking closely at Illumina's behaviour and we are confident that their actions will be recognised for their anti-competitive motivation. In September 2017, Illumina filed another similar patent infringement suit in the UK against the IONA® test, in another example of such behaviour. We will continue to build a diverse international group to reduce the impact of these pressures and I would particularly like to thank our legal advisers and the Group's management for their tireless efforts.

Financial position

We continue on our journey to becoming profitable and intend to achieve this objective during the current financial year, despite the litigation-related uncertainties described elsewhere in this report. The Company remains encouraged by the significant support and facilities we continue to receive from our shareholders and Thermo Fisher, reinforcing both the Group's strategy and exciting potential. This was demonstrated by our successful fundraisings in both September 2016 and February 2017 enabling us to execute on our strategy.

Strategic relationship

The relationship with Thermo Fisher has continued to strengthen throughout the year with effective collaboration on commercial and product development initiatives as well as with the additional funding provided by Thermo Fisher in September 2016 and July 2017. This is testament to our strong mutual interest in creating a successful channel for their next generation sequencing platforms.

Board changes

Following the acquisition of Yourgene I am very pleased to welcome Alan Chang and Bill Chang to the Board. Alan is a very experienced international IP lawyer and Bill has been key in building the Yourgene business and developing a strong network of scientific collaborators. 

People and science working effectively together

Both the Premaitha and Yourgene teams continue to innovate within the field of clinical genetics, achieving impressive scientific developments and improving services for the pregnant women we support. I would like to thank them all for their continued efforts.

Outlook

With our growing scale, Premaitha is now working to extend its footprint, both through the acquisition of new customers and by ensuring existing laboratory customers are successful in their markets to grow demand for both our IONA® and SAGE^TM products and services.

The Asian and Middle Eastern markets offer significant growth opportunities and the Group will be increasingly focused on those regions in the months ahead. Europe and the UK will remain our home markets with steadier progress affected by public policy and legal decisions. Whilst continuing to focus on these core markets, we will remain alert to opportunities in the Americas and for the next wave of products in adjacent sectors to NIPT.

The Company does continue to face a number of headwinds, not least the continued unwanted legal attention from Illumina. However, supported by strong technology, a growing international commercial footprint, support from our platform partner and a dedicated global team, I believe we have a very strong foundation from which to continue growing in 2017/18 and beyond.

Adam Reynolds

Chairman

28 September 2017

CEO Report

We have now completed our second full year of trading and I am immensely proud of what we have achieved at Premaitha and at the same time acutely aware of the level of effort we need to maintain to ensure our continued success. As anticipated, prenatal screening has emerged as the single biggest market for DNA testing technologies but with great opportunity comes fierce competition. Premaitha's key strengths are scientific and clinical excellence, a laser focus on the prenatal screening market and an exceptional team of people. Taken together these considerable assets will allow us to prevail in the coming years.

Acquisition of Yourgene Bioscience

A key event this financial year has been the acquisition of the Taiwanese genetics company, Yourgene. At the beginning of the year we were competitors fighting for the same accounts but we soon realised that the activities of our companies were complementary and the management teams found it easy to communicate and work together. The Yourgene acquisition has been a great success for both parties. Yourgene has gained access to the class leading IONA® product and Premaitha hasve extended its capabilities in the Asia Pacific region. Furthermore, as both companies share the same technology platform from Thermo Fisher, this has extended the breadth of our relationship with this major corporate supporter.

Expanding our geographic footprint

Premaitha is now well established in Europe, the Middle East and Asia and there is a strong pipeline of opportunities in the Americas. A focus of the coming year will be to explore how best to provide the IONA® test in these territories. This is an ongoing project and recently we announced that the Company had been approved for Brazilian Good Manufacturing Practice for the IONA® test by Brazil's regulatory authority ANVISA. Brazil's IVD registration process has a number of strict requirements  to overcome and to have obtained approval is a very positive development for the IONA® test.  The approval also demonstrates the high quality processes we have embedded at Premaitha, and our effective collaboration with Thermo Fisher.

Strategy

The strategy of the business remains unchanged - we were established to build in vitro diagnostic products using advanced DNA analysis technologies and this is exactly what we have done. Our first product - the IONA® test (alongside the Sage^TM test from Yourgene) - is available to laboratories globally and we will continue to grow sales of these products whilst expanding our product range to incorporate new genetic tests and maintaining the highest quality standards.

