TIDMTRX
RNS Number : 8422I
Tissue Regenix Group PLC
26 March 2018
Tissue Regenix Group plc
Annual results for period ended 31 December 2017
Group Revenues increase to GBP5.2m
Acquisition of CellRight Technologies completed
Significant commercial agreements signed
Leeds, 26 March 2018 - Tissue Regenix Group (AIM:TRX) ("Tissue
Regenix" or "The Group") the regenerative medical devices company,
today announces its results for the 12 months ended 31 December
2017.
Corporate and Recent Highlights
-- Completed acquisition of CellRight Technologies, August 2017
-- Delivered GBP40m equity fundraise, August 2017
-- Appointed Steve Couldwell as CEO, November 2017
-- Signed significant strategic distribution partnerships with
Arthrex, Inc. and ARMS medical, Q1 2018
-- Gained complete Medicare coverage for DermaPure in the US, Q1 2018
Operational Highlights
-- Launched additional product lines, addressing surgical
reconstructive procedures and dental applications
-- Began processing of SurgiPure XD at the UK facility for US market
-- Recognised distribution synergies following the CellRight Acquisition
-- Transfer of DermaPure manufacturing on schedule
Financial Highlights
(Note: 2016 comparatives are for the 11 months ended 31 December
2016)
-- Revenues increased more than three-fold to GBP5.2m (2016: GBP1.4m)
o Dermapure - sales increased by 46% to GBP1.9m (2016:
GBP1.3m)
o Controlled joint venture - sales increased more than 8-fold to
GBP1.1m (2016: GBP0.1k)
o CellRight - sales momentum maintained - five months
post-acquisition were GBP2.2m
-- Gross profit increased to GBP2.6m (2016: GBP0.7m)
-- Operating loss before exceptional items of GBP9.7m (2016: GBP11.1m)
-- Operating loss GBP10.8m (2016: GBP11.1m)
-- Cash at 31 December 2017 of GBP16.4m
-- Equity issued during the year of GBP40.0m raised cash of GBP37.7m net of costs
-- Cash of GBP19.9m was used for investment in CellRight
Technologies (towards total consideration at fair value of up to
GBP22.7m) together with GBP1.0m used to pay costs
Steve Couldwell, CEO, Tissue Regenix Group, commented: "2017 was
a transformative year for the Tissue Regenix Group with the
completion of the acquisition of CellRight Technologies providing a
complementary regenerative platform technology, state-of-the-art
manufacturing facility in San Antonio, TX, and a vastly experienced
team of research, regulatory and manufacturing personnel.
This has brought a step- change in the strategic vision of the
Company, as we enter a new phase of commercialisation, highlighted
by the post-period announcements of strategic partnerships with
ARMS Medical for DermaPure, and Arthrex, Inc. for the distribution
of CellRight's innovative 'BioRinse' portfolio. Moving forward
strategic partnerships of this nature will be of increasing
importance to the Company, as we look for ways to increase our
market penetration and maximise our research and manufacturing
capabilities to deliver differentiated products, and a long term
return on investment.
The underlying dCELL(R) business in the US continued to perform
well. With a realigned strategy focusing on the inpatient setting
where the clinical benefits of DermaPure are pertinent, and where
the advantages of our 'Innovative Technology' awards with the
Premier and Vizient Group Purchasing Organisations can be
recognised. The expansion of DermaPure's use into surgical
applications; primarily in the orthopaedics and urogynaecology
space, has allowed us to access new clinical areas. Recognising
this expanded potential, we rebranded our wound care division 'TRX
BioSurgery' in February 2018.
In Europe, the CE mark approval for OrthoPure XT is ongoing, and
we continue to undertake pre-approval marketing activities as we
position ourselves for launch. We remain optimistic that this
approval will be received to allow a roll out during 2018.
Controlled joint venture GBM-V also continues to progress through
the regulatory body for the approval of the CardioPure heart
valves, and in tandem has initiated a revenue stream through the
processing of allograft corneas.
The performance of CellRight in the five months since the
acquisition had a material effect on the Group's revenue figure,
and we continue to look at synergistic opportunities to maximise
the cross selling potential of the enlarged Group. CellRight has a
successful OEM and distributor commercial model, and continues to
establish strategic partnerships. We are developing a blended
commercial model combining the historic branded, direct sales model
of Tissue Regenix Group with the CellRight white label, indirect
sales approach and expect that this will provide significant growth
opportunities moving forward.
We now have two complementary platform technologies which allows
us to offer a broader portfolio to our customers and bring further
clinical benefits to patients
With the initial integration of the Companies now complete we
are optimistic around the Group's potential for 2018 and
beyond."
For more Information:
Tissue Regenix Group plc Tel: 0330 430 3073 / 07920272
Caitlin Pearson, Head of Communications 441
----------------------------------------- ------------------------------
Jefferies International Ltd Tel: 020 7029 8000
Simon Hardy / Christopher Binks
----------------------------------------- ------------------------------
FTI Consulting Tel: 0203 727 1000
Brett Pollard / Mo Noonan
----------------------------------------- ------------------------------
About Tissue Regenix
Tissue Regenix is a leading medical devices company in the field
of regenerative medicine. Tissue Regenix was formed in 2006 when it
was spun-out from the University of Leeds, UK. The company's
patented decellularisation ('dCELL(R) ') technology removes DNA and
other cellular material from animal and human soft tissue leaving
an acellular tissue scaffold which is not rejected by the patient's
body and can then be used to repair diseased or worn out body
parts. Current applications address many critical clinical needs
such as sports medicine, heart valve replacement and wound
care.
