Preliminary results for year ended 31 January 2014

 

 

Tissue Regenix Group plc

 

Unaudited preliminary results for the year ended 31 January 2014

YORK, 19th May 2014 - Tissue Regenix Group plc (AIM:TRX) ("Tissue Regenix" or "the Group"), the regenerative medical devices company, today announces its unaudited preliminary results for the year ended 31 January 2014.

 

Operational Highlights

 

During the year, the Group has:

 

·      Achieved significant progress in the implementation of the Group's commercial roll-out strategy in the US

o  Signed a processing agreement with Community Tissue Services (CTS), one of the largest tissue banks in North America, and worked together to successfully transfer the Group's patented dCELL® technology for use in the US market

o  Signed seven independent regional sales distribution agreements, providing access to an extensive network of over 40 sales representatives across 25 states

o  Strengthening and expansion of the Group's US team, including strategic appointments in Sales, Marketing, Clinical Affairs  and Operations

o  Remains on track to launch its first product, DermaPure™, in to the US market in H1 2014

 

·      Successfully completed trials of a new treatment for chronic leg ulcers, in conjunction with NHS Blood and Transplant ('NHSBT'), in which half of patients involved had their wounds completely healed

·      'Soft launch' of DermaPure™ in the UK by NHSBT to a limited number of hospitals with initial positive results from patients and clinicians 

·      Developed the composition of the Board, with the appointment of Randeep Singh Grewal and Steven Couldwell as Non-Executive Directors, who both have strong commercial and entrepreneurial experience in the healthcare sector

·      Appointed Peter Hamer as Business Development Manager of the Group's Orthopaedics division

 

Financial Highlights

 

·      Continued strong cash position with a balance of £18.5m at the year-end (2013: £24.2m)

·      Operating loss for the year of £6.6m (2013: £4.4m) reflected the anticipated acceleration of use of cash as the Group progresses its development programme and pre-clinical and clinical trials

·      Continued submission of enhanced research and development tax claims - expected refund for the year is £710k.

 

Antony Odell, Tissue Regenix's Chief Executive Officer, commented:

 

"This year, we have continued to invest in our product development programme and are poised to deliver a scalable commercial roll-out of products using our dCELL® technology. We have made a lot of progress in a relatively short space of time, particularly in the US, where we are now in a strong position to capitalise on opportunities in what is the world's largest healthcare market."

 

 

Enquiries

 

Tissue Regenix Group plc	+44 (0)1904 435 176
Antony Odell, Chief Executive Officer Ian Jefferson, Chief Financial Officer
Jefferies International Ltd.	+44 (0)20 7029 8000
Simon Hardy Harry Nicholas
Newgate Communications	+44 (0)20 7680 6550
Andrew Jones Stephanie Dobbs

 

 

 

About Tissue Regenix

Tissue Regenix is a leading medical devices company in the field of regenerative medicine. The company's patented decellularisation ('dCELL®') technology removes DNA and other cellular material from animal and human tissue leaving an acellular tissue scaffold which is not rejected by the patient's body which can then be used to repair diseased or worn out body parts. The potential applications of this process are diverse and address many critical clinical needs such as vascular disease, heart valve replacement and knee repair.

 

Tissue Regenix was formed in 2006 when it was spun-out from the University of Leeds. The company commercialises academic research conducted by our partners around the World.

 

In November 2012 Tissue Regenix Group plc set up a subsidiary company in the United States- 'Tissue Regenix Wound Care Inc.', as part of its commercialisation strategy for its dCELL® technology platform.

 

  

 

Chairman's Statement

 

Overview

2013 has been another strong year in the execution of the Group's commercialisation strategy and a number of important milestones have been reached to bring our proprietary dCELL® technology to market. We are in a position to launch our first product of scale, DermaPure™, into the US market and our North American subsidiary, Tissue Regenix Wound Care Inc., has grown substantially and developed agreements with a number of important commercial partners.     

 

Health Economics

Regenerative medicine holds the promise of permanent repair to the body, which for a population that is living longer, must be a key consideration. As a result of this, coupled with the challenges of today's constrained health budgets, we have decided to engage with a leading health economic consultancy to begin to develop the case for using our constructs and our growing body of current and future clinical data. We foresee this work highlighting the tangible social and economic benefits of using our dCELL® technology platform.

