23 May 2023

IXICO plc

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

Half yearly report to 31 March 2023

IXICO plc (AIM: IXI), the medical imaging advanced analytics company delivering intelligent insights in neuroscience, announces its unaudited interim results for the six months ended 31 March 2023.

Commercial and operational highlights

·      Client contracts worth £2.8m signed during the period;

·      Order book of £13.3 million at 31 March 2023 (H1 2022: £12.6m) following the signing of contracts totalling £11.6m across the last twelve months;

·      Expansion of core imaging (MRI, PET and SPECT) services to provide an extended offering to address clinical trial opportunities in Alzheimer's Disease (AD), Multiple Sclerosis (MS) and Parkinson's Disease (PD); and

·      £1.0m additional funding secured for the IXICO-led HD-IH Consortium which is now committed to the analysis of over 6,000 Huntington's disease MRI data sets utilising IXICO's proprietary IXIQ.Ai analysis platform.

Financial highlights

·      Revenues of £3.2 million for the six months to 31 March 2023 (H1 2022: £3.9m);

·      Gross margin at 46.1% (H1 2022: 59.8%);

·      Loss before interest, taxation, depreciation and amortisation ('EBITDA') of £0.6m (H1 2022: £0.5m profit);

·      £5.0 million cash as at 31 March 2023 (H1 2022: £5.8m);

·      £0.2m operational cash inflow (H1 2022: £0.2m);

·      Net assets of £11.9m (H1 2022: £11.8m); and

·      Loss per share of 1.50p (H1 2022: 0.35p profit).

Giulio Cerroni, CEO of IXICO, commented:

"We complete the first six months of the year on track to achieve our full year guidance of £7.0m revenues for the year.  We expect the combination of our diversified order book and near-term opportunities to deliver revenue growth in the second half of this financial year, relative to the first half, and return the Company to year-on-year revenue growth in 2024.

Following a multi-year programme of ongoing investment in our IT infrastructure, we are excited by the anticipated launch of our next generation TrialTracker image data collection and management system in the coming year.

This highly scalable platform will ensure that IXICO continues to be able to satisfy our clients' increasingly stringent data security requirements as we look to further penetrate a highly regulated clinical trials market. The new platform ensures that our business can easily scale as we anticipate levels of investment in neurological development to accelerate further as tangible drug development progress in disease areas such as Alzheimer's disease is delivered by the biopharmaceutical industry.

As we look forward, the development of our order book remains a priority which we are addressing through further investment in our commercial capabilities.

Successfully executing on our five-pillar strategy will enable IXICO to secure more contracts from a more extensive customer base and capture a more substantial share of the growing market opportunity from the investments made in addressing a broader range of neurological diseases."

A recording of the results presentation will be made available on the Group's website here: https://ixico.com/investors/company-information/investor-videos/

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

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About IXICO

IXICO is dedicated to delivering insights in neuroscience to help transform the advancement of investigational therapies for neurological diseases, such as Huntington's disease, Parkinson's disease and Alzheimer's disease. The Company's purpose is to advance medicine and human health by turning data into clinically meaningful information, providing valuable new insights in neuroscience by supporting pharmaceutical companies across all phases of CNS clinical research. IXICO's goal is to be a leading advocate of artificial intelligence in medical image analysis.

IXICO has developed and deployed breakthrough data analytics, at scale, through its remote access technology platform, to improve the return on investment in drug development and reduce risk and uncertainty in clinical trials for the Company's pharmaceutical clients.

More information is available on www.IXICO.com

CHIEF EXECUTIVE OFFICER'S STATEMENT

Statement from Giulio Cerroni

Across the past six months, we have delivered revenues of £3.2 million (H1 2022: £3.9m) and, as at 31 March 2023, our order book totalled £13.3 million (H1 2022: £12.6 million).  These two figures reflect the full and final negative revenue impact in 2023 of the large client trial cessations reported in 2021 and 2022 and also provide improved visibility to future contracted revenues, as compared to twelve months ago.  This supports our expectation that revenues would bottom out during the first half of 2023 before returning to revenue growth, relative to H1 2023, across H2 2023 and 2024.

As previously communicated, our revenue mix has shifted significantly across the last three years from revenues principally related to a single large late phase clinical trial, to revenues from a greater number of individually smaller, early phase clinical trials.   This highlights the requirement to build operational capabilities and scale to service all phases of development in servicing the clinical trials market.  Clinical trials commence with relatively small, more labour-intensive, early phase trials before, if successful, progressing into much larger trials requiring significant analysis of imaging data.  Whilst this change in mix to early phase trials is accompanied by a reduction in gross margin over the last few months at 46% (H1 2022: 60%), we are well positioned to accompany more successful trials to later phases in the coming years, which can be expected to deliver revenues at higher margins.

Our strengthened order book compared to twelve months ago, continues to reflect the recent trend of a more diversified client base with our largest client expected to deliver approximately 20% of our 2023 revenues, as compared to almost 40% in the prior year.  Similarly, whilst we continue to see our expertise contracted in Huntington's disease ('HD') we are also delivering over 25% of our revenues from Alzheimer's disease ('AD') studies as we pursue growth in this important and large neurological clinical trials market.