In November 2012 Tissue Regenix Group plc set up a subsidiary
company in the United States - 'Tissue Regenix Wound Care Inc.',
rebranded TRX BioSurgery in February 2018. January 2016 saw the
establishment of joint venture GBM-V, a multi- tissue bank based in
Rostock, Germany.
In August 2017 Tissue Regenix acquired CellRight Technologies(R)
, a biotech company that specializes in regenerative medicine and
is dedicated to the development of innovative osteoinductive and
wound care scaffolds that enhance healing opportunities of defects
created by trauma and disease. CellRight's human osteobiologics may
be used in spine, trauma, general orthopedic, foot & ankle,
dental, and sports medicine surgical procedures.
Chairman Introduction and Highlights
"I am very pleased with the progress the Group has made,
delivering against our strategic objectives for the year. We have
completed a transformative acquisition, delivered 46% growth in
DermaPure sales and expanded the clinical applications of our
products to access new healthcare professionals whilst successfully
progressing integration activities. We now have a more
differentiated and diverse product portfolio, robust pipeline and
the route to market from which to drive sustainable long-term
growth."
Our Business
The Group has performed well against our strategic milestones
for the year. The acquisition of CellRight Technologies is a
transformative opportunity for the Group, combining two innovative,
regenerative platforms with large addressable markets and
synergistic growth opportunities. With the appointment of Steve
Couldwell as CEO, the Board is confident that it has the leadership
in place to take the company to the next stage and a comprehensive
review of the development pipeline is ongoing. With our augmented,
established product portfolio generating a growing level of sales,
we have identified key development assets to focus our commercial
resources behind, and we are confident that following final product
validation and transfer of manufacturing in-house, the newly
focused strategy will drive significant shareholder returns.
Financial Performance
Overall Group performance
The Group delivered revenues of GBP5,233K in the 12 months to 31
December 2017 a 263% increase when compared to the 11 month period
to December 2016.
Organic DermaPure sales grew 46% in the US to GBP1,932K, and the
commercial traction of the European controlled joint venture
continued with increased revenues to GBP1,135K.
Following the equity fundraise undertaken in August 2017, the
Group has a robust cash position to fund the near term future of
the enlarged Group and we maintain our expectation that the Group
will be cash break even during 2020.
Leadership
In November 2017, we announced the appointment of Steve
Couldwell as CEO of the Group. Steve succeeds Antony Odell who
stepped down in October 2017 after nine years leading the Group. We
would like to thank Antony for his leadership during the Group's
early years.
Steve has experience spanning over 25 years in the Medical
Device space and a proven track record of delivering revenue and
profit growth. He has had an extensive career including Smith &
Nephew and more recently, Sanofi BioSurgery based in Boston,
Massachusetts. Having held senior commercial positions in both the
US and Europe, Steve has the necessary skill set to drive the next
stages of the Group's commercial strategy required to deliver
shareholder returns.
Following the resignation of Paul Devlin on 30 November, we have
appointed an interim CFO and initiated a search for a permanent
candidate.
Our people
The Board and I would like to extend our thanks to our employees
and partners, especially throughout this year of significant
change. With the integration of CellRight Technologies, we welcomed
a new team in the US, led by CEO Jesus Hernandez, and the addition
of their experience and the ongoing commitment of all our employees
remain fundamental to our success.
CEO Operational Review
2017 was a transformational year for the Tissue Regenix
Group.
The acquisition of CellRight Technologies and successful equity
fundraise augments our commercial opportunity, financial position
and distribution outreach of the Group; combining two complementary
platform technologies across key clinical markets in an expanding
number of territories.
Growth in our dCELL(R) Technology product portfolio was
underpinned by a 46% increase in DermaPure sales. With its first
full year of sales, controlled joint venture GBM-V increased
revenue by 8 fold to GBP1.1m. The contribution of CellRight
Technologies, acquired on 9 August 2017, included in the year end
figure means we have increased overall Group revenue to over
GBP5m.
Alongside the acquisition of CellRight Technologies we have
commenced a review of the enlarged Group's product pipeline and
opportunities to establish the best strategy to drive the Group
forward.
Business developments and product pipelines
TRX BioSurgery (previous Tissue Regenix Wound Care, Inc)
DermaPure has proven successful in a number of clinical
applications outside of the traditional advanced wound care
settings. With adoption by the acute surgical and wound
reconstruction markets, due to its impressive clinical outcomes
with a single application, DermaPure has seen significant uptake in
the orthopaedic trauma and urogynaecology arenas where treatment
innovation has been in high demand.
Having identified an opportunity in this market, we have signed
an exclusive distributor agreement with ARMS Medical, a specialist
urogynaecology distributor in the United States to maximise this
opportunity, leveraging their strong relationships with Key Opinion
Leaders and surgeons. The partnership allows our direct sales force
to remain focussed on the in-patient woundcare, plastics,
orthopaedics and general surgery sales channels.
Alongside this, the addition of CellRight's advanced wound care
products give the Group a wide product portfolio in this field,
offering physicians access to DermaPure, a room temperature stable
decellularised single application allograft, Matrix IQ, a frozen or
freeze dried decellularised allograft, and AmnioWorks, derived from
amniotic tissue.
