RNS Number:1339V
BioProgress PLC
19 April 2007
For Immediate Release 19 April 2007
BioProgress plc
("BioProgress", the "Company" or the "Group")
Preliminary Results for the year ended 31 December 2006
London, UK, 19 April 2007: BioProgress plc (AIM: BPRG; NASDAQ: BPRG), the
specialty pharmaceutical and healthcare company, is pleased to announce its
preliminary results for the year ended 31 December, 2006.
Financial Highlights
* Revenue increased by 116% to #9.5m (2005: #4.4m)
* Gross profit increased by 200% to #5.4m (2005: #1.8m)
* Cash reserves of #6.6m (2005: #6.5m)
- Despite significant investment in system and product development
Operational Highlights
* Acquisition of Dexo S.A., Segix Farma and trading assets of AirPharma
* Successful integration of acquisitions
* Placement of TabwrapTM at Inyx
* Launch of new proprietary technologies
- SolupolTM and EntWrapTM
Post Period Highlights
* Acquisition of DMPL
* Successful Arab Health Exhibition
* Various in-licensing and co-promotion arrangements
* Launch of MeltumsTM proprietary technology
Commenting on the results, Richard Trevillion, Chief Executive Officer, said:
"2006 has been an extremely successful and productive year. We have achieved
operational profitability for the first time in the Company's history,
significantly expanded our proprietary technologies and made several value
enhancing acquisitions. The success of the past 12 months has positioned the
Group well for continued growth and the ongoing growth of shareholder value."
For further information:
BioProgress Plc + 44 (0) 20 7098 9881
Richard Trevillion, CEO
Steve Martin, CDO
Hiral Patel, CFO
Buchanan Communications + 44 (0) 20 7466 5000
Rebecca Skye Dietrich
Mark Court
Chairman's Review
2006 has been an exceptional year and one of business transformation.
BioProgress has become a technology enabled Specialty Pharmaceutical and
Healthcare business and reclassification during the year as a healthcare company
reflects this. The major acquisitions; Dexo, Segix and Airpharma's respiratory
products have greatly expanded the product base and taken the group into new
markets. These have been rapidly assimilated by the business to contribute to
fresh organic growth and to create proof of concept opportunities for the
Group's unique technologies. This in turn has stimulated a growing interest by
third parties in our technological capabilities. What makes it exceptional is
the small, tightly focussed, team that achieved all of this and the short time
scale in which it was accomplished.
A team of seasoned professionals is now growing the business and driving it
forward as members of the recently established operational board. The
competencies of the main board have also been expanded with the addition of
Steve Martin and Hiral Patel as executive directors and Dr Jim Murray, the
co-founder of Shire Pharmaceuticals, as a non-executive director. The Group has
within it, and on its advisory panels, outstanding, dedicated and committed
individuals. We have a team and collegiate culture that ensures that our output
is greater than the sum of its individual parts. This, in large measure, is what
has enabled the business to move forward so quickly from its industrial
technology past to the present dynamic and vibrant business. It is a critical
capability that will take us on the next stages of our vision.
The business now has multiple revenue streams, from product sales, milestone
payments and third party partner payments and contract revenues. These revenue
streams are derived from classic cost reduction and price revisions of bread and
butter generics through to the development of novel branded generics using our
unique technologies. We have seen examples of these this year; achieved in
record times from concept to market. The broad area of supportive care has been
identified as one where we can use our special expertise to make life easier for
patients, carers and professionals with novel medication and devices. These
solutions extend across therapeutic classes. As we enter new international
markets there is great opportunity to introduce products that are successful
elsewhere in the group. Our business base extends across medical devices, over
the counter medicines (OTC) and prescription medicines. Once again there are
opportunities to develop these segments in each of our operating geographies.
Last, but by no means least, is our ability to work with third parties to help
them better exploit their intellectual property utilising BioProgress's
proprietary technologies.
