Cyprotex PLC
(“Cyprotex” or “the Company”)
Interim Results 2016
Revenue growth and increase in profitability continue into 2016
Cyprotex PLC (AIM: CRX), a specialist ADME-Tox Contract Research Organisation (CRO), today reports its interim results for the half year to 30 June 2016.
Financial Highlights
· Revenues up 26% to £8.73 million (H1 2015: £6.93 million).
· Gross margins were 77.5% (H1 2015: 76.8%).
· Operating profit up significantly to £1.49 million (H1 2015: £0.36 million).
· Underlying EBITDA^ increased to £2.34 million (H1 2015: £1.10 million).
· Cash of £6.82 million (H1 2015: £4.13 million, FY 2015: £5.41 million).
^ excluding share based payment charge of £0.13 million (H1 2015: £0.08 million)
Operational Highlights
· Significant increase in new customers to 139 (H1 2015: 103).
· Watertown revenues in H1 2016, up almost 70% from the comparative period, benefitting from the general improvement in the investment environment in the East Coast of USA.
· Demand for high value drug-drug interaction packages and metabolite identification has been strong and has assisted in growing revenues ahead of expectations.
· Our presence at Alderley Park BioHub site has increased with the opening of a new bioanalytical laboratory to allow for planned expansion of these services later in the year and the expansion our toxicology facility. Proprietary 3D cellular models have been highly successful in revenue generation.
· Validation of a High Throughput (HT) ADME screening platform at our Watertown site has been completed and is supporting large scale screening contracts for the US Government and other customers.
· Upgrading of our toxicology assays at Kalamazoo to provide in vitro GLP genotoxicity services has already seen positive customer interest.
· Website upgrades and social media engagement have increased the global recognition of the Cyprotex brand.
· Revenue from the largest customer accounts for 10.3% (FY 2015: 9.6%) of total revenue and represents continuing business with a major pharmaceutical company.
Ian Johnson, Chairman of Cyprotex PLC, said:
“I am delighted to report that the progress made in 2015 has continued into 2016 and, as previously flagged to the market, we are substantially ahead of our expectations. The growth of the business is global and from an increasingly wide range of industries and sectors. Investment in all sites, which commenced in 2014, continues and is delivering high quality new services which contributed to the increase in revenue in H1 2016. Watertown and both UK sites have grown revenues and consequently operational profitability. The Kalamazoo site has received considerable investment to launch a suite of GLP genotoxicity services which we expect will drive revenue growth for the site in the second half of the year. Of note is the collaboration with Cytocentrics announced in February 2016 where we are developing a full range of ion channel services to meet the expected regulatory changes in cardiac safety testing as a consequence of the CiPA initiative. The second half has started well and the Board looks forward to the remainder of the year with continued confidence.”
This announcement contains inside information for the purposes of Article 7 of EU regulation 596/2014.
For further information:
Cyprotex PLC / Tel: +44 (0) 1625 505 100Dr Anthony Baxter, Chief Executive Officer
John Dootson, Chief Financial Officer
Mark Warburton, Chief Operating Officer and Legal Counsel /
www.cyprotex.com
N+1 Singer (Nomad and broker to Cyprotex) / Tel: +44 (0)20 7496 3000
Shaun Dobson
Jen Boorer /
www.n1singer.com
About Cyprotex PLC
Cyprotex is listed on the AIM market of the London Stock Exchange (CRX). It has sites at Macclesfield and Alderley Park, both of which are near Manchester in the UK, and at Watertown, MA and Kalamazoo, MI in the US. The Company was established in 1999 and works with more than 1400 partners within the pharmaceutical and biotech industry, cosmetics and personal care industry and the chemical industry. Cyprotex acquired Apredica and the assets of Cellumen, Inc. in August 2010 and the combined business provides support for a wide range of experimental and computational ADME-Tox and PK services. The acquisition of the assets and business of CeeTox in January 2014 has enabled Cyprotex to expand its range of services to target the personal care, cosmetics and chemical industries. In 2015, Cyprotex launched its new bioscience division to expand its capabilities into phenotypic and target based screening. The Company’s core capabilities include high quality in vitro ADME services, mechanistic toxicology and high content toxicology screening services, including our proprietary CellCiphr® toxicity prediction technology, bioscience services, predictive modelling solutions including Cloe® PK, chemPK™, chemTarget and chemTox, and a range of skin, ocular and endocrine disruption services. For more information, please visit www.cyprotex.com
Chairman and Chief Executive Officer's Statement
The Company has made an excellent start to the year reporting a 26% increase in revenues and a four-fold increase in operational profitability over the corresponding period last year. This growth continues the strong operational performance observed during 2015.
