ANGEL BIOTECHNOLOGY HOLDINGS PLC 
By 10 December 2012
Angel Biotechnology Holdings Plc ("Angel" or "the Group")
Interim results for the six month period ended 30 September 2012
Angel Biotechnology Holdings Plc (AIM: ABH), the specialist contract manufacturer of advanced biologics, announces its interim results for the six month period ended 30 September 2012.
Summary points:
· The loss for the period was £2,862k. The majority (£2,037k) is attributable to a combination of write back of accrued revenue and contract liabilities for the period, related to the proposed transfer of contracts with OOO "NPF Materia Medica Holding" ("MMH") from ABH to a joint venture company ("Joint Venture Company") to be established by Angel and Mapix s.a.r.l. ("Mapix"), a company associated with MMH.
· Net liabilities at the end of the period are £117k including £1,692k which is the net liability owed to the Joint Venture Company on transfer of MMH contracts. Settlement of this liability, most of which is expected to be written back in subsequent periods, does not involve the payment of cash.
· Angel acquired the necessary assets to allow the formation of Angel Biomedical Limited ("ABL") in Glasgow. ABL also established a supply agreement with Cardium Therapeutics for the supply of bulk collagen material for its FDA-approved 510K Excellagen product to the value of £400k over the first 12 months.
· ABH retained its MHRA (IMP and MIA) licences for its Pentlands facility, and extended these licences to include its Cramlington operations in Q2 2012.
· Dr Paul Harper stood down as Executive Chairman, with Mr Nicholas Smith appointed as Non-Executive Chairman.
Dr Stewart White, Commercial Director and Acting CEO of Angel Biotechnology Holdings plc said: "The first half of 2012 has been a challenging period for Angel. The operational review of our business, measured against client requirements, has been thorough and has resulted in what we believe is the best outcome in the circumstances for our customers, staff and shareholders. The main outcome has been to progress the formation of the Joint Venture Company with MMH, using our Pentlands facility, in addition to the proposed transfer of existing MMH contracts from Angel to the Joint Venture Company.
In parallel with these challenges, Angel continues to service its existing clients securing the additional GMP manufacturing contracts to complete the ReNeuron phase I clinical trial, in addition to establishing an exciting new subsidiary company, ABL, providing access to a wider range of markets and customers within the regenerative medicine and medical device sectors."
Mr Nicholas Smith, Non-Executive Chairman of Angel Biotechnology Holdings plc said: "Looking back, it is disappointing to see how events beyond Angel's control such as the global funding squeeze and technical problems with the MMH contracts have derailed the promising business plan that delivered its maiden profit less than two years ago. My disappointment reinforces my determination to reduce Angel's exposure to uncontrollable risks, to build on its strengths to provide a broader commercial offering and, in particular, to focus on strategic partnerships with those looking for a manufacturing base for their products.
I look forward to the delivery of the Joint Venture Agreement and to helping the Joint Venture Company achieve its goals in the future.
I would like to thank all members of staff who have played a part in the Angel business in this difficult half-year, especially for the professional way they have dealt with the challenges whilst pragmatically accepting a reduction in pay. I would also like to thank our patient shareholders and assure them that every effort of the board is devoted to the development of a resilient and robust business model and the delivery of sustainable earnings."
For further information:
Angel Biotechnology Holdings plc
Grant Thornton, Corporate Finance
Colin Aaronson / Melanie Frean +44 (0) 20 7383 5100
Hybridan LLP (Broker)
Claire Noyce, Deepak Reddy +44 (0) 20 7947 4350
Media enquiries:
The Communications Portfolio Ltd
Philip Ranger / Caolan Mahon +44 (0) 20 7536 2028 / 2029
Non-Executive Chairman and Acting CEO's Statement
The first half of the financial year has been dominated by issues arising from contracts undertaken by Angel for MMH, the protracted negotiations for the transfer of the MMH contracts into a new Joint Venture Company and by difficult market conditions caused by funding restraints for many of our existing and prospective clients.
The decision to form a Joint Venture Company with Mapix involving the development and manufacture of active antibody products for MMH was announced in October 2011. The intention was that Angel should finish the development of the five products (then subject to pre-existing contracts) with new product lines and repeat business for existing products to be dealt with in the Joint Venture Company. It was then anticipated that the Joint Venture Company would occupy a dedicated development and GMP space at Angel's Cramlington Facility and that the development of that space and the resources to occupy it would be financed by the Joint Venture Company. The five projects would be finished at both the Pentlands and Cramlington facilities and further projects would be undertaken at our Cramlington facility. By May 2012 it had become apparent to Angel that a number of technical difficulties were producing outlying deviations which could severely disrupt the progress of the five MMH contracts and involve Angel in open-ended costs to completion. Resources were devoted to finding solutions and reducing disruption but in the end proved fruitless. Angel commenced discussions with MMH in May 2012 with a view to re-pricing and rescheduling the five MMH contracts to close off the potential losses for Angel. These discussions concluded at the end of August 2012 with an agreement for Angel to continue working on the five MMH contracts, subject to a monthly payment to cover cash costs of Angel, on a temporary basis until the five contracts could be transferred into the Joint Venture Company. During this time it was agreed that the Joint Venture Company would be located in Pentlands to utilise the staff and resources currently working on the five contracts and to reduce the development budget of the Joint Venture Company so as to compensate for the additional liabilities it was to assume.