Over the next year I anticipate significant organic growth from our multiple
revenue streams as we step up commercialisation. There will also be a further
filling of gaps in our product families, therapeutic classes, segments and
markets. We shall also begin to see a steady stream of innovative and novel
products emerging from our development pipeline. This will firmly establish our
proprietary development as another of the Group's key competencies as well as
increasing revenue opportunity. Some early fruits from our third party
collaborations are also anticipated. The Group will continue to maintain tight
control over its costs relative to its expansion.
I should like to extend my special thanks to Richard Trevillion and his team who
have worked incredibly hard over the last year to create the platform from which
we will strive to create sustainable and substantial shareholder value during
2007.
Anthony Knight
Non-Executive Chairman
Chief Executive's Review
As a preamble to my review of 2006 I and my colleagues would like to welcome
Anthony (Tony) Knight to the role of non-executive Chairman and to thank Peter
Ibbetson for his contribution in this role over the past 18 months. It is
testament to the strength of our board that we have been able to change roles in
a flexible manner maximising strengths as the Company's dynamic growth continues
whilst at the same time also ensuring continuity and balance. Tony's network and
experience within the pharmaceutical sector will be of great value to
BioProgress as the Company increases its profile in key markets.
2006 has been a tremendous year of achievement for BioProgress. The Group has
been transformed from a business operating with large amounts of committed
capital expenditure and very high losses to having six commercialised systems
(two of which are new developments) and 48 products distributed across its US
and EU network. For the first time in the Company's history BioProgress is
profitable at an adjusted operating profit level. This colossal achievement is
attributed to a highly focused group of key employees whose commitment and
dedication to the Company has enabled the creation of the success story
BioProgress now represents. That is as an emerging specialty pharmaceutical and
healthcare group. It is also worth noting for the first time in recent history
the Company is litigation and partner dispute free.
I will present my report in the following sections:
* Financial;
* Operational; and
* Future developments and growth drivers.
Financial
The Group's finance capability is now fully integrated across the Group's
operations and led by Hiral Patel. Hiral joined BioProgress from Grant Thornton,
the Company's former auditors. Hiral's tireless assistance prior to his joining
made the transition of the new team quite natural for the Group and has
facilitated a major acceleration of Company performance at all levels as
resource has been released to focus on the rapid expansion initiatives within
the Company.
Financially the results for 2006 stand out in stark contrast to previous years.
Revenues were more balanced than previous financial periods being made up of
product sales, some milestone and other partner payments and contract revenues.
The highlights for the year were as follows:
* Sales of #9.5 million;
* Cash reserves of #6.6 million;
* Significant investment in systems, people and product development;
* Adjusted operating profit of #0.1m; and
* Adjusted profit after taxation of #507k.
During the year the Group expanded its portfolio of enabling systems,
fast-tracked the creation of a product development programme and continued the
infrastructure build up of cGMP facilities in both the UK and the US. All of
these initiatives required significant investment necessary for the future
growth and expansion of the Company. The developments have also required an
increased yet measured growth in employee numbers across the business. Senior
hires have been necessary to manage the sales and marketing infrastructure and
to staff the new product development and formulation team. Support functions
have also been built upon as the Company's operations have expanded. All of
these functions are now integrated across the Group's infrastructure.
Cash at year end remained strong in parallel with the investment programme. This
was achieved due to the robust growth of the pharmaceutical sales and marketing
division and the various line extension launches achieved during the trading
year.
Operational
Operationally 2006 was a transformational year. The business for the first time
was managed on an integrated basis and directed by consumer focused market
driven criteria. The Group's first acquisition, Dexo S.A. whose brand name now
forms the international pharmaceutical sales and marketing division with
operations in the UK, France, Italy and the US was the catalyst behind this
change. All underlying technology development and manufacturing has been
integrated within a market based approach which from a strategic perspective has
been the most dramatic change within the Group. This synergistic approach
enables the Company to draw on the necessary skills and intellectual property
(IP) from the Group which is demonstrated by the accelerated line extension
developments launched during the period. In total six new products were created
in 2006 and a further four in the first quarter of 2007.