 

The Board

We implemented the planned changes to the composition of the Company's Board during the year, with the appointment of Randeep Singh Grewal and Steven Couldwell as Non-Executive Directors. Both bring extensive commercial and entrepreneurial experience in the healthcare sector and they have already made invaluable contributions to the Group at this important stage in our development. We made a decision to progress the composition of the Board to ensure that it has the most appropriate skill set to complement the executive management team and help guide the commercialisation of Tissue Regenix's products. I would also like to take the opportunity to thank our previous Non-Executive Directors who have made an immeasurable contribution in helping the Company reach this stage in its development.    

 

Shareholders

We have been delighted by the uptake from new significant shareholders that joined our register during the year, reflecting the institutional appetite to access the opportunities that our dCELL® platform provides, particularly as we move from development to commercialisation. Share price growth over the period was particularly pleasing and is indicative of a wider appreciation of the depth and value of the current and future promise of our pipeline of products.

 

Outlook

This year we have made significant progress in taking our animal-based development pipeline in woundcare and orthopaedic products towards commercial launch. Furthermore, we have built a strong team in the US that is capable of taking our products to market and capitalising on the full market opportunity that our decellularised human tissue products can address. We identified the opportunity for this product area to  generate revenue within a shorter timescale, and DermaPure™ represents the first to be fully commercialised, with its launch still expected to take place in the first half of 2014.

Regenerative medicine holds great future promise for the long term treatment of many medical problems. We are close to delivering the first of our products to market in a format that makes adoption by clinicians and hospitals simple and economically attractive.

At Tissue Regenix we have always aimed to become a world leader in regenerative medicine, and we will continue to develop new local relationships around the world to deliver our pipeline to market, as we accelerate into the first phase of our commercial expansion. Alongside this, our development programmes are maturing as they enter the clinical stage as a precursor to regulatory approval. We remain excited about the prospects for the Group in 2014.

 

 

John Samuel

Chairman

19 May 2014

 

 

Chief Executive's Review

 

Overview

This year, Tissue Regenix laid the foundations for the successful commercialisation of the dCELL® platform. We maintained the strong momentum generated in 2012 and have progressed the development and application of our dCELL® technology into scalable products which have the potential for distribution into key markets across the world. In particular, our strategy for the development of a significant US human tissue business began to be implemented. We now have the partnerships in place to deliver a pipeline of products to large existing markets and even in some cases, to meet significant unmet clinical needs in the world's largest healthcare market.

 

 

Financial Review

Tissue Regenix continues to hold a strong cash position with a balance of £18.5m at the year-end (2013: £24.2m). As we have previously stated, we had anticipated that our cash utilisation would accelerate over coming years, as we continue to fund our development programme and progress through pre-clinical and clinical trials. The increase in our operating loss to £6.6m (2013: £4.4m) reflects this acceleration, which is in line with our expectations, and the necessary investment that has been required to progress the development of our US business to its current status, as it approaches commercial roll-out.

 

The Group continues to manage its cash resources to maximise interest income whilst at the same time minimising any risk to these funds.  A balance of working capital and short to medium term deposits are maintained.

 

The Group continues to submit enhanced research and development tax claims and elects to exchange tax losses for a cash refund.  The refund expected for the year to 31 January 2014 is £710k.

 

 

Product Development Pipeline

Our proprietary platform technology, dCELL®, is protected by a library of patents. It is used to decellularise human or animal donor tissue to create biological scaffolds that are then implanted into patients to replace diseased or damaged parts of their body. These scaffolds in vivo appear to induce regeneration through natural healing mechanisms including the recruitment of stem cells but, because they are inert when implanted, they are classified as medical devices. This means they are required to follow a regulatory pathway that is typically faster and less costly than, for example, a pharmaceutical product.

 

 

Commercial stage in the US

Since establishing our US operation in late 2012, we have achieved a great deal in a short space of time. We have made significant strides in the delivery of our commercialisation strategy, with the imminent launch of DermaPure™, our human decellularised dermis product for chronic wounds. During the past year, we have achieved a number of important milestones including:

 

·      We have extended and strengthened our US team, including making strategic appointments in Sales, Marketing, Clinical Affairs and Operations. All of these appointments have brought extensive industry expertise and knowledge to their respective roles. 

 

·      In June 2013, we signed a processing agreement with Community Tissue Services (CTS), one of the largest tissue banks in North America, distributing over 230,000 grafts for transplant annually.