Following the end of the period, Tissue Regenix Wound Care Inc.
was rebranded as TRX BioSurgery.
dCELL(R) Orthopaedics
Changes to Medical Device Regulations have extended the timeline
to receive CE marking for OrthoPure XT (xenograft tendon) within
the EU. However, this has resulted in the opportunity to submit an
extension to this application to include other ligament indications
accelerating the broadening of the commercial opportunity. Subject
to approval, this would allow OrthoPure XT to be utilised not only
in primary and revision ACL reconstruction, but also procedures in
small ligaments in the knee, expanding utilisation and broadening
our label claims. We have commenced pre-launch activities and have
engaged European distributors in selective key markets to
facilitate a timely roll out once country registrations have been
received.
The OrthoPure XT clinical data collected at one year showed the
implant to be comparable, and in some indications, preferable to
the current gold standard treatment, an autograft harvested from
the hamstring and without the additional rehabilitation of an
autograft procedure.
This clinical data has also been used to validate the potential
for a pre-clinical trial in the US. As reported previously we have
been in discussions with the FDA and it is expected that this
pre-clinical work will commence during 2018 with the support of our
Orthopaedic Clinical Advisory Board.
The technology transfer for the production of OrthoPure HT
(allograft ligament), at the CellRight facility continues according
to plan and we expect the first product to be available in H2 2018.
As this is a human tissue derived application, it can be approved
under the HCT/P pathway for minimally manipulated tissue thus
expediting the time to market. This would serve as a pathfinder
validating the dCELL(R) Technology within the US Orthopaedic
market.
Cardiac and GBM-V
The regulatory submission for CardioPure dCELL(R) allograft
pulmonary and aortic heart valves, continues to progress through
the German regulatory authorities. The clinical data generated by
Dr Francisco da Costa, our clinician partner in Brazil, continues
to demonstrate the clinical relevance and advantages of these
transplants even after more than 10 years of follow up. Subject to
the regulatory process we anticipate that approval will be received
for launch during 2019.
In addition to the preparation and commercialisation of
CardioPure, the controlled joint venture in Germany has captured a
12%([1]) market share in its first year of operations with
processed corneas. We expect to release further cryo-preserved
tissues throughout the year.
Orthopaedics and Dental - CellRight Technologies
CellRight Technologies officially became a part of the Tissue
Regenix Group in August 2017.
Based around a proprietary processing technology 'BioRinse(R)',
CellRight produces a portfolio of inductive, verified bone matrices
in different physical forms to address clinical indications in the
orthopaedic, spine, dental and general surgery procedures.
BioRinse(R) offers a complementary platform Technology to
dCELL(R), allowing the Group to address regenerative solutions for
both soft tissue and bone.
DentalFix(R) a portfolio of traditional as well as innovative,
dental biologics validated as being osteoinductive, was launched.
The dental market is an area in which we see a significant
opportunity for the Group with both dCELL(R) and BioRinse(R)
products, and currently comprises around 20% of CellRight
sales.
CellRight has reached several milestones since the completion of
the acquisition. In October they commenced the production of
AmnioWorks(R), an advanced wound care product derived from human
amniotic membrane. Alongside this, additional sizes of their frozen
and freeze dried wound care product Matrix IQ were released to
address larger surgical site procedures.
With no direct sales force, CellRight based their business model
around establishing strategic partnerships for distribution of both
their white label (OEM) as well as branded products. These
partnerships have continued to gain traction and we expect to see
further partnerships develop in the coming year.
CellRight delivered on their revenue expectations during 2017
and we continue to see increasing commercial traction and momentum.
We expect to report positive advances with the CellRight portfolio
during 2018.
Integration
The integration process has continued to progress according to
plan and we expect the initial commercial and financial synergies
to materialise in H1 2018.
The technology transfer for DermaPure production has been
initiated. The completion of residual DNA testing returned positive
results, demonstrating over 99% removal of DNA from the tissue. We
expect that this process will complete ahead of schedule with our
first CellRight-processed DermaPure becoming available during H1
2018. Having our own in-house source, of DermaPure manufactured in
the US, for the US market, will support supply from our
relationship with CTS, removing the risk of single sourcing and
ensuring that our product inventory can align with customer
demand.
In October, the Tissue Regenix Wound Care office, also based in
San Antonio, TX, moved into the CellRight facility, allowing all US
operations to be centralised in one location. A shared services
infrastructure has been implemented and the advantages of a cross
selling distribution and partnership network are beginning to be
realised.
Post period developments
Following the reported period, the Group reached a number of
regulatory and commercial milestones which will play an important
part in the strategy and commercial success of the Group moving
forward.
Fundamental to this was the announcement of a long-term,
multi-year distribution agreement with Arthrex, Inc. for
CellRight's osteobiologic products. Arthrex is one of the world's
leading sports medicine businesses and a premier innovator of
orthopaedic surgical solutions. This is the first agreement of this
nature to be signed since completing the acquisition and paves the
way for the Group to pursue relationships with other strategic
partners.
In order to expedite a route to market in Europe for the
CellRight products Tissue Regenix applied for a Human Tissue
Authority licence and we expect this to be granted imminently,
allowing for the import of CellRights osteobiologics to the
manufacturing facility in Leeds for direct distribution. It is
expected that the first sales under this approval will commence in
H2 2018.
Further to this, initial manufacturing for commercial
distribution of SurgiPure XD has begun at the Leeds facility for
export to the US where it is approved under the 510(k) market
clearance pathway. We are in discussions with potential partners to
determine the optimal route to market.