During 2006, BioProgress continued the renegotiation of key contracts commenced
in 2005. The Company with its partner, FMC Magenta completed a restructuring
which now better reflects the refocused NRobeTM commercialisation strategy. Of
particular note in these new arrangements is a significant decrease in capital
expenditure requirements and with a significant increase in the amount of total
and net income received over the remaining life of the patent. In addition,
BioProgress now enjoys an ongoing relationship with FMC, including the
developments of products for BioProgress's Dexo division.
Although operationally the Group integrates all development from a market led
perspective it is helpful to separate certain developments to highlight key
successes of 2006 and drivers for the proceeding financial years.
* Enabling systems - All of the Group's IP has undergone significant
investment and strategic change. The fundamental theme of this change has
been from broad industrial platforms to enabling drug delivery systems/
solutions (DDS). TabWrapTM for example, although elegant, was historically
limited in its functionality offering an alternative to gelatine coating: a
highly competitive market, limited predominantly to the US OTC market. The
redeveloped TabWrapTM system which can also be enteric coated - EntWrap - is
now a complete drug delivery system enabling rapid or controlled dissolution
and possessing added advantages of integral anti counterfeiting and tracking
capabilities. Rather than a cost addition, therefore, TabWrapTM is an
integral total product solution moving BioProgress' systems up the value
chain. Such is the strength of the solution BioProgress is now working with
multiple partners and have taken a number of such products through pre scale
up stability. It is expected that the first production of these enabled
products, the system for which is now placed with our partner Inyx (a fully
FDA and EU compliant manufacturing facility) will take place this year.
The Group has not only applied this strategic focus to all historic platforms
but used the base IP to create new DDS's. SoluPol was launched earlier in the
year leveraging from the Group's expertise in cellulose polymers in liquid
form and EntWrap (novel enteric coating films) was created from developments
during the period. Both these have not only been applied to the Group's own
product development initiatives but also attracted partnerships from global
pharmaceutical companies. It is expected that products from these
developments will be submitted to the regulatory authorities in 2007 in
parallel with the Company's continuing partnership program.
The recurring theme of the enabling systems which is relevant to the product
development programme is the focus on the ultimate consumer, that is the
patient. The Company's DDS assets allow a more patient friendly
administration by enabling the oral intake of medicines where this had
previously been either problematic or impossible and ensuring compliance
with required dosing regimes. These capabilities are key differentiators
and create solutions to the most significant issues facing the global
pharmaceutical industry today.
* Product development and formulation - This has been a new creation within
the Group spearheaded by Steve Martin, BioProgress's Chief Development
Officer. Market driven screening of over 1,000 products and available systems
highlighted significant gaps in the market. This is from an available product
perspective as well as technology inadequacies within current commercialised
pharmaceutical manufacturing systems. The core enabling technologies combined
with product development initiatives have demonstrated the uniqueness of our
patented technologies in enabling specific solutions to current formulation
difficulties. By targeting known problems and requirements within the
industry, BioProgress is able to achieve rapid screening methods to achieve
its commercial targets. The Company has in excess of 30 patent protected
product developments in various stages all of which carry significantly
reduced regulatory risk when compared with traditional drug development
programmes. The team use existing molecules as the base and combine the
unique IP and formulation expertise now within the Group. In addition,
BioProgress's XGELTM technology is categorised as GRAS (Generally Regarded
As Safe), which coupled with the fact that the developments use known active
products, greatly reduces the time to market. A new chemical drug can take
between 8 and 12 years before it comes to market. BioProgress on the other
hand develops products that will come to market within a time frame as short
as 6 months.
The creation of this experienced team has required substantial investment
which has been necessary to create innovative product initiatives such as the
nicotine replacement SoluleavesTM product, the GI SoluPol system and the
various CNS and pain management product programmes. BioProgress has also
invested in an experienced regulatory team specially skilled in shortening
regulatory pathways and converting prescription medicines into OTC forms.
We expect this to be a significant driver of value and revenues in 2007 and
beyond as these initiatives move into commercial marketing.