Product development

Both Premaitha and Yourgene were founded on innovation in science and technology and we continue to excel in this area. Our development programmes encompass five related areas all designed to improve and extend the range of products available to our customers. The goals of these programmes are:

·     reducing the costs of the test;

·     extending the breadth of the test;

·     improving the ease of use the test;

·     exploring novel approaches for NIPT; and,

·     developing new products outside of NIPT.

With regards to this latter activity, we have decided to focus in the short term on the reproductive health space and our activities are based around tests to support in vitro fertilisation and pre-conception screening for genetic diseases. We remain interested in applications of our technology in cancer screening but this field has not yet developed beyond the research and discovery phase and we will maintain a watching brief before investing in the best applications in this space.

Operations

Key performance indicators (KPIs)

The Board recognises the importance of financial and non-financial KPIs in driving appropriate behaviours and enabling the monitoring of group performance.  For the current financial year the primary KPIs were the number of tests sold or performed in-house, and net cash balances.

Tests performed is a direct measure of marketing effectiveness and take-up rates for NIPT, as well as driving revenues and gross profits. In the 2017 reporting period, over 24,000 tests were sold or performed (2016: 17,000 tests), including one month of Yourgene activity.  This is an increase of over 40% in only our second year of trading, due to an expanding customer base.

Net cash balances is a combined measure of the Group's ability to drive operating cashflows and manage working capital effectively while continuing to invest in future capabilities and attract appropriate funding into the business.  Cashflows are cyclical and in the reporting period net cash balances reduced to £1.3m at the period end (2016: £5.3m), as we funded business growth and litigation expenses.  We are appreciative of our financial backers for supporting our strategic ambitions and are striving to achieve positive cashflows in the near future.

The board continues to monitor business performance closely and will adopt appropriate KPIs to drive commercialisation of the business, and ensure robust financial performance.

Geographic footprint

Premaitha is focusing heavily on increasing its revenue-generating capabilities and has significantly expanded its international laboratory customer base and also appointed distributors in many countries across Europe, the Middle East and in Asia.  The core, highly experienced sales team, remains focused on direct sales, and we are working closely with instrumentation and distribution partners to compete effectively with our larger competitors. The acquisition of Yourgene has given us significant technical and commercial capabilities in the fast-growing Asian markets and enables the enlarged group to plan our entry into the key Chinese market as well as further expansion in India.

Application support

Our training and application support services are critical to customer laboratories and the feedback has been extremely positive as we endeavour to routinely outperform our competitors.  Delivering great customer service will be vitally important in retaining and growing customers as the NIPT space matures and we believe we have market-leading capabilities in this regard.

Clinical service laboratory

The Premaitha clinical service laboratory in Manchester has continued to deliver outstanding service performance to an increasing number of hospitals and doctors in the UK and internationally.  The laboratory back-up service has been invaluable to customers in the process of installing laboratories, experiencing workflow problems, spikes in demand and cover of religious or national holiday periods.  The service laboratory in Taipei offers similar levels of support to its customers and we are integrating the two labs to provide a seamless global offering.

Supply chain

Our supply chain and NGS platform partners, coupled with our in-house operational capabilities, have coped well with the scaling up of activities and we are confident there is headroom for significant further growth.

Dr Stephen Little

Chief Executive Officer

Financial Report

Income statement

In the trading year, revenues were up 26% at £3,079k (2016: £2,452k), or up 48% after excluding non-recurring equipment revenues from one customer in 2016.  These revenues include one month of Yourgene sales after the acquisition which completed on 2 March 2017.  Gross profit was £1,282k (2016: £701k) representing a gross margin of 42% (2016: 29%) due to scale benefits and product cost reductions.  General administrative expenses of £7,079k (2016: £6,573k) were principally incurred on staff costs, sales and marketing and product development expenditure which grew at a slower rate than revenue increased. Research and development tax credits are anticipated to be £806k (2016: £294k) reflecting our ongoing commitment to developing high quality products. Total administrative expenses were £8,886k (2016: £12,733k) after separately disclosed items as explained below.

Separately disclosed items

Significant irregular administrative expenses have been shown separately in the consolidated statement of comprehensive income, with further detail in the Annual Report and Accounts. These costs comprise charges related to the ongoing UK patent litigation of £388k (2016: £5,834k); adjustments to the valuations of share-based payments and warrant expenses of £332k (2016: £325k); costs associated with the Yourgene acquisition of £301k (2016: nil); and, a provision for doubtful debts of £785k (2016: nil) related to the Group's Swiss customer, Genoma SA, which is now in bankruptcy and for which debt recovery is ongoing.

Operating loss

There is a resultant operating loss after total administrative expenses of £7,603k (2016: £12,032k).