The increase in sales is attributable to the successful continuation and expansion of several strategic ADME contracts with large pharma companies and growth of new product lines, including the ability to offer full in vitro drug-drug interaction (DDI) packages and the introduction of proprietary 3D cellular models. Revenue from our metabolite identification service continues to be strong following our investment in high resolution mass spectrometry in 2014. We have seen an increase in the general ADME and Tox outsourcing market indicating a strong investment climate in the pharma / biotech industries in Europe and the US.
Despite the ADME-Tox services market remaining fragmented and highly competitive, our expansion into high value and technically challenging new service offerings has been beneficial in gaining market share.
The investment programme that commenced in 2014 has continued into H1 2016. To support our toxicology service offerings and expand our bioscience capabilities, we have acquired a high throughput flow cytometer (iQue® Screener). This versatile cell analyser has a wide range of applications and we expect it to attract interest from customers working in the fields of immunology and oncology, in addition to other areas of research. Our expertise in 3D cellular models and high content imaging has enabled us to lead the way in an area of significant growth and is driving further R&D efforts to secure our position as a market leader. To support this growth in new services and to allow for expansion of our bioanalytical capabilities in the second half of the year, we have increased our presence at the Alderley Park BioHub site.
A key investment at our Kalamazoo site is the development of GLP compliant in vitro genotoxicity services, including the Ames test, in vitro micronucleus test and in vitro chromosomal aberration test. These tests are required for regulatory submissions in a range of different industries and therefore offer a potential large customer base. Early customer take up of these assays has been pleasing and we anticipate Genotox services to be an engine of growth at our Kalamazoo site going forward.
In February this year, we announced a strategic collaboration with Cytocentrics (a San Antonio, US based specialist ion channel company). Cytocentrics have placed two state-of-the-art Cytopatch TM4 instruments at our Watertown site and we expect to launch a full package of in vitro ion channel screening services which will form the basis of a comprehensive package of in vitro cardiac safety services in the second half of the year. This is in direct response to the ongoing CiPA initiative which is currently evaluating new regulatory cardiac safety testing approaches. In silico modelling techniques are becoming more widely accepted across a number of different industries. Our Scientific Computing Group has developed an impressive range of tools for the prediction of pharmacokinetics, toxicity and efficacy. In May 2016, a new version of chemPKTM was launched for predicting human pharmacokinetics directly from structure. The new version has enhanced functionality for different dosage routes and regimens. In June 2016, chemTarget was launched for predicting biological target interaction. chemTarget and chemPKTM are powerful virtual screening tools which can be used in combination for understanding clinically relevant efficacy of new chemical entities.
As a result of these first half initiatives and last years’ new products and services, the UK and US operations have benefitted in terms of additional revenues. Growth has also come, as it did in 2015, from larger volumes serviced from existing customers. The positive impact to the Company flowing from the inter-dependency between the sites through cross selling and in our relationships with US Government agencies has continued into 2016.
Our UK sites remain the main driver for revenues and operational profits, however our Watertown site has also exhibited strong performance and excellent half year results. Our high throughput ADME screening platform at our Watertown facility has played a role in supporting this increase in business allowing us to service larger scale screening projects from the United States Environmental Protection Agency (‘EPA’). Our Kalamazoo site has made a slower start to the year, however, we are confident that performance will improve in the second half through the introduction of the new genotoxicity services as well as other planned investment at the site.