* Partner programmes - Again the emphasis has changed in 2006 from
licensing platforms to product arrangements. This has a number of
implications; first the number of partner programmes has increased and
second the Group receive not just royalties for use of film but royalties
for material use, product sales and system applications. Importantly also
the Group retains the rights to use its own DDS IP for its own products
which it has the option to either partner or market in its own right. This
flexibility will maximise shareholder value and again we anticipate will be
a significant value driver in the future.
A number of new developments have been completed with both existing and new
commercial partners across the Group's range of enabling DDS suites. We
expect revenue from those activities to grow throughout 2007 and beyond.
These developments have also involved the new product development and
formulation group and is again coordinated by Steve Martin.
Future Developments and growth drivers
In keeping with the momentum created in 2006, 2007 has started extremely well.
Organic growth has maintained its pace and partner programmes have progressed
faster than anticipated.
The Group intend to maintain the levels of investment commenced in 2006 in
product and system development in parallel with expanding its sales and
marketing infrastructure. In particular the more rapid development of OTC
products will provide a point of focus from a number of perspectives:
* Switching products from prescription only to branded consumer medicines
is now a core competency of the Group and increasingly requested by partners
seeking defence from generic alternatives to prescription only medicines.
* Proprietary OTC product developments which can potentially achieve rapid
market penetration. A number of such programmes are in development and have
created considerable interest as highly differentiated and protected
consumer friendly products.
* Creation of a separate OTC sales and marketing infrastructure capability
will become necessary as the Group expands this element and product
development programmes reach full marketing.
The Group is continuing to adapt its core technologies to meet its partner's
expectations. These technical advances will allow greater protection and
commercial opportunities for a wider global pharmaceutical and healthcare
customer base.
In addition to the above, a number of partner programmes are forecast to reach
the marketing phase in 2007. We therefore anticipate a strong increase in both
organic, partner and development revenues in the current financial year.
Post Period developments
The first quarter of 2007 has exhibited the same pace of growth as that built up
during 2006. Worthy of particular note are the following:
* In-licensing - The Group have completed a number of in-licensing deals in
both the OTC and ethical market sectors. This development is important in a
number of respects; first it demonstrates the strength others see in the
capabilities of BioProgress and second the products either complement the
Company's own niche offerings e.g. slimming and slimming maintenance
('SlimThru' from Melbrosin) or add a synergistic dimension to the portfolio.
In addition the in-licensing of OradiscTM from Uluru is complimentary to
BioProgress's patient supportive care franchise. The product will be
submitted for regulatory approval by mid-2007 throughout Europe, with
revenues being generated from sublicenses in 2007 and from own product
launches in 2008.
* The acquisition of DMPL - Although relatively small in terms of
consideration, the DMPL addition is significant in adding the start of an
OTC sales and marketing capability to the Group bringing in specialist
distribution networks at a time when a number of product development
programmes commenced in 2006 are reaching fruition. These will enable the
Company to leverage its development programmes direct to the consumer
markets.
* New Systems - The Development Team have launched a new innovative
technology, Meltums. Using the Group's proprietary XGELTM technology,
Meltums is a novel melt in the mouth delivery system which allows the
administration of larger amounts of active drug compared with our
SoluleavesTM technology. We are able to deliver sustained release products
from Meltums, a unique technology and one that can be applied broadly across
many therapeutic areas, including ADHD, Alzheimer's and Parkinson's Disease.
We expect products to be launched from this DDS in the US market during
2008.
* Global Marketing - The Group has continued to increase its global
awareness campaign. Exhibiting at Arab Health in Dubai has led to the Group
registering its products within the important Middle Eastern markets with
expected additional revenues commencing in 2007.
I would like to end my report with a note of thanks to the individuals within
the Group who have made the remarkable achievements of 2006 possible. The
success of the past 18 months have positioned the Group well for continued
growth and the board as a consequence view the current financial year with
optimism.