 

·      From the signing of the processing agreement, we have been working with CTS towards the successful transfer of our patented dCELL® technology for use in the US market.

 

·      In October, we signed seven independent regional sales distribution agreements, providing us with access to over 40 sales representatives that will actively promote DermaPure™ into acute care hospitals, Veteran Affairs (VA) Hospitals and institutions, as well as Long Term Acute Care hospitals (LTACs) across a total of 25 states. This provides us with significant initial channels to market and enables us to roll out our sales strategy. Going forward, our aim is to sign further distribution agreements to enable us to have a sales presence in all major metropolitan areas within the US by the end of 2014.

 

The strategy we have pursued during the year of collaborating with prominent industry partners has allowed us to be effective in setting up operations in new geographies, as well as gaining access to local industry knowledge and potential customers. The US represents a significant market opportunity for our products, with for example 6.5 million US patients afflicted by chronic wounds at present. We are now in the position to target the existing $1.4bn market for wound healing devices and equipment in the US, which is anticipated to reach $1.5bn by 2016.

 

 

Business Developments

 

Advanced Wound Care

In May 2013, Tissue Regenix announced that more than half of patients involved in the first trial of a new treatment for chronic leg ulcers at University Hospital South Manchester had their wounds completely healed. The trials, conducted by NHS Blood and Transplant ('NHSBT'), demonstrated that the patients who had tough chronic wounds (defined as clinically unresponsive to healing for three months) who were treated with Tissue Regenix's DermaPure™, have seen an 87% reduction in the size of all wounds, while 60% of patients were completely healed with virtually no recurrences. In October, these results were published in the peer reviewed journal - Wound Repair and Regeneration. The clinical trial report concluded that: "we have demonstrated that DCD (decellularised dermis- DermaPure™) and its application process safely promoted wound healing in treatment-resistant chronic lower limb ulceration."

 

In January 2014, NHSBT 'soft launched' dCELL® Human Dermis (DermaPure™) to a limited number of hospitals with initial results showing a very positive response from patients and clinicians.

 

As part of our plans to commercialise our advanced wound care product in the US, we are planning a multicentre clinical investigation in North America involving c.60 patients to establish the wound healing performance of DermaPure™ in diabetic foot ulcers to support marketing activity.

 

As part of preparation for this US trial of DermaPure™, we have been speaking with key opinion leaders across the country and discussing the data from the UK clinical trial and have received positive feedback.

 

Orthopaedic

We have continued to invest in and develop Tissue Regenix's Orthopaedic market presence, including the appointment in May 2013 of Peter Hamer as Business Development Manager, as we progress towards commercialisation of our first product.   

The EU safety study for CE mark is looking to recruit 60 patients in clinics in the UK, Netherlands and Poland. We are looking to commercialise the product for the treatment of knee injuries, a potentially significant market due to the 1.5 million meniscal tears treated every year in the US and EU.

 

Other Business Areas

Positive clinical data from the 1000+ dCELL® Human Heart Valves implanted in Brazil was presented in 2013 by Professor da Costa at two major cardiology conferences. This data continues to demonstrate the superiority of decellularised valves over conventional cryopreserved ones and we are in discussions with selected tissue banks in the EU and Asia/Pacific about making these available to clinicians who are keen to use them to help their patients.

 

 

Looking Ahead

 

Commercialisation

Creating a firm foundation for our future commercial strategy has been the focus of 2013 and we have delivered this on many levels, both operationally and strategically. Our new partners in the US - CTS in Dayton, Ohio and the strong Tissue Regenix team we have established in San Antonio, Texas are clear evidence that we are a nimble, responsive company with a compelling message that can attract a high calibre of organisations and individuals, who share our vision of Tissue Regenix as a global leader in the regenerative medicine arena. Adding commercial strength to our Orthopaedic portfolio by recruiting Peter Hamer is also an important indicator of our global ambitions in this substantial market and the steady progress of our first animal tissue products towards commercialisation.

 

Human Tissue Strategy

The partnership with CTS and our on-going discussions with other tissue banks has opened up the opportunity to deliver dCELL™ products much more rapidly into key markets like the US. The use of room temperature human tissue constructs using the dCELL™ process has the potential to transform the way certain types of human tissue are used, since it removes the need for freezing or cryopreservation - a substantial cost associated with tissue banking. Importantly, it also simplifies use within the hospital environment.