Outlook
The Group has reached a significant inflection point in terms of
its development as a commercial entity. Having successfully
completed the acquisition and integration of CellRight Technologies
we now have two complementary and highly valuable regenerative
technology platforms and a comprehensive product portfolio. Looking
forward, we have a diverse distribution network, a strengthened
commercial management team and significant opportunities to
increase our commercial footprint both in the US, and international
markets.
The Group is well positioned for future growth with a clearly
defined strategy, strong leadership and a robust product portfolio
and pipeline. The CellRight acquisition allows for acceleration of
our route to market; specifically, for the dCELL(R) business, and
offers an enhanced product portfolio, which strengthens our ability
to increase our market adoption and penetration. This was
demonstrated during Q1 2018 where we announced strategic
distribution agreements with ARMS Medical, a specialist
urogynaecology distributor for DermaPure, and Arthrex, Inc. a world
leader in orthopaedic sports medicine.
We are grateful for the continued support of our shareholders
throughout the year. Their commitment enables us to continue to
advance the strategic vision of the Group which we are confident
will create significant value as we accelerate the
commercialisation of our product portfolio.
Sales in both CellRight and BioSurgery have had a strong start
to the year, including shipments under two significant distributor
agreements. With the recent launch of the CellRight DentalFix
portfolio and AmnioWorks product, the approval of the OrthoPure XT
CE mark and additional BioSurgery product line extensions expected
to come onstream throughout the year, 2018 is set to be a year of
significant newsflow, increasing commercial traction and revenue
growth.
Trading for 2018 remains in line with Board expectations.
Financial Overview
Note: 2016 comparatives are for the 11 months ended 31 December
2016.
Sales
In the year ended 31 December 2017 revenue increased by 263% to
GBP5,233K (2016: GBP1,443K). Revenue from existing businesses
increased by 113% to GBP3,067K (2016: GBP1,443K). Revenue from
CellRight was GBP2,166K (2016: GBPnil) since its acquisition on 09
August 2017.
Cost of sales and gross profit
Cost of sales includes cost of product of GBP2,039K (2016:
GBP354K) and third party commissions of GBP588K (2016: GBP376K).
Gross profit increased by 265% to GBP2,606K (2016: GBP713K).
Trading results
Administrative expenses increased by GBP1,649K from GBP11,773K
to GBP13,422K. These included GBP1,098K of exceptional costs. Other
costs increased by GBP551K. Overheads included staff costs (55%),
sales and marketing (1%), research and development (11%),
establishment and administration costs (33%). Operating loss was
GBP10,816K (2016: GBP11,060K).
CellRight was acquired on 9 August 2017 and the operating profit
of GBP277K for the period to 31 December 2017 is included within
the consolidated result.
Exceptional items
Non-recurring costs include the costs of acquisition of
CellRight of GBP996K and GBP102K of legal costs in relation to the
LifeNet litigation which were written off in arriving at the
operating loss. A further GBP2,258K was set off against the share
premium account arising on the issue of new shares.
Finance income
Finance income of GBP47K (2016: GBP114K) represents interest
earned on cash deposits.
Taxation
Net taxation was a credit of GBP1,348K (2016: credit GBP1,034K).
The Group submits enhanced research and development tax claims and
elects to exchange tax losses for a cash refund. The refund
expected for the year ended 31 December 2017 is GBP799K. (2016:
GBP875K), 2016 R&D tax credits were received in January 2018.
Tax payable of GBP31K (2016: GBPNil) represents corporation tax
payable in the US on the profits of CellRight since
acquisition.
Gross tax losses carried forward in the UK were GBP35,819K
(2016: GBP32,037K). The Group does not currently pay tax in the UK.
A deferred tax asset has not been recognised as the timing and
recoverable value of the tax losses is uncertain.
Loss for the year
Loss for the year was GBP9,421K (2016: Loss GBP9,912K). The
number of shares in issue during the year was 1,170,990,924 (2016:
760,124,264) resulting in a basic loss per share of (1.00p) (2016:
loss (1.29p))
Balance sheet
Cash absorbed by operations was GBP9,786K (2016: GBP10,811K)
The Company issued shares by way of a placing and subscription
of shares which were admitted to AIM on 9 August 2017. This raised
proceeds of GBP40,000K which, after expenses of GBP2,318K netted
GBP37,682K.
On 9 August 2017 the Group acquired CellRight for a maximum
consideration of GBP23,078K of which GBP19,945K was paid to the
vendors on the acquisition date and GBP3,133K is payable contingent
upon achieving performance criteria. The fair value of the
contingent consideration is assessed at GBP2,718K. The fair value
of the net assets acquired was assessed at GBP7,359K. This includes
GBP4,374K attributed to intangible assets not previously recognised
in the financial statements of CellRight. Goodwill on acquisition
was GBP15,304K.
At 31 December 2017 the Group had net assets of GBP39,522K
(2016: GBP11,536K) of which cash in hand totalled GBP16,423K (2016:
GBP8,173K)
Going Concern
The Group's forecasts indicate it has sufficient resources until
more than one year from the date of this report.
Current trading and prospects
There has been a strong start in sales of both CellRight and
BioSurgery product, including shipments under two significant
distributor agreements. The integration of CellRight is progressing
well. 2018 promises to be a further year of revenue generation and
product launch. Trading for 2018 remains in line with
expectations.