Finance income/(expenses)

During the period the Group incurred a net finance charge of £247k (2016: net charge of £84k), with interest and unwinding discounts on the Thermo Fisher loan instrument offsetting interest earned on cash balances.

Taxation and foreign exchange

The loss on ordinary activities after taxation of £7,859k (2016: £12,076k) generated a tax loss, the benefit of which will not be recognised until the Group can be more certain of recoverability through future profitability. The Group made a loss of £24k (2016: £54k) on translation of its foreign subsidiaries and foreign currency balances to the presentational currency.

Loss per share

The total comprehensive loss of £7,883k (2016: £12,130k) represents a loss per share of 3 pence (2016: 6 pence).

Statement of financial position

At the balance sheet date, the Group had total assets of £17,563k (2016: £10,490). Goodwill of £7,014k (2016: nil) and intangible assets of £1,539k (2016: nil) have been recognised on the acquisition of the Yourgene business, its existing customer relationships and its exciting prospects for future synergies.  Property, plant and equipment increased to £2,890k (2016: £1,936k) due mainly to the acquired Yourgene assets. Current assets reduced to £6,119k (2016: £8,554k) due to cash consumption partially offset by higher debtors.

Total equity and liabilities increased to £17,563k (2016: £10,490k) with a higher merger relief reserve of £10,013k (2016: £955k) arising from the Yourgene acquisition, new loan funding from Thermo Fisher in September 2016 and an equity fundraise in March 2017, being partially offset by the comprehensive loss.   The litigation provision has not been increased (2016: £5,834k) as management deems it already covers all costs associated with the July 2017 trial and ongoing counterclaims.  However, there is significant uncertainty over the outcome of the trial, which is expected to be received in Autumn 2017, and any potential cost awards or appeal costs arising.  Any appeal by either party, if granted by the Court, is likely to take over 12 months to complete and any estimates would be purely speculative at this time.

Cashflow

The Group had an opening cash position of £5,337k (2016: £2,709k) and expended £4,036k during the period (2016: surplus of £2,628k). Cash and cash equivalents at the end of the period were £1,301k (2016: £5,337k).  During the period the Group used £7,862k (2016: £7,042k) of cash in operating activities due to higher operating losses and increased net working capital. Investing activities were broadly neutral at £2k (2016: deficit of £1,131k) due to capital expenditure being offset by inflows associated with the Yourgene acquisition. Financing activities generated a surplus of £3,832k from Thermo Fisher loan funding and an equity raise in March 2017 (2016: surplus of £10,800k).

As with all businesses at this early stage of development, the Board carefully assesses the Group's ability to operate as a going concern and has detailed plans for revenue growth, margin improvement and cashflow control which are intended to achieve positive cashflows in the 2018 financial year.  More detail on these plans can be found in Note 2 in this announcement.

In September 2016, the Group secured additional funding from Thermo Fisher Scientific in the form of a £4,000k extension of their secured loan facility and the issue of two tranches of warrants (see note 31 in the Annual Report and Accounts for full details)  In February 2017, there was a share placing of 17 m shares to Harwood Capital, which raised £1,475k.

Dividends

No dividend is recommended (2016: £nil) due to the early stage nature of the Group.

Capital management

The Bboard's objective is to maintain a balance sheet that is both efficient at delivering long-term shareholder value and also safeguards the Group's financial position in light of variable economic cycles and the principal risks and uncertainties outlined in this report. As at 31 March 2017, the Group had cash of £1,301k (2016: £5,337k).  Business growth is expected to enable the Group to operate as a going concern for the foreseeable future, whilst material uncertainties surrounding the litigation are acknowledged in this report, with mitigation strategies being actively pursued including geographic and product diversification.

Post-balance sheet events

After the balance sheet date there was a further extension of the Thermo Fisher loan faciliites including a cash injection of £3.1m ($4m) and an additional secured facility of $1m in return for further issues of warrants.  The patent litigation trial finally commenced in the UK Courts in July 2017 and the ruling is expected to be known in Q4 2017.  The costs of the trial were fully provided for in prior years. Future costs of any appeal, if any, by either party are uncertain and therefore no additional provision has been made.  If they materialise, such costs are anticipated to be substantially lower than the trial costs to date.  Other aspects of the legal battle, such as assisting the EU Competition Commission with its anti-trust investigation, are ongoing and provisioned.  In September 2017, Illumina filed a further similar patent infringement claim against Premaitha in the UK.  The costs and timing of this latest action are unknown at the time of completing this report.

Barry Hextall

Chief Financial Officer

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position