Provalis PLC - Interim Results
28 Mars 2000 - 9:30AM
UK Regulatory
RNS Number:0106I
Provalis PLC
28 March 2000
PROVALIS PLC
Interim Results
for the six months ended 31 December 1999
Provalis PLC ("PRO.L"), the integrated healthcare company
today announces its interim results for the six months ended
31 December 1999. The results show significant progress
towards Provalis' goal of moving into profit and growing the
business steadily and securely over the longer term with
upside from its therapeutic research and development.
Highlights
The Emergence of a Balanced Growth Business
Operating Performance
- Group loss reduced by 58% to #4.8M
- Turnover up #0.2M to #3.4M (+6.3%) incorporating a stronger
operational performance rather than one-off R&D payments
- Capital raising completed yielding #5.0M net
- Group reconstruction now complete and Provalis plc launched
- Cash at 31st December 1999 #7.4M
Progress
- Healthcare Division:
* Record sales #2.45M (+38%)
* First net profit of #0.40M following years of losses
- Medical Diagnostics:
* Glycosal(TM):
* Now being launched in worldwide markets (outside USA) via
alliances with Bio-Rad Laboratories Inc. and Drew
Scientific Group
plc
* USA FDA Registration for marketing clearance underway
(510K)
* Osteosal(TM):
* Launched on European and Far-Eastern markets
* Final stages of negotiation with Japanese distributor
underway - they will be submitting product for
regulatory approval
- Therapeutic R&D Division:
* Licence secured with SmithKline Beecham for otitis
media vaccine
Management : Strengthening of the Board
- Scientific Advisory Board established chaired by Dr Dudley Earl
- Christine Soden joins Board as Non-Executive Director
Commenting on the results, Frank Harding, Chairman,
said: "Collectively, our operating businesses are on track to
break even and move into profitability. Since the launch of
Provalis and its new business strategy in October last year,
the Group has been divided into two principal operating
divisions, Medical Diagnostics and Healthcare (ethical
pharmaceutical sales) and a Therapeutics R&D Division.
It is the Group's intention that profits from these two
operating divisions will generate cash largely for therapeutics
R&D,which the Board sees as providing the exciting, long-term
growth for the Company. This model of low risk profitable businesses
funding the higher risk R&D area is a very different business model
from many of the biotech companies in the U.K."
For further information:-
Dr Phil Gould
PROVALIS PLC Tel: 01244 833463
Lisa Baderoon
BUCHANAN COMMUNICATIONS Tel: 020 7466 5000
Overview
The first half of our financial year has seen many changes within
the Group but most importantly, the successful launch of Provalis
together with #5 million of new funding.
We are pleased to report that the loss of previous years has now
been substantially reduced through the restructuring activities
conducted in 1999. We have disposed of our interests in OraTol
Limited for a consideration of #1.1M and of the assets
in our nutritional supplements businesses for #0.76M.
Our headcount reached its target level and is now increasing
again with the recruitment of more sales representatives given
the performance of the Healthcare Division. We have also
completed the consolidation of the business at Deeside and the
installation of new IT and management accounting systems, which
will lead to improved business performance and financial control.
Collectively, our operating businesses are on track to break even
and move into profitability thereby helping to fund our therapeutics
R&D activities. This key goal at the time of the launch of
Provalis should be realised somewhat ahead of schedule. Turnover
up to the end of December 1999 was up by 6% over the same period
last year but now reflects the growing operational performance
of the Company rather than an increase in one-off' R&D payments.
Healthcare Division - Move to Greater Revenues and Significant Net
Profit
The Healthcare Division had a strong first half to the year
with record sales of #2.45M (up 38%). This business is now
profitable at #403K to December 1999, reversing the losses
of previous years.
Sales of the Dr Falk gastroenterological product range exceeded
#1M with a 16.8% increase on the same period last year.
This is the first time we have achieved such growth over a
half-year period. Sales of Calceos(TM), a calcium and vitamin D3
supplement for osteoporosis,increased by 134% and of
Clotam(TM), for migraine, by 18.9%. A successful launch
of Budenofalk(TM), for irritable bowel syndrome, led to sales
of #79K in this period. In the last period we have been awarded
a number of NHS regional health authority hospital contracts
giving more secure business to the Division. This more aggressive
marketing approach coupled with a margin management
programme is already beginning to accelerate further our
ability to drive revenues and profit from this business.
The margin management programme is focused on the control
of product cost with a stronger manufacturing outsourcing emphasis
now that our expensive Wrexham facility has been closed.
Our UK sales force has now been expanded to 32 sales personnel and
it is our aim to increase this number to 42 over the next year.
This will then provide improved UK coverage which should ensure
better market penetration and uptake of new products.
Two new gastroenterological products have been submitted
for registration and launches are anticipated in the latter part
of this year. Discussions are also underway with a number of
companies on the acquisition of established prescription
brands and novel niche products that will ensure growth
and development of this business.Opportunities are also being
reviewed to take our pharmaceutical salesdistribution business
into mainland Europe.
Medical Diagnostics Division - The Launch of Glycosal(TM) and
Osteosal(TM) onto World Markets
Sales of medical diagnostics were comparable to the same period
last year. However, these sales represent the beginning of an
important change in the mix of the product base. Osteosal(TM)
- the Group's osteoporosis risk assessment and monitoring
diagnostic - is being introduced with its first sales in the
Far East. Sales of Helisal(TM) - a diagnostic for H. pylori
infection are moving predominantly from Europe to the USA.