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2017
Year to 11 Months
31 December to
2017 31 December
2016
Notes GBP000 GBP000
---------------------------------------- ------ ------------- -------------
REVENUE 2 5,233 1,443
Cost of sales (2,627) (730)
---------------------------------------- ------ ------------- -------------
GROSS PROFIT 2,606 713
Administrative expenses before
exceptional items 2 (12,324) (11,773)
Exceptional items (1,098) -
---------------------------------------- ------ ------------- -------------
Total administrative expenses (13,422) (11,773)
---------------------------------------- ------ ------------- -------------
OPERATING LOSS (10,816) (11,060)
Finance income 47 114
---------------------------------------- ------ ------------- -------------
LOSS BEFORE TAXATION (10,769) (10,946)
Taxation 3 1,348 1,034
---------------------------------------- ------ ------------- -------------
LOSS FOR YEAR (9,421) (9,912)
---------------------------------------- ------ ------------- -------------
ATTRIBUTABLE TO:
Equity holders of the parent (9,221) (9,786)
Non-controlling interests (200) (126)
---------------------------------------- ------ ------------- -------------
(9,421) (9,912)
---------------------------------------- ------ ------------- -------------
OTHER COMPREHENSIVE INCOME:
Foreign currency translation
differences - foreign operations (614) (1)
TOTAL COMPREHENSIVE EXPENSE FOR
THE YEAR (10,035) (9,913)
---------------------------------------- ------ ------------- -------------
ATTRIBUTABLE TO:
Equity holders of the parent 4 (9,835) (9,787)
Non-controlling interests (200) (126)
---------------------------------------- ------ ------------- -------------
(10,035) (9,913)
---------------------------------------- ------ ------------- -------------
LOSS PER SHARE
Basic and diluted on loss attributable
to equity holders of parent 4 (1.00)p (1.29)p
The loss for the period arises from the Group's continuing
operations.
The accompanying notes form an integral part of the financial
statements.
Consolidated Statement of Financial Position for the year ended
31 December 2017
31 December 31 December
2017 2016
Notes GBP000 GBP000
------------------------------- ------ ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 2,994 1,087
Intangible assets 19,305 550
TOTAL NON-CURRENT ASSETS 22,299 1,637
------------------------------- ------ ------------ ------------
Current assets
Inventory 2,872 661
Trade and other receivables 4,168 3,130
Cash and cash equivalents 16,423 8,173
------------------------------- ------ ------------ ------------
TOTAL CURRENT ASSETS 23,463 11,964
------------------------------- ------ ------------ ------------
TOTAL ASSETS 45,762 13,601
------------------------------- ------ ------------ ------------
LIABILITIES
Non-current liabilities
Other payables (635) -
------------------------------- ------ ------------ ------------
TOTAL NON-CURRENT LIABILITIES (635) -
------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables (4,781) (2,065)
------------------------------- ------ ------------ ------------
TOTAL CURRENT LIABILITIES (4,781) (2,065)
------------------------------- ------ ------------ ------------
Provisions
Deferred Tax (824) -
------------------------------- ------ ------------ ------------
TOTAL PROVISION (824) -
------------------------------- ------ ------------ ------------
TOTAL LIABILITIES (6,240) (2,065)
------------------------------- ------ ------------ ------------
NET ASSETS 39,522 11,536
------------------------------- ------ ------------ ------------
EQUITY
Share capital 6 5,855 3,801
Share premium 6 86,398 50,461
Merger reserve 6 10,884 10,884
Reverse acquisition reserve 6 (7,148) (7,148)
Reserve for own shares 7 (831) (831)
Share based payment reserve 1,186 1,156
Retained earnings deficit 7 (56,413) (46,578)
------------------------------- ------ ------------ ------------
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF PARENT 39,931 11,745
Non-controlling interests (409) (209)
------------------------------- ------ ------------ ------------
TOTAL EQUITY 39,522 11,536
------------------------------- ------ ------------ ------------
Approved by the Board of Directors and authorised for issue on
26 March 2018.
Steven Couldwell
Chief Executive Officer
Consolidated Statement of Cash Flows for the year ended 31
December 2017
Year to 11 Months to
31 December 31 December
2017 2016
Notes GBP000 GBP000
-------------------------------------------------- ------ --------------------------------- -------------
OPERATING ACTIVITIES
Operating loss (10,816) (11,060)
Adjustment for:
Depreciation of property, plant and equipment 482 301
Amortisation of intangible assets 225 -
Share based payments 30 210
Research tax credit received 1,541 319
Operating cash outflow (8,538) (10,230)
-------------------------------------------------- ------ --------------------------------- -------------
(Increase) in inventory (503) (597)
(Increase) in trade and other receivables (783) (90)
Increase in trade and other payables 38 106
-------------------------------------------------- ------ --------------------------------- -------------
Net cash outflow from operations (9,786) (10,811)
-------------------------------------------------- ------ --------------------------------- -------------
INVESTING ACTIVITIES
Interest received 47 114
Purchases of property, plant and equipment (130) (487)
Capitalised development expenditure (93) (550)
Acquisition of subsidiary 5 (19,945) -
-------------------------------------------------- ------ --------------------------------- -------------
Net cash (outflow) from investing activities (20,121) (923)
-------------------------------------------------- ------ --------------------------------- -------------
FINANCING ACTIVITIES
Proceeds from issue of share capital 6 37,682 -
Proceeds from exercised share options 309 -
Net cash inflow from financing activities 37,991 -
-------------------------------------------------- ------ --------------------------------- -------------
Increase/(decrease) in cash and cash equivalents 8,084 (11,734)
Foreign exchange translation movement 166 -
Cash and cash equivalents at start of period 8,173 19,907
CASH AND CASH EQUIVALENTS AT OF PERIOD 16,423 8,173
-------------------------------------------------- ------ --------------------------------- -------------
NOTES TO THE FINANCIAL STATEMENTS
GENERAL INFORMATION
The financial information set out above does not constitute the
company's statutory accounts for the year ended 31 December 2017 or
2016 but is derived from those accounts. Statutory accounts for
2016 have been delivered to the registrar of companies, and those
for 2017 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor 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.