Richard Trevillion
Chief Executive Officer
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2006
2006 2005
Notes #'000 #'000
(restated)
Turnover
Restructured operations 1,806 4,429
Acquisitions 7,661 -
------- -------
9,467 4,429
Cost of sales (4,041) (2,658)
------- -------
Gross profit 5,426 1,771
Sales and distribution expenses (2,280) -
Administrative expenses (6,100) (11,655)
--------------------------------------------------------------------------------
Operating profit/(loss) before amortisation and
depreciation, share based payments and exceptional
items 89 (8,240)
Amortisation and depreciation (1,510) (1,245)
Share based payments (694) (399)
Exceptional items relating to claims and
restructuring (839) -
--------------------------------------------------------------------------------
Operating (loss)/profit
Restructured operations (3,941) (9,884)
Acquisitions 987 -
------- -------
(2,954) (9,884)
Exceptional gain on redemption of convertible bond - 544
Interest receivable and similar income 213 434
Interest payable and similar charges (37) (163)
------- -------
176 815
Loss on ordinary activities before taxation (2,778) (9,069)
Tax on loss on ordinary activities 242 -
------- -------
Loss for the financial year 3 (2,536) (9,069)
======= =======
------- -------
Loss per ordinary share
Basic and Diluted 2 (1.8)p (7.5)p
======= =======
AUDITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006
2006 2006 2005 2005
Notes #'000 #'000 #'000 #'000
(restated) (restated)
Fixed assets
Intangible assets 26,709 13,856
Tangible assets 1,496 1,874
------- -------
28,205 15,730
Current assets
Stocks 867 453
Debtors 5,066 1,541
Cash at bank and in hand 6,555 6,517
------- -------
12,488 8,511
Creditors: amounts falling
due within one year (3,513) (2,003)
------- -------
Net current assets 8,975 6,508
------- -------
Total assets less current
liabilities 37,180 22,238
Provision for liabilities and
charges (4,526) (3,148)
------- -------
32,654 19,090
======= =======
Capital and reserves
Called up share capital 1,558 1,231
Share premium account 46,065 34,251
Profit and loss account (20,510) (17,709)
Other reserves 1,317 1,317
Merger reserve 3,173 -
Shares to be issued 1,051 -
------- -------
------- -------
Shareholders' funds 3 32,654 19,090
======= =======
AUDITED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2006
2006 2005
Notes #'000 #'000
Net cash outflow from operating activities 4 (1,109) (6,687)
-------- -------
Returns on investments and servicing of finance
Interest received 213 434
Interest paid (37) (5)
-------- -------
Net cash inflow from returns on investments
and servicing of finance 176 429
-------- -------
Taxation (86) -
-------- -------
Capital expenditure and financial investment
Purchase of tangible fixed assets (157) (269)
Sale of tangible fixed assets 18 -
Purchase of intangible fixed assets (2,612) -
Sale of intangible fixed assets 361 -
-------- -------
Net cash outflow from capital expenditure
and financial investment (2,390) (269)
-------- -------
Acquisitions and disposals
Purchase of subsidiary undertaking (5,366) -
Purchase of unincorporated business (2,332) -
-------- -------
Net cash outflow from acquisitions and disposals (7,698) -
-------- -------
Financing
Issue of shares 12,506 262
Share issue costs (430) -
Redemption of convertible bond - (1,650)
Repayment of borrowings (906) -
-------- -------
Net cash inflow / (outflow) from financing 11,170 (1,388)
-------- -------
Increase/(decrease) in cash 5 63 (7,915)
======== =======
AUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2006
2006 2005
#'000 #'000
(restated)
Loss for the financial year (2,536) (9,069)
Currency differences on foreign currency net investments (959) (326)
------- -------
Total recognised gains and losses for the year (3,495) (9,395)
=======
Prior year adjustments (462)
-------
Total gains and losses recognised since last financial
statements (3,957)
=======
EXTRACTED NOTES FROM THE AUDITED FINANCIAL STATEMENTS
For the year ended 31 December 2006
1 accounting policies
Basis of preparation
The principal accounting policies of the Group are set out in the Group's 2005
annual report and financial statements. The policies have remained unchanged
from the previous annual report apart from those detailed below that have been
adopted to reflect changes of accounting policies required during the course of
the year to comply with new financial reporting statements.
