TyraTech : Interim Results for the six months ended 30 June 2015

TyraTech Inc. (AIM: TYR, and TYRU), a life sciences company focused on nature-derived insect and parasite control products, today announces its interim results for the six month period ended 30 June 2015.

TyraTech is now at an inflexion point in its development. Following the successful launch of Vamousse® Lice Treatment & Protective Shampoo in the US and in the UK, the Directors believe that Tyratech is now extremely well positioned to unlock the true value potential of its technology platform. Through the commercialisation of Vamousse, as well as with the launch of Guardian personal repellent and OutSmart equine fly spray, TyraTech has proven that its innovative products can answer real unmet market needs, satisfy customer demands and generate value for distribution and commercialisation partners. The result is that Vamousse is now the fastest growing branded head lice product in the US, reaching the number 3 position in less than 18 months, with a distribution network that has quadrupled its number of sales outlets in the same short period of time.

In addition to achieving sales growth of 267% in the first half of the year (with $3.3 million of product sales), TyraTech has also built strong brands, secured relationships with major retailers and strengthened its pipeline, all elements that will generate future value. Nevertheless, the head lice market represents a relatively small part of the addressable market for our technology. Having validated the commercial potential of its technology platform, and having proven its capability to implement a scalable business model with high margins, TyraTech is poised to develop and launch true alternatives to pesticides in a number of other target markets.

Operational Highlights:

• Continued progress of Vamousse Lice Treatment with strong sales growth at Walmart;
• Launch of Vamousse Lice Protection Shampoo in over 3,600 Walmart stores and Walmart.com in the US;
• Expansion of Vamousse Lice Treatment into CVS/pharmacy and Walgreens, the two largest pharmacy chains in the US;
• Gained additional distribution of Vamousse Treatment and Protective Shampoo in the UK with Lloyds, Rowlands, and Day Lewis and smaller independent pharmacies;
• Number 3 OTC head lice brand by dollar sales in the US;
• Launched equine spray for control of flies, mosquitos, and ticks.

Financial Highlights:

• Total revenue from operations in the six months nearly tripled to $3.5 million (2014: $1.3 million) as the result of expansion of the Vamousse product lines into major drug store chains in both the US and the UK as compared to only three months of commercialisation of Vamousse Lice Treatment at Walmart in the US during the same six month period in 2014;
• Product sales increased by 267% to $3.3 million (2014: $0.9 million) primarily from sales of the Vamousse Lice Treatment and Shampoo;
• Collaborative revenue decreased by 50% to $0.2 million for the first half of 2015 (2014: $0.4 million) as the demand for shared services from Envance decreased;
• Gross profit increased by approximately 150% to $2.0 million (2014: $0.8 million) from the effect of new product commercialisation;
• Overall operating expenses increased 6% to $3.7 million (2014: $3.5 million) primarily from increased sales and marketing expenses related to the commercialisation of Vamousse Lice Treatment and Shampoo;
• Loss from operations reduced to $1.7 million for the first half of 2015 (2014: $2.6 million) resulting primarily from increased product sales;
• Net loss before and after taxes decreased to $1.5 million (2014: $3.1 million);
• Cash and cash equivalents were $1.3 million at 30 June 2015 ($0.6 million at 30 June 2014 and $2.2 million at 31 December 2014).

Post period end:

• Successful launch of Vamousse Treatment and Shampoo in Ireland;
• Launch of Vamousse Shampoo in Boots and significant increase in number of Boots stores stocking Vamousse Treatment;
• Distribution in Well pharmacy chain (previously Co-op).

Outlook and current trading

Notwithstanding the positive developments and enhanced distribution arrangements, the Company continues to be in uncharted territory from a forecasting perspective, not having experienced, as yet, a full year with current distribution arrangements in place.

Sales have continued to grow in absolute terms during the period since 30 June. However, they have been behind our forecast expectations and if this trend continues for the remainder of the year, our second half results, whilst still expected to be materially better than the first half, will not be as strong as previously thought.