1) BASIS OF PREPARATION
The financial statements of Tissue Regenix Group plc are audited
consolidated financial statements for the year ended 31 December
2017. These include audited comparatives for the 11 months period
ended to 31 December 2016.
The Group financial statements consolidate the financial
statements of Tissue Regenix Group plc and the entities it
controls, being its subsidiaries and its joint venture interest,
and are presented in the Group's functional currency that is GBP
Sterling.
Going Concern
As at 31 December 2017, the Group had GBP16.4m of cash and cash
equivalents available to it. The Directors have considered their
obligation, in relation to the assessment of the going concern of
the Group and each statutory entity within it and have reviewed the
current budget cash forecasts and assumptions as well as the main
risk factors facing the Group.
After due enquiry, the Directors consider that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements. As is the
nature of the business the Directors acknowledge there will be
further funding requirements before revenues have grown to the
point of self sufficiency
Change in Accounting Presentation
Cost of sales in the group's financial statements comprises cost
of goods sold and external commissions payable. This is a change
from previous years where external commissions were expensed as
administration expenses. The change is because the Directors
believe this presentation gives the users of the accounts a clearer
view of the costs directly associated with generating revenue.
This change has increased Cost of sales by GBP376,000 from what
was previously presented in the 11 months to December 2016 with a
corresponding reduction in the administration expenses. The impact
on the 2017 figure is an increase of GBP588,000 with a
corresponding reduction in administration expenses. The loss before
tax and earnings per share in both the current year and prior
period are unaffected by this change.
2) SEGMENTAL REPORTING
The following table provides disclosure of the Group's revenue
by geographical market based on location of the customer:
Year to 11 Months to
31 December 31 December
2017 2016
GBP000 GBP000
--------------- ------------- -------------
USA 4,098 1,322
Rest of world 1,135 121
--------------- ------------- -------------
5,233 1,443
Analysis of revenue by customer
During the year ending 31 December 2017 the Group had two
customers who individually exceeded 10% of revenue. These customers
generated 13% and 11% of revenue respectively (2016:12% and
10%).
Operating segments
The Group is organised into BioSurgery, Orthopaedics &
Dental, Cardiac and Other divisions for internal management,
reporting and decision-making, based on the nature of the products
of the Group's businesses. Managers have been appointed within
these divisions, who report to the Chief Executive Officer. These
are the reportable operating segments in accordance with IFRS8
"Operating Segments". The Directors recognise that the operations
of the Group are dynamic and therefore this position will be
monitored as the Group develops.
In accordance with IFRS8, the Group has derived the information
for its operating segments using the information used by the Chief
Operating Decision Maker. The Group has identified the Chief
Executive Officer as the Chief Operating Decision Maker as he is
responsible for the allocation of resources to the operating
segments and assessing their performance.
Central overheads, which primarily relate to operations of the
Group function, are not allocated to the business unit.
BioSurgery Orthopaedics Cardiac
& Dental
Year 11 Year Year 11
to Months to 11 Months to Months
31 to 31 to 31 to
Dec 31 Dec Dec 31 Dec Dec 31 Dec
2017 2016 2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- -------- -------- -------- -------------- -------- -----------
Revenue 1,932 1,322 2,166 - - -
Cost of sales (916) (664) (829) - - -
---------------- -------- -------- -------- -------------- -------- -----------
Gross Profit 1,016 658 1,337 - - -
Administrative
costs (4,737) (5,124) (3,297) (2,738) (481) (462)
Exceptional - - - - - -
costs
---------------- -------- -------- -------- -------------- -------- -----------
Operating
loss (3,721) (4,466) (1,960) (2,738) (481) (462)
Finance income - - 3 - - -
---------------- -------- -------- -------- -------------- -------- -----------
Loss before
taxation (3,721) (4,466) (1,957) (2,738) (481) (462)
Taxation 372 323 722 600 254 111
---------------- -------- -------- -------- -------------- -------- -----------
Loss for
the year (3,349) (4,143) (1,235) (2,138) (227) (351)
---------------- -------- -------- -------- -------------- -------- -----------
Other Central Total
Year Year Year
to 11 Months to 11 Months to 11 Months
31 to 31 to 31 to
Dec 31 Dec Dec 31 Dec Dec 31 Dec
2017 2016 2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- -------- ---------- -------- ---------- --------- ----------
Revenue 1,135 121 - - 5,233 1,443
Cost of sales (882) (66) - - (2,627) (730)
---------------- -------- ---------- -------- ---------- --------- ----------
Gross Profit 253 55 - - 2,606 713
Administrative
costs (484) (308) (3,325) (3,141) (12,324) (11,773)
Exceptional
costs - - (1,098) - (1,098) -
---------------- -------- ---------- -------- ---------- --------- ----------
Operating
loss (231) (253) (4,423) (3,141) (10,816) (11,060)
Finance income - - 44 114 47 114
---------------- -------- ---------- -------- ---------- --------- ----------
Loss before
taxation (231) (253) (4,379) (3,027) (10,769) (10,946)
Taxation - - - - 1,348 1,034
---------------- -------- ---------- -------- ---------- --------- ----------
Loss for
the year (231) (253) (4,379) (3,027) (9,421) (9,912)
---------------- -------- ---------- -------- ---------- --------- ----------