Customer Relationships
To meet our financial goals, the Company realises the importance of building on existing customer relationships as well as attracting new customers. Investment in sales and marketing has helped us achieve this goal. The upgraded Cyprotex website (www.cyprotex.com) now incorporates all the services we offer across all the sites, and enquiries directly from the website result in approximately 50% of new business generated. New customers additions totalled 139, 36 higher than the comparative period. Our new blog, launched on the Cyprotex website in 2015, along with a focus on social media, has driven a significant increase in customer enquiries through search engine optimisation and external brand awareness. We are continuing the focus on making the Cyprotex name the brand of choice for ADME -Tox screening services given that we now have over 1400 customers, including many of the major and medium sized pharmaceutical companies as well as clients in many other industry segments such as cosmetics, agrochemicals, industrial chemicals, petrochemicals and medical devices. To attract further business from industries outside the pharmaceutical industry, in March 2016, we released our new Chemical and Cosmetics Testing guide. This valuable resource features many of the services offered at our GLP Kalamazoo site, and highlights the expertise we have in this testing field.
Several of our larger customers have signed up to exclusive service contracts with Cyprotex which has benefitted us on several levels and is a reflection of the growing confidence our customers have in our ability to continuously deliver a quality service.
Expansion into the Japanese market via a local distributor has resulted in the award of several more projects from Japanese clients. Brand awareness of Cyprotex continues to be strong globally and we have noticed an increase in business from areas such as Australia and Brazil.
Financial Performance
Reported turnover increased by £1.80 million or 26% higher than the comparable period last year, with sales to North American customers accounting for £1.04 million of this increase, driven predominantly by servicing larger ADME contracts and capitalising on our recent R&D investment strategy. Revenues generated at our UK facilities, which, as last year, contribute approximately 75% of the total revenue reported, were up 20% compared with the comparative period. Revenues from the Watertown site are also markedly higher than the comparative period, up almost 70%, due in part to the R&D investments made on this site, the general improvement in the investment environment in the East Coast of the USA and the burgeoning market for our services in North America. Revenues for our Kalamazoo site were down 20% on last years’ comparative period, due to the delay in our GLP genotoxicity launch, a soft second quarter and the timing of receipt of expected income from US Government agencies.
Revenue from our largest customer accounts for 10.3%, a slight increase from 9.6% in the comparative period and represents continuing trade with a major pharmaceutical company.
Gross margins have remained robust at 77.5% up from 77.3% achieved in FY 2015 and 76.8% in H1 2015.
We have continued to invest in R&D projects to be able to launch new, competitive assays to the ADME-Tox market. In terms of capital expenditure, which is undertaken to support R&D programmes and drive new efficiencies, total additions in H1 2016 were £0.88 million with total investments in laboratory equipment in the last 30 months exceeding £3.20 million. Upgrading our equipment and investment in new capabilities brings additional depreciation charges to the income statement and as a consequence the depreciation charge is 13.3% higher at £0.65 million (H1 2015: £0.57 million).
We continue to invest substantially in our internal expertise, skills and knowledge base increasing staff numbers from 116 at 30 June 2015 to 144 at 30 June 2016.
With continuing improved trading the Company reports an increase in operating profits of £1.13 million, up from £0.36 million for H1 2015 to £1.49 million for H1 2016. Similarly, underlying EBITDA has nearly doubled, increasing to £2.34 million, up £1.24 million from H1 2015. Underlying EBITDA is defined as operating profits; adjusted for depreciation, amortisation and share based payment charges.
The Company’s cash balances remain robust and stood at £6.82 million at period end, up from £4.13 million at the start of the year. Principal movements are £2.40 million generated from operations, £0.88 million spent on tangible fixed assets and £0.11 million in servicing finance and hire purchase debts.
In September 2013, the Company issued Loan Notes to the value of £7.00 million, to assist with its investment strategy. One of the terms attached to the issue of these Loan Notes is that the value of an associated embedded derivative is linked to changes in the Company’s share price via conversion or notional conversion rights into ordinary shares. The Loan Note holders will then ultimately effectively share with ordinary shareholders any increase in value of the Company above 60 pence per share, the share price at time of issue. At 30 June 2016, the Company’s share price was 110 pence (v 122 pence at 31 December 2015). The relative decrease in share price, along with other factors such as share price volatility, has at 30 June 2016 led to a downward revision in the fair value of the embedded derivative associated with the Loan Notes by £1.98 million to £7.44 million from £9.42 million at 31 December 2015. This decrease is recorded as finance income in the income statement in H1 2016.