In August 2012, MMH appointed technical auditors to review the completion stage of the on-going contracts. They estimated a difference of approximately £2.6 million between amounts invoiced and settled to date and contract completeness based on the proportion of contract costs incurred and Angel's entitlements in line with a strict interpretation of the contractually defined milestones. The terms of the contracts allow for the reduction of the net liability to just under £1.7 million, which is recognised as a loss in the profit and loss account for the six months to 30 September 2012. In addition Angel is writing off an accrued income balance of £0.35 million at the half year stage in relation to the contracts as it will not be invoicing this amount. Under the terms of the prospective Joint Venture Agreement, the £1.7 million would be recognised as a loan from the Joint Venture Company which will, in turn, assume the £1.7 million contractual liability to MMH. The loan balance will be offset by approximately £0.5 million on the transfer of assets and systems from Angel into the Joint Venture Company. The balance of the loan shall be offset by value derived on the obtaining of licencing and from future profits from the delivery of project milestones by the Joint Venture Company. Full details of the Joint Venture Company arrangements will be disclosed as soon as the Joint Venture Agreement is signed, which is expected to be before the end of this month.
Market conditions remain difficult and hard to predict with funding being the main constraint on client activity. Revenues for H1 2012 reduced to £1,070k compared with £1,402k in H1 2011. In the last 6 months Angel has seen a number of promising contracts fall away or be deferred due to funding issues and this has often happened after Angel has devoted significant time and resources to developing the technical aspects of potential projects, including technical audits and multiple and sequential requests for proposals. During the first half of the financial year Angel has entered into contracts worth only about £1.3 million and the major part of this is a contract with TransGenRx, the start of which has not been communicated to us by the client. The current pipeline of projects that are judged to be near order total about £3.0 million.
Angel has responded to the unpredictable market conditions by not over-committing resources and reducing the consumption of cash. During the period Angel had to make staff redundant at Cramlington who had been recruited for the Joint Venture Company work, following the decision to relocate the Joint Venture Company to Pentlands. Staff numbers at Pentlands have also reduced with a present total complement for all sites of 24, of whom two are administrative. Capital investment programmes have been pared to the minimum necessary for maintenance of capability and discretionary expenditure has been curtailed. Angel is well aware of the continued heightened risk that the projects in the pipeline may not be delivered in the expected timeframe. Angel is putting more business development focus on smaller-value niche projects which may be less susceptible to funding issues. At the same time, Angel is actively pursuing strategic partnerships in its cell therapy, biologics and biomedical businesses in order to advance shareholder value. In this way, Angel expects that it can overcome its current low cash position and build a more resilient business model.
Business Development
The continued investment from both the private and public sector in regenerative medicine demonstrates clear opportunities for early stage entrants such as Angel who have long established clinical GMP capabilities. Indeed, Angel's track record in delivering both autologous and allogeneic material for clinical trials provides the necessary credibility for Angel to interact with potential clients operating across the wide spectrum of regenerative medicine.
Recent research has shown that the number of cell based products described as "tools and technologies" is broadly equivalent to those in preclinical and phase I clinical trials. The capability across the Angel group will allow the company to offer its established manufacturing services to such clients with non-clinical cell based products but also to the medical device and in-vitro diagnostics sectors. Importantly for Angel, the regulatory process for such products is generally shorter as is the time to market.
Despite a challenging environment, we believe that the interest we are receiving from the broader spectrum of life science and medical device companies will reduce the potential risk to revenue of over-reliance on the success of early stage cellular therapies and indeed competition from other GMP contract manufacturers.
Business development activities remain focussed on the USA and Europe where Angel will continuewith its established strategy of early stage engagement with clients at the pre-GMP process/product development stage. In addition,Angel will have a presence at conferences in both locations during H2 2012, in addition to hosting a number of on-site visits by potential clients.
Outlook
During the remainder of 2012, Angel will seek to complete the Joint Venture Agreement with MMH. This will reduce the Group's cost base and will result in a lower fixed cost profile for the Group and allow it to gradually scale up resources to match revenue opportunities. It is the aim of the board to provide a cash neutral H2 outturn at year end 2013 and to move towards positive free cash flow in 2013-14. At the same time, Angel is actively seeking strategic partnership opportunities for elements of its businesses to provide necessary contingencies and to convert market potential into earnings at an early stage.