BioSurgery Orthopaedics Cardiac
& Dental
Year 11 Months Year 11 Months Year 11 Months
to to to to to to
31 31 Dec 3 Dec 31(st) 31 31 Dec
Dec 2016 2017 Dec Dec 2016
2017 GBP000 GBP000 2016 2017 GBP000
GBP000 GBP000 GBP000
--------------------- -------- ---------- -------- ---------- -------- ----------
Staff costs (3,343) (3,162) (1,837) (1,327) (281) (293)
--------------------- -------- ---------- -------- ---------- -------- ----------
Sales and
marketing
costs (64) (79) (17) (12) (4) (3)
--------------------- -------- ---------- -------- ---------- -------- ----------
Research
and development (277) (388) (894) (1,221) (147) (70)
--------------------- -------- ---------- -------- ---------- -------- ----------
Establishment
and administration
costs (1,053) (1,495) (549) (178) (49) (96)
--------------------- -------- ---------- -------- ---------- -------- ----------
Administrative
costs (4,737) (5,124) (3,297) (2,738) (481) (462)
--------------------- -------- ---------- -------- ---------- -------- ----------
Other Central Total
Year 11 Months Year 11 Months Year 11 Months
to to to to to to
31 31 Dec 31 31 Dec 31 31 Dec
Dec 2016 Dec 2016 Dec 2016
2017 GBP000 2017 GBP000 2017 GBP000
GBP000 GBP000 GBP000
--------------------- -------- ---------- -------- ---------- --------- -----------
Staff costs (181) (157) (1,135) (2,087) (6,777) (7,026)
--------------------- -------- ---------- -------- ---------- --------- -----------
Sales and
marketing
costs (21) (4) - - (106) (98)
--------------------- -------- ---------- -------- ---------- --------- -----------
Research
and development (32) - - - (1,350) (1,679)
--------------------- -------- ---------- -------- ---------- --------- -----------
Establishment
and administration
costs (250) (147) (2,190) (1,054) (4,091) (2,970)
--------------------- -------- ---------- -------- ---------- --------- -----------
Administrative
costs (484) (308) (3,325) (3,141) (12,324) (11,773)
--------------------- -------- ---------- -------- ---------- --------- -----------
3) TAXATION
Tax loss on ordinary activities
Year to 11 Months to
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------------------------------- ------------- -------------
Current tax:
UK corporation tax credit on losses of period (1,348) (1,034)
---------------------------------------------------------- ------------- -------------
(1,348) (1,034)
Deferred tax:
Origination and reversal of temporary timing differences - -
---------------------------------------------------------- ------------- -------------
Tax credit on loss on ordinary activities (1,348) (1,034)
---------------------------------------------------------- ------------- -------------
The charge for the year can be reconciled to the loss before tax
per the Statement of Comprehensive Income as follows:
Factors affecting the current tax charges
The tax assessed for the year varies from the main rate of
corporation tax as explained below:
Year to 11 Months to
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------------------------------------------------------------- ------------- -------------
The tax assessed for the period varies from the small company rate of corporation tax
as explained
below:
Loss on ordinary activities before tax (10,776) (10,946)
Tax at the standard rate of corporation tax 19.25% (FY16:20%) (2,074) (2,189)
Effects of:
Expenses not deductible for tax purposes - -
Research and development tax credits received (799) (875)
Surrender of research and development relief for repayable tax credit 1,098 1,249
Research and development enhancement (621) (706)
Prior period adjustment (549) (158)
Unutilised tax losses 1,597 1,645
---------------------------------------------------------------------------------------- ------------- -------------
Tax credit for the period (1,348) (1,034)
---------------------------------------------------------------------------------------- ------------- -------------
Deferred Tax
Year to 11 Months to
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------------------------ ------------- -------------
Tax losses
Losses available to carry forward against future trading profits 35,819 32,037
Deferred tax asset - unrecognised* 6,089 5,767
------------------------------------------------------------------ ------------- -------------
*The Group has not recognised a deferred tax asset relating to
these losses as their recoverability is uncertain.
4) LOSS PER SHARE (BASIC AND DILUTED)
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the period
excluding own shares held jointly by the Tissue Regenix Employee
Share Trust and certain employees. Diluted loss per share is
calculated by adjusting the weighted average number of ordinary
shares in issue during the year to assume conversion of all
dilutive potential ordinary shares.
Year to 11 Months to
31 December 31 December
2017 2016
GBP000 GBP000
--------------------------------------------------------------------- ------------- -------------
Total loss attributable to the equity holders of the parent (9,221) (9,786)
--------------------------------------------------------------------- ------------- -------------
No. No.
Weighted average number of ordinary shares in issue during the year 920,506,514 760,124,264
--------------------------------------------------------------------- ------------- -------------
Loss per share
Basic and diluted on loss for the year (1.00)p (1.29)p
--------------------------------------------------------------------- ------------- -------------
The Company has issued employee options over 243,105,607
ordinary shares and there are 16,112,800 jointly owned shares which
are potentially dilutive. There is however, no dilutive effect of
these issued options as there is a loss for each of the periods
concerned.