There is good evidence that the market for head lice products is growing year-on-year and we believe that we are well positioned with our product range and the quality of our customer base to benefit from this growth. In addition, we believe there will be additional contributions next year from the animal health and equine products. We are therefore pleased with the progress that TyraTech is making towards the goal of self-sufficiency in cash terms.

For further information:

TyraTech has achieved remarkable progress in the current financial year, with net product sales in the six month period more than three times higher than the corresponding period last year and already comfortably ahead of the previous full year. Our Vamousse Treatment now has a wide distribution in both the US and UK and is already the number three head lice OTC brand by dollar sales in the US. The Shampoo is also progressing well and should become more widely distributed next year.

In 2014 the team managed to gain space on the shelves of many of the biggest retailers in two very competitive markets - the US and the UK. Whilst that was a tremendous result the real inflexion point is happening right now in that the products are now important products in the stores' personal care ranges - in fact the number of outlets has more than quadrupled since this time last year. This is a result of demonstrating to the retail trade that the Vamousse range of products are highly appreciated by the user and are an efficient and profitable use of shelf space. The Board feels confident that the Vamousse brand will continue to gain significant market share and will expand both geographically and by product line extension.

However, TyraTech is much more than a head lice company. Our technology is now demonstrated and has proved capable of driving the development of insect control products with a combined level of safety and efficacy well ahead of the standard synthetic chemical offerings, especially where resistance has developed against these products. Many of the target markets are much bigger than the personal care area.

Animal health markets, for example, encompass industrial scale production facilities, small farms, and companion animals with needs for internal and external parasiticides. TyraTech has already developed products for many of these markets and we are actively working on others. We hope to see the products previously licensed to Novartis generating sales in animal production facilities from next year.

I believe that we have demonstrated our ability - unusual in a small company - to develop a brand in a short time frame with limited resources. The Vamousse brand alone already has significant value and will be further developed both geographically and in product line extension - but we plan to enter other larger markets in the short to medium term. Each of these is a high margin opportunity and can generate real value either with TyraTech or in the hands of a major player. It is only when the possibilities that flow from the TyraTech pipeline are looked at by segment that the true value of the sum of the parts becomes apparent. We realize that we still have much work to do, but everyone at TyraTech is genuinely excited about the future of our Company.

Alan Reade
Non-executive Chairman
24 September 2015

In the half year to 30 June 2015, sales of our Vamousse Treatment product continued to grow, in particular at Walmart. We also achieved our aim of placing Vamousse Lice Treatment with Walgreens and CVS, the two largest pharmaceutical chains in the US, together with further expansion in the UK with Lloyds, Rowlands, Day Lewis and smaller independent pharmacies. Despite the two major US pharmacy chains having placed product in stores later than expected, product sales, nevertheless, increased by a factor of more than three times compared to the corresponding period in the prior year. It is also worth noting that 2015 H1 sales were ahead of the full year to 31 December 2014. An excellent measure of our progress is that in the 12 weeks to 14 June 2015, Vamousse was the number three head lice brand by dollar retail sales in the US, excluding private labels. The Vamousse Protection Shampoo has also made a good start in Walmart stores and we are pleased with the level of sales so far.

Our Guardian range of personal mosquito and tick repellants continues to gain very high rating by users on amazon.com, building a core of loyal customers and generating a small but useful and increasing level of sales. With increasing brand awareness, word-of-mouth and a strong market need for a serious alternative to pesticides, we are exploring various possibilities for widening distribution of these products.

Earlier this year, we launched our insect repellant product for use on horses. Although widely praised by end users, we decided to develop an improved product with better aesthetics and enhanced stability, which will be re-launched next year. This is an attractive and potentially high margin niche market with estimated retail sales in excess of $20 million in the US and EU.