 

Overall

During the first half of 2014, Tissue Regenix is poised to launch its first product in the US, the world's largest healthcare market, and the team looks forward to continuing to progress the commercialisation of our unique technology.

 

 

Antony Odell

Chief Executive Officer

19 May 2014

 

 

 

		2014	2013
		£000	£000
OPERATING INCOME		6	49
Administrative expenses		(6,583)	(4,461)
OPERATING LOSS		(6,577)	(4,412)
Finance income		274	440
LOSS BEFORE TAXATION		(6,303)	(3,972)
Taxation		710	474
LOSS AFTER TAX ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		(5,593)	(3,498)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation differences - foreign operations		3
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR		(5,590)	(3,498)
LOSS PER SHARE
Basic and diluted on loss from continuing operations		(0.88)p	(0.55)p

 

There are no items of other comprehensive income.  The loss for the period arises from the Group's continuing operations.

 

 

 

	Share Capital	Share Premium	Merger Reserve	Reverse Acquisition Reserve	Reserve For Own Shares	Share Based Payment Reserve	Retained Earnings Deficit	Total
	£000	£000	£000	£000	£000	£000	£000	£000
At 31 January 2012	3,262	31,965	10,884	(7,148)	(831)	454	(10,707)	27,879
Loss and total comprehensive expense for the year	-	-	-	-	-	-	(3,498)	(3,498)
Issue of shares	2	1	-	-	-	-	-	3
Share based payment expense	-	-	-	-	-	82	-	82
At 31 January 2013	3,264	31,966	10,884	(7,148)	(831)	536	(14,205)	24,466
Loss for the year	-	-	-	-	-	-	(5,593)	(5,593)
Other comprehensive expense	-	-	-	-	-	-	3	3
Total comprehensive expense for the year	-	-	-	-	-	-	(5,590)	(5,590)
Exercise of share options	3	5	-	-	-	-	-	8
Share based payment expense	-	-	-	-	-	94	-	94
At 31 January 2014	3,267	31,971	10,884	(7,148)	(831)	630	(19,795)	18,978

 

 

 

 

		2014	2013
		£000	£000
ASSETS
Non-current assets
Property, plant and equipment		472	238
TOTAL NON-CURRENT ASSETS		472	238
Current assets
Trade and other receivables		1,127	707
Cash and cash equivalents		18,483	24,206
TOTAL CURRENT ASSETS		19,610	24,913
TOTAL ASSETS		20,082	25,151
LIABILITIES
Current liabilities
Trade and other payables		(1,104)	(685)
TOTAL LIABILITIES		(1,104)	(685)
NET ASSETS		18,978	24,466
EQUITY
Share capital		3,267	3,264
Share premium		31,971	31,966
Merger reserve		10,884	10,884
Reverse acquisition reserve		(7,148)	(7,148)
Reserve for own shares		(831)	(831)
Share based payment reserve		630	536
Retained earnings deficit		(19,795)	(14,205)
TOTAL EQUITY		18,978	24,466

 

Approved by the Board and authorised for issue on 19 May 2014

 

John Samuel (Chairman)                    Ian Jefferson (Chief Financial Officer)

 

 

 

 

		2014	2013
		£000	£000
Operating activities
Operating loss		(6,577)	(4,412)
Adjustment for non-cash items:
Depreciation of property, plant and equipment		124	74
Share based payment		94	82
Tax refunded		474	239
Operating cash outflow		(5,885)	(4,017)
(Increase)/decrease in trade and other receivables		(184)	(122)
Increase in trade and other payables		422	36
Net cash outflow from operations		(5,647)	(4,103)
INVESTING ACTIVITIES
Interest received		274	440
Purchases of property, plant and equipment		(358)	(155)
Net cash outflow from investing activities		(84)	285
FINANCING ACTIVITIES
Proceeds from issue of share capital		8	3
Net cash inflow from  financing activities		8	3
Decrease in cash and cash equivalents		(5,723)	(3,815)
Cash and cash equivalents at start of year		24,206	28,021
CASH AND CASH EQUIVALENTS AT END OF YEAR		18,483	24,206

 

 

The Company's annual report and accounts for the year ended 31 January 2014 have been published today and will be posted to shareholders shortly.  The annual report and accounts are also available in electronic form for download on the Company's website, www.tissueregenix.com.