Mr Nicholas Smith
Non-Executive Chairman, Angel Biotechnology Holdings Plc
Dr Stewart White
Acting CEO, Angel Biotechnology Holdings Plc
Angel Biotechnology Holdings Plc | ||||||
Unaudited Consolidated Statement of Comprehensive Income | ||||||
for the six months ended 30 September 2012 | ||||||
Unaudited | Unaudited | Audited | ||||
Half year to | Half year to | Period ended | ||||
30-Sept-12 | 30-Jun-11 | 31-Mar-12 | ||||
£'000 | £'000 | £'000 | ||||
Revenue | 1,070 | 1,402 | 3,456 | |||
Angel Biotechnology Holdings Plc
Unaudited Consolidated Statement of Financial Position as at 30 September 2012 | ||||||
Unaudited | Unaudited | Audited | ||||
As at | As at | As at | ||||
30-Sept-12 | 30-Jun-11 | 31-Mar-12 | ||||
£'000 | £'000 | £'000 | ||||
Non-current assets | ||||||
Intangible assets | 3 | 6 | 4 | |||
Property, plant and equipment | 1,284 | 436 | 989 | |||
1,287 | 442 | 993 | ||||
Current assets | ||||||
Trade and other receivables | 699 | 630 | 1,127 | |||
Cash and cash equivalents | 496 | 902 | 580 | |||
1,195 | 1,532 | 1,707 | ||||
Total assets | 2,482 | 1,974 | 2,700 | |||
Current liabilities | ||||||
Trade and other payables | -514 | -183 | -383 | |||
Amounts payable on contract transfer | -1,692 | - | - | |||
Finance leases | -135 | - | -50 | |||
Loans | -14 | -49 | -14 | |||
Deferred income | -109 | -35 | -312 | |||
-2,464 | -267 | -759 | ||||
Non-current liabilities | ||||||
Other non-current liabilities | -135 | - | -135 | |||
Total liabilities | -2,599 | -267 | -894 | |||
Net assets/liabilities | -117 | 1,707 | 1,806 | |||
Angel Biotechnology Holdings Plc | |||||
Statement of changes in equity for the 6 months ended 30 September 2012 | |||||
Share | Total | ||||
Share | premium | Retained | shareholders' | ||
capital | account | earnings | funds | ||
£'000 | £'000 | £'000 | £'000 | ||
At 31 December 2010 | 2,111 | 4,384 | -6,420 | 75 | |
Share issue (net of costs) | 1,163 | 1,823 | 2,986 | ||
Share based payments | 44 | 44 | |||
Capital reduction | -5,684 | 5,684 | - | ||
Loss for the year | -1,299 | -1,299 | |||
At 31 March 2012 | 3,274 | 523 | -1,991 | 1,806 | |
Share issue (net of costs) | 500 | 439 | 939 | ||
Loss for the period | -2,862 | -2,862 | |||
At 30 September 2012 | 3,774 | 962 | |||
Angel Biotechnology Holdings Plc | ||||||
Unaudited Consolidated Cash Flow Statement for the 6 months ended 30 September 2012 | ||||||
Unaudited | Unaudited | Audited | ||||
Half year to | Half year to | Period ended | ||||
30-Sept-12 | 30-Jun-11 | 31-Mar-12 | ||||
£'000 | £'000 | £'000 | ||||
Cash flows from operating activities: | ||||||
Operating loss/profit | -2,857 | -209 | -1,266 | |||
Amortisation and depreciation | 57 | 32 | 107 | |||
Share-based payment expense | - | - | 44 | |||
Increase/(decrease) in receivables | 428 | 31 | -594 | |||
Increase/(decrease) in payables | 132 | -194 | 5 | |||
Decrease in deferred income | -203 | -852 | -445 | |||
Increase in provision | 1,692 | - | - | |||
Cash used in operations | -751 | -1,192 | -2,149 | |||
Angel Biotechnology Holdings Plc
Notes to the Interim Financial Statements
1. General information
Angel Biotechnology Holdings Plc is a public limited company ("the Company") incorporated in the United Kingdom under the Companies Act 1985 (registration number: 5383314). The Company is domiciled in the United Kingdom and its registered address is 50 Broadway, London SW1H 0BL. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange ("AIM"). Copies of the interim report are available from the Company's website,www.angelbio.com. Further copies of the interim report and annual report and accounts can be obtained from the address above.
The Company's principal activity is the manufacture and supply of bio-materials for use in clinical trials and at product launch.
Angel Biomedical Ltd is a wholly owned subsidiary of Angel Biotechnology Holdings Plc incorporated in the United Kingdom under the Companies Act 2006 (registration number: 7999919). The Company is domiciled in the United Kingdom and its registered address is 44 Colbourne Crescent, Nelson Industrial Estate, Cramlington, NE23 1WB.
The Company's principal activity is the manufacture and supply of clinical grade collagen based bio-materials.
2. Basis of preparation
The consolidated interim financial statements of the Group for the six months ended 30 September 2012, which are unaudited, have been prepared in accordance with the accounting policies set out in the annual report and accounts for the period ended 31 March 2012.
The financial information contained in the interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the full preceding year is based on the statutory accounts for the period ended 31 March 2012. Those accounts, upon which the auditors, Baker Tilly UK Audit LLP, issued an unqualified audit opinion, and whose report did not contain any matters to which they drew attention by way of emphasis, nor contained a statement under Section 498(2) or 498 (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.
As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and not in accordance with IAS 34 "Interim Financial Reporting", therefore, it is not fully compliant with International Financial Reporting Standards (IFRS).
The interim financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
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