Post period end and outlook

Since the half year-end, Boots has taken the Vamousse Protective Shampoo into a portion of their stores and expanded the outlets taking the Vamousse Treatment product. We have recently gained distribution in over 400 Well pharmacy chain stores (ex Co-op). The product has also been successfully launched in Ireland and we continue to plan for further geographical expansion in Europe and Australasia. With the recent publicity emphasising the emergence of head lice resistant to the leading OTC brands in the US, we have re-focused our marketing efforts to emphasise the effectiveness of Vamousse against lice resistant to synthetic pesticides.

With the acquisition of Novartis Animal Health by Eli Lilly, we decided to withdraw Novartis' rights to our animal health products, which are intended for insect control in animal production facilities where there are major problems with resistance to existing synthetic products. We have used the time to further develop what were already attractive products and are in discussions with several potential partners, expecting to launch the enhanced products next year.

Notwithstanding the positive developments and enhanced distribution arrangements, the Company continues to be in uncharted territory from a forecasting perspective, not having experienced, as yet, a full year with current distribution arrangements in place. Sales have continued to grow in absolute terms during the 'back to school' period in August and September to date, however they have been behind our forecast expectations and if this trend continues for the remainder of the year, our second half results, whilst still expected to be materially better than the first half, will not be as strong as previously thought.

There is good evidence that the market for head lice products is growing year-on-year and we believe we are well positioned with our product range and the quality of our customer base to benefit from this growth. In addition, we believe that there will be additional contributions next year from the animal health and equine products. We are therefore pleased with the progress that TyraTech is making towards the goal of self-sufficiency in cash terms.

Bruno Jactel
Chief Executive Officer
24 September 2015

Revenue
Total revenue for the six month period to 30 June 2015 was $3.5 million (2014: $1.3 million). Gross product sales were $3.3 million of which $2.7 million were sales in the US and $0.6 million in the UK. (2014: $0.9 million all in the US), with net product sales of $2.9 million (2014: $0.9) Collaborative revenue decreased to $0.2 million (2014: $0.4 million). Collaborative revenue includes upfront license fee amortisation and cost reimbursement from our Envance Technologies and Mondelez Global (Kraft) agreements.

Cost of sales and gross profit
Material and manufacturing costs for product sales were $0.9 million (2014: $0.3 million) and costs related to collaborative revenue remained steady at $0.1 million (2014: $0.1 million). Gross profit increased to $2.0 million, with a margin on net revenue of 66% (2014: $0.8 million and 65%) primarily as a result of increased product revenue generated from the addition of new customers in 2015. Margin on net product sales was 68% (2014: 66%).

Operating expenses
Overall operating expenses from continuing operations increased slightly by 6% for the six month period to $3.7 million (2014: $3.5 million). This increase in operating expenses was primarily driven by additional marketing costs related to the Vamousse head lice treatment and shampoo sales offset by reductions to research and development expenses. Operating expenses for the six months included non-cash equity compensation of $0.1 million (2014: $0.1 million) and depreciation of $0.1 million (2014: $0.1 million).

Liquidity and cash flow
Cash used in operations for the period was $0.9 million compared to $3.2 million in the first half of 2014, a $2.3 million decrease from the first half of 2014. This decrease in cash used in operations is primarily due to an increase in product revenue sales in the first half of 2015, coupled with more efficient management of working capital. There is also a seasonal component to the Company's product sales which can impact liquidity. There was no sale of common stock in the period (2014: $2.9 million) and the Company currently has no committed external source of funds.

Based on the Company's existing cash, its current operating plans, anticipated revenues from product sales and collaborative arrangements, and the ability to control costs, the Company's revised forecasts indicate that it will have sufficient cash resources for at least the next twelve months. However, with new products and distribution channels, there is always uncertainty as to the speed and level of market penetration and if these forecasts prove inaccurate the Company may need to initiate actions to raise additional finance.

The Company invests its cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.

Barry M. Riley
Acting Chief Financial Officer
24 September 2015

The notes to the results are available in the PDF download.

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