Despite recent reports by multiple pharma companies of cuts to R&D budgets, AD continues to represent a multi-billion-dollar market for successful disease modifying drugs and the recent progress achieved in this therapeutic indication is anticipated to attract long term investment into AD research and development.  This is exemplified by the accelerated FDA approval of Eisai's Leqembi drug and reported successes of Eli Lilly's Donanemab, which has been shown to reduce clinical decline by approximately a third compared to placebo in early-stage AD patients.  Further, the approval of these drugs, and their application in the clinic, opens further opportunities for image analysis service providers such as IXICO, particularly around safety monitoring.  The monitoring of known potential side effects of these drugs such as the risk of ARIA (Amyloid-related imaging abnormalities) will be an important accompaniment in the healthcare setting to the prescription of these drugs.

At IXICO, this confidence in the growth opportunity for a specialist provider of neurological disease biomarker analysis has underpinned our continued investment program.  A significant and critical investment for IXICO is our next generation image capture and analysis platform, which is approaching completion. In an increasingly regulated market environment, the platform will provide regulation and cyber-security risk-driven capabilities that are required to achieve seamless image data collection in an efficient, robust and secure CFR 11 compliant manner; irrespective of the global location of the original data collection.  The nature of the technology that forms the basis of this platform (developed using Microsoft's Azure cloud platform) will provide IXICO with a highly scalable, extensible platform and it underpins our growth ambitions to become a leading neuroimaging clinical-trials service provider to the global pharmaceutical industry.

Alongside this we continue to strengthen our portfolio in both MRI and PET imaging technologies, including novel PET and SPECT analysis solutions that will launch later in the year, to provide a full offering across a wide range of CNS clinical trials, across all stages of development.

These investments follow the success of our IXIQ.Ai MRI imaging analysis platform, launched in 2022, which led to the formation of the HD-IH consortium. The consortium now constitutes three biopharmaceutical companies alongside IXICO and CHDI, securing additional funding to accelerate and complete the analysis of over 6,000 HD datasets which will enhance research and drug development in this therapeutic indication.

In reporting an EBITDA loss of £0.6m for the first six months of 2023 (H1 2022: £0.5m profit), careful cost management will continue to be a focus in 2023 as we balance a period of lower revenues and increased inflationary pressures alongside the commitment to investments designed to enhance growth across the medium- and long-term.  As we rebuild our order book, we expect to see increased revenues in 2024.

We hold a strong, debt-free, cash position of £5.0m as at 31 March 2023 (H1 2022: £5.8m), and have generated £0.2m operating cash inflows across the six month period (H1 2022: £0.2m), which provide a resilience to our financial position, important at a time of wider global and market uncertainty, and which allows us to continue to pursue the growth opportunities presented by the attractive CNS clinical trials space.

Financial Review

¹Order book is contracted but not yet recognised revenue adjusted down to reflect the Company's best estimate of delivery.

Revenue

·      The Company reports revenue of £3.2 million (H1 2022: £3.9m) representing an 18.3% decrease on the prior period.

·      This reduction was caused by the final tail effects of large client trials being cancelled during 2021 and 2022. The contract cycle typical of the clinical trials market leads to a recovery in the contracted order book before it is seen in revenue.

·      The Company anticipates a stronger second half of the financial year as the trials relating to contracts won over the last 12 months commence and progress beyond start-up phases.

Gross profit and margin

·      Gross profit of £1.5 million (H1 2022: £2.3m) with a gross margin of 46.1% (H1 2022: 59.8%). 

·      The year-on-year change is reflective of reduced revenue, and a greater proportion of this revenue consisting of services to smaller-scale early-phase clinical trials.  These earlier phase trials tend to be more labour intensive and therefore lower margin.

·      The Company has been impacted by high market-driven inflation, both in relation to its employee and non-employee cost base.  These cost increases are seen within the Company's margins when it has not been possible to pass these onto clients.

Operating expenses and capital expenditure

·      Operating expenditure of £2.6 million (H1 2022: £2.6m)

·      Careful management of operating expenditure has been offset by the impact of inflation plus increased expenditure within sales and marketing as the Company continues to rebuild its commercial team.

·      Capitalised R&D expenditure in the period totalled £0.8 million (H1 2022: £1.0m), predominantly in the Company's next generation image capture and analysis platform and also in new image analysis capabilities.

EBITDA and operating profit / (loss)

·      EBITDA loss of £0.6 million (H1 2022: £0.5m profit) and operating loss of £0.9m (H1 2022: £0.2m profit).  Both reflecting the reduced revenues across the period whilst the Company's cost base has remained largely flat (with cost management actions largely offset by inflation and increased sales and marketing expenditure).

Order book

·      Order book of £13.3m at 31 March 2023 (H1 2022: £12.6m).  Across the last twelve months the order book has increased by £0.7m reflecting £11.6m of new contract wins, offset by £7.9m revenues recognised and £2.9m of contract value reductions reflecting the cancellation or descope of a small number of clinical trials, the most significant resulting in a descope of £0.6m from the order book (as announced on 8 December 2022).

·      The order book has also seen a relatively minor (£0.1m) negative foreign exchange impact driven by the strengthening of GBP relative to USD across the past twelve months.

Cash

·      Cash of £5.0 million at 31 March 2023 (H1 2022: £5.8m).  This reflects operating cash inflows of £0.2m (H1 2022: £0.2m) offset by capital investment of £0.9m (H1 2022: £1.1m).

Net Assets

·      Reported net assets at 31 March 2023 of £11.9m (H1 2022: £11.8m). This reflects the increase of the Company's non-current asset position to £6.0m (H1 2022: £4.5m) partially offset by a reduction in its working capital to £6.3m (H1 2022: £7.7m).

Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2023 - unaudited

Consolidated Statement of Financial Position
As at 31 March 2023 - unaudited