  

NOTES TO THE FINANCIAL STATEMENTS

 

1. Basis of preparation

 

The preliminary results of the year ended 31 January 2014 have been extracted from audited accounts which have not yet been delivered to the Registrar of Companies. The Financial Statements set out in this announcement do not constitute statutory accounts for the year ended 31 January 2014. The report of the auditors on the statutory accounts for the year ended 31 January 2014 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The Financial Statements for the year ended 31 January 2014 included in this announcement were authorised for issue in accordance with a resolution of the Board of Directors on 19 May 2014.

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

 

2. Significant accounting policies

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 January 2014 and applied in accordance with the Companies Act 2006.

The accounting policies adopted are consistent with those followed in the preparation of the audited financial statements of Tissue Regenix Group Plc for the year ended 31 January 2014 and are disclosed in those statements.

 

3. Segmental reporting

At 31 January 2014, the Group operated in one business segment, that of the development and commercialisation of innovative platform technologies in the field of tissue engineering and regenerative medicine.

The Group operates in two geographic sectors, the UK and the USA.  A split of the expenses and assets is included below:

 

	31 January 2014
	UK £'000	USA £'000	Total £'000
Operating Loss *	(6,577)	-	(6,577)

*Expenses of £952k incurred in USA recharged to UK parent

	31 January 2013
	UK £'000	USA £'000	Total £'000
Operating Loss	(4,372)	(40)	(4,412)

 

	31 January 2014
	UK £'000	USA £'000	Total £'000
Assets	19,861	221	20,082
Liabilities	(846)	(258)	(1,104)

 

	31 January 2013
	UK £'000	USA £'000	Total £'000
Assets	25,151	-	25,151
Liabilities	(645)	(40)	(685)

NOTES TO THE FINANCIAL STATEMENTS continued

 

4. Taxation

	Year to	Year to
	31 January 2014	31 January 2013
	£000	£000
Current tax:
UK corporation tax credit on losses of year	(710)	(474)
	(710)	(474)
Deferred tax:
Origination and reversal of temporary timing differences	-	-
Tax credit on loss on ordinary activities	(710)	(474)

 

The Group has accumulated losses available to carry forward against future trading profits of £10,226k (2013: £6,850k).  No deferred tax asset has been recognised in respect of tax losses as their recoverability is uncertain.  The unrecognised deferred tax asset would equate to £2,045k (2013: £1,370k).

 

5. 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 year excluding own shares held jointly by the Tissue Regenix Employee Benefit 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 31 January 2014	Year to 31  January 2013
	£000	£000
Total loss attributable to the equity holders of the parent	(5,593)	(3,498)
	No.	No.
Weighted average number of ordinary shares in issue during the period	635,574,603	635,276,123
Loss  per share
Basic and diluted on loss for the period	(0.88)p	(0.55)p

 

The Company has issued employee options over 20,356,143 ordinary shares and there are 16,940,386 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 years concerned.

 

6. Share Capital

 

		Share capital	Share premium	Merger reserve	Reverse acquisition reserve	Total
	Number	£000	£000	£000	£000	£000
Total Ordinary shares of 0.5 p each as at 31 January 2012	652,380,047	3,262	31,965	10,884	(7,148)	38,963
Share options exercised	444,972	2	1	-	-	3
Total Ordinary shares of 0.5p each as at 31 January 2013	652,825,019	3,264	31,966	10,884	(7,148)	38,966
Share options exercised	662,338	3	5	-	-	8
Total Ordinary shares of 0.5p each as at 31 January 2014	653,487,357	3,267	31,971	10,884	(7,148)	38,974

NOTES TO THE FINANCIAL STATEMENTS continued

 

7. Movement in retained earnings and reserve for own shares

 

		Retained Earnings Deficit	Reserve For Own Shares
		£000	£000
At 31 January 2012		(10,707)	(831)
Loss for the year		(3,498)	-
At 31 January 2013		(14,205)	(831)
Loss for the year		(5,593)	-
Exchange movement		3	-
At 31 January 2014		(19,795)	(831)

 

 

8. Annual report and accounts

The Company's annual report and accounts for the year ended 31 January 2014 have been published today and will be posted to shareholders shortly.  The annual report and accounts are also available in electronic form for download on the Company's website, www.tissueregenix.com.