5) BUSINESS COMBINATION
Acquisition of CellRight Technologies
On 09 August 2017, the Group acquired 100 per cent of the voting
equity instruments of CellRight Technologies LLC. This acquisition
was made as the first part of the expansion plan for the US group
to process inhouse human tissue products in the US. The Group
anticipated the close relationship between CellRight and Tissue
Regenix businesses will be mutually beneficial including shared
resources in manufacturing, sales, marketing and accounting.
Details of the fair value of the identifiable assets and
liabilities acquired, purchase consideration and goodwill are as
follows:
Net assets Book value Adjustments Fair value
GBP'000 GBP'000 GBP'000
--------------------- ----------- ------------ -----------
Intangible assets - 4,374 4,374
Inventory 2,298 (598) 1,700
Property and
land 643 237 880
Plant and equipment 1,574 (113) 1,461
Trade and other
receivables 448 - 448
Trade and other
payables (551) - (551)
Deferred tax
liability - (953) (953)
--------------------- ----------- ------------ -----------
Total fair value 4,412 2,947 7,359
--------------------- ----------- ------------ -----------
Consideration 23,078 (415) 22,663
Goodwill 15,304
--------------------- ----------- ------------ -----------
Deferred tax has been calculated on the value of the asset
acquired at a US corporation tax rate of 21 per cent.
Fair value of consideration
GBP'000
Cash 19,945
Contingent consideration 2,718
-------------------------- --------
Total consideration 22,663
-------------------------- --------
Contingent consideration
The Group has agreed to pay the contingent consideration if
Gross Revenue during the first year after acquisition equals or
exceeds seven million dollars ($7,000,000), in an amount equal to
$2,036,201.46.
The Group has agreed to a milestone advance payment of an amount
equal to one million dollars ($1,000,000) in addition to the
milestone payment earned, if Gross Revenue during the first
milestone period equals or exceeds ten million dollars
($10,000,000),
The Group has agreed to pay a second milestone if Gross Revenue
during the second annual period
equals or exceeds twelve million five hundred thousand dollars
($12,500,000) an amount equal to $2,036,201.46 less the amount of
the milestone advance payment, if any.
Acquisition-related costs
Acquisition costs relating to this transaction amounted to
GBP996,000 and have been disclosed within the exceptional costs in
the statement of comprehensive income.
Since the acquisition date, CellRight has contributed
GBP2,166,000 to Group revenues and a profit of GBP277,000 to Group
income. If the acquisition had occurred on 1 January 2017, Group
Revenue would have increased by GBP2,930,000 and Group income for
the period would have increased by GBP702,000
Measurements of fair values
The valuation techniques used for measuring the fair
value of material assets acquired were as follows.
Assets acquired Valuation technique
Property, plant Market comparison technique and cost
and equipment technique: The valuation model considers
market prices for similar items when
they are available, and depreciated
replacement cost when appropriate.
Depreciated replacement cost reflects
adjustments for physical deterioration
as well as functional and economic
obsolescence.
------------------ -------------------------------------------------
Intangible assets Relief-from-royalty method and multi-period
excess earnings method: The relief-from-royalty
method considers the discounted estimated
royalty payments that are expected
to be avoided as a result of the patents
or trademarks being owned. The multi-period
excess earnings method considers the
present value of net cash flows expected
to be generated by the customer relationships,
by excluding any cash flows related
to contributory assets.
------------------ -------------------------------------------------
Inventories Net realisable value: The fair value
is determined based on the actual
cost of the inventory items.
The trade receivables comprise gross contractual amounts due of
GBP713k, which was acquired with a provision of GBP265k which was
expected to be uncollectible at the date of acquisition to give a
net value of GBP448k.
6) SHARE CAPITAL
Share capital Share premium Merger reserve Reverse acquisition Total
reserve
Number GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------------- -------------- -------------- --------------- --------------------- -------
Total Ordinary
shares of 0.5 p
each as at 31
January 2016 760,124,264 3,801 50,461 10,884 (7,148) 57,998
--------------------- -------------- -------------- -------------- --------------- --------------------- -------
Issue of shares - - - - - -
Share options
exercised
--------------------- -------------- -------------- -------------- --------------- --------------------- -------
Total Ordinary
shares of 0.5p each
as at 31 December
2016 760,124,264 3,801 50,461 10,884 (7,148) 57,998
Issue of shares 400,000,000 2,000 35,682 - - 37,682
Share options
exercised 10,866,660 54 255 - - 309
--------------------- -------------- -------------- -------------- --------------- --------------------- -------
Total Ordinary
shares of 0.5p each
as at 31 December
2017 1,170,990,924 5,855 86,398 10,884 (7,148) 95,989
--------------------- -------------- -------------- -------------- --------------- --------------------- -------
As permitted by the provisions of the Companies Act 2006, the
Company does not have an upper limit to its authorised share
capital.
7) MOVEMENT IN RETAINED EARNINGS AND RESERVE FOR OWN SHARES
Retained Earnings Deficit Reserve For Own Shares
GBP000 GBP'000
------------------------------ -------------------------- -----------------------
At 31 December 2016 (46,578) (831)
------------------------------- -------------------------- -----------------------
Loss for the period (9,421) -
Foreign translation movement (614) -
Minority Interest 200 -
------------------------------ -------------------------- -----------------------
At 31 December 2017 (56,413) (831)
------------------------------- -------------------------- -----------------------
[1] Tissue Regenix Group estimates
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUCUWUPRPGA
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