Share Based Payments
The Group operates an equity-settled, share-based compensation plan or option
scheme. The fair value of the employee services received in exchange for the
grant of the options is recognised as an expense with a corresponding increase
in equity. The total amount to be expensed over the vesting period is determined
by reference to the fair value of the options granted at the grant date.
Non-market based vesting conditions are not included in the calculation of the
fair value of the options, but are taken into account each year when calculating
the number of options likely to be exercised. At each balance sheet date, the
entity revises its estimates of the number of options that are expected to
become exercisable. It recognises the impact of the revision of original
estimates, if any, in the profit and loss account, with a corresponding
adjustment to equity. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
Previously share based payments were valued at the difference between the market
price of the company's shares on the date of grant and the exercise price. This
value was recognised in the profit and loss account over the vesting period.
The impact of this change in accounting policy has been to charge the profit and
loss account for 2006 with #694,000 (2005: #399,000).
2 LOSS PER SHARE
2006 2005
#'000 #'000
(restated)
Basic loss per share
Net loss attributable to ordinary shareholders (2,536) (9,069)
======= ======
2006 2005
Number Number
Thousands Thousands
Weighted average number of ordinary shares in issue
during the period 143,531 121,001
======= ======
Basic loss per share (1.8)p (7.5)p
======= ======
The share options and warrants in issue are anti-dilutive and therefore the
basic loss per share and diluted loss per share are the same.
3 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
The group 2006 2005
#'000 #'000
(restated)
Loss for the year (2,536) (9,069)
Issue of shares 15,314 2,000
Shares to be issued 1,051 -
Share options charge during the year 694 399
Exchange differences (959) (326)
------- -------
Net increase/(decrease) in shareholders' funds 13,564 (6,996)
Shareholders' funds at 1 January 2006 (as restated) 19,090 26,086
------- -------
Shareholders' funds at 31 December 2006 32,654 19,090
======= =======
4 NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2006 2005
#'000 #'000
(restated)
Operating loss (2,954) (9,884)
Depreciation and amortisation 1,761 1,245
Decrease in stocks 450 1,351
(Increase)/decrease in debtors (1,343) 660
Increase/(decrease) in creditors and provisions 314 (808)
Non cash share issue - 350
Share based payments 694 399
Exchange rate movements (31) -
------- -------
Net cash outflow from operating activities (1,109) (6,687)
------- -------
5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2006 2005
#'000 #'000
Increase/(decrease) in cash in the period 63 (7,915)
Cash outflow from financing 906 1,650
Loans acquired from acquisition of subsidiary undertakings (962) -
Non-cash redemption of debt - 3,067
Foreign exchange (84) (15)
------ ------
Net movement in funds (77) (3,213
Net funds at 1 January 2006 6,517 9,730
------ ------
Net funds at 31 December 2006 6,440 6,517
====== ======
6 ANALYSIS OF CHANGES IN NET FUNDS
At 1 Jan Acquisition Foreign At 31 Dec
2006 Cash flow of subsidiary exchange 2006
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 6,517 122 - (84) 6,555
Overdrafts - (59) - - (59)
------- ------- ------- ------- -------
6,517 63 - (84) 6,496
Debt - 906 (962) - (56)
------- ------- ------- ------- -------
6,517 969 (962) (84) 6,440
======= ======= ======= ======= =======
7 POST BALANCE SHEET EVENTS
Acquisition of Diffusion Medicale et Paramedicale Laruelle SARL
On 5 March 2007, the Group acquired the entire share capital of Diffusion
Medicale et Paramedicale Laruelle SARL, a private 'Over-the-counter' sales and
marketing company through its Paris based pharmaceutical division, Dexo BioPharm
France SAS. The acquisition value of #251,842 (Euro376,000) has been satisfied in
cash.
8 Publication of non-statutory accounts
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2006 or 2005 but is derived
from those accounts. Statutory accounts for 2005 have been delivered to the
Registrar of Companies, and those for 2006 will be delivered in due course. The
auditors have reported on those accounts; their reports were unqualified and did
not contain statements under section 237(2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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