Full year sales should also now bring the first contribution
from our diagnostic product Glycosal(TM) - our new point of
care test for glycated haemoglobin for use in the diagnosis
and monitoring of diabetes - which was launched on 15th March 2000.
Growing sales of Helisal(TM) in the USA through Beckton Dickenson
and restructuring of the business to focus on medical diagnostics
have led to an improved financial position for this Division
with a reduction in the loss to #977K in the period to
December 1999. A large proportion of this loss was due to
R&D expenses (#398K). This R&D spend was necessary to
support late stage development and commercialisation of
our new products, which have now been launched and are beginning
to generate a revenue stream for the Company.
Glycosal(TM)
Glycosal(TM) provides a significant opportunity to drive revenues
and profits to secure the profitability of the Diagnostics
Division. We believe that Glycosal(TM) delivers a product
performance, user friendliness and value for money, unmatched by
any other point of care' system on the market available to
diabetologists, clinics, general practitioners or pharmacies.
Accordingly, we have now appointed distributors on a non-
exclusive basis to ensure full and rapid commercialisation of the
product. We have also taken the opportunity to market the
product in the UK through a contracted sales force (Mediserve
Ltd) and our own Healthcare Division sales force.
Glycosal(TM) Distribution Through Bio-Rad Laboratories Inc., Drew
Scientific Group plc
In recent months much of the division's focus has been on
securing the successful launch of Glycosal(TM) with a number
of distributors tailored to the diversity of the point of care'
marketplace. The product will be sold throughout the world non-
exclusively through an alliance with Bio-Rad Laboratories Inc. -
a major diagnostics sales company in worldwide markets and the
leader in glycated haemoglobin testing - and Drew Scientific
Group plc - the UK's largest manufacturer of equipment used by
laboratories for glycated haemoglobin testing which has extensive
worldwide distribution partners such as Fischer Corporation in
the USA. We intend to appoint further distributors to sell the
product in Japan. Representative training in Bio-Rad is now
complete and the product is in the process of being launched in
Latin America and the Far East. First shipments to Bio-Rad and
Drew were made in March 2000.
USA and Japan Registration
We expect to file for 510K-registration and approval of
Glycosal(TM) in the USA during April 2000. Collaborative
studies are also underway with a potential distributor in
Japan and a specific product is being developed for this
market. A registration application in Japan should be made
in the next six months.
Osteosal(TM)
The Division has also started the sale of Osteosal(TM) in the
UK through MediServe Ltd and the product is presently being
sold in a number of European and Far Eastern markets.
Collaborative studies are now complete with a potential
distributor in Japan and a registration application will
be made in the next period.
Therapeutics R&D
This Division has experienced considerable change and
restructuring over the last nine months, which has
culminated in a focus on vaccines. In future R&D will be
largely outsourced through a network of major third party
vaccine companies, academic collaborators and contract houses.
This approach for the development of vaccine candidates
is now well underway and is exemplified by our recent licensing
agreement with SmithKline Beecham plc for the development and
commercialisation of our Haemophilus influenzae and Moraxella
cattarhalis antigens as a paediatric vaccine to be used to
prevent otitis media. This agreement, with a world leading
vaccine company, supports our strategy of seeking to
partner our novel vaccine development programmes.
This is the first of a number of commercial development
relationships that we are exploring.
Similar collaborative deals are being explored for our other
antigen sets to enable us to progress a portfolio of
vaccine candidates. These can then move forward with a
series of collaborators allowing us to manage development
spend and risk.
We still await the outcome of our application to the FDA
for orphan drug status for Pseudostat(TM), our oral
vaccine being developed for Pseudomonas aeuriginosa
infection in cystic fibrosis patients. During 2000 we
will seek to identify suitable partners for Macrulin(TM) based
on our clinical research data. No further news is expected
until late 2000.
Board and Management
Following the departure on 31st December 1999 of James Long
as Group Finance Director, our search for a new Group Finance
Director is at a late stage and we expect to make an announcement
on this shortly.
Additionally, we are delighted to welcome Christine Soden as a
Non-Executive Director to the Board. She brings with her a
wealth of financial and business development experience
within the industry,which will be invaluable to Provalis
and its future development.
We have formed a Scientific Advisory Board for our Therapeutics
R&D Division. This will be chaired by Dr Dudley Earl, our
senior Non-Executive Director. He and the other members
together have the necessary scientific, developmental and
commercial skills in vaccine and therapeutic product
development to be a major benefit for the Company.
Future Prospects
Following the successful launch of Provalis we have
achieved an encouraging operating performance, established
new commercial relationships in our Medical Diagnostics
Division, rapidly restructured therapeutic R&D and secured
a collaborative programme with a major vaccine development
and marketing company.
The launch of Provalis has been challenging but we are committed
to an integrated Healthcare business where cash flow from our
operating divisions, rather than cash burn, will drive our
longer-term vaccines R&D programmes. We are progressing well with
this strategy and with the very pleasing progress we have made in
the first half and with the necessary management changes and drive
for profit in place, we look forward to more significant progress
in the second half of the year.
We believe that Glycosal(TM) provides a significant opportunity
to drive revenues and profits to secure the profitability of
the Diagnostics Division. We now have an operational break-even'
position for our two operating businesses within sight and we
remain committed to driving these businesses into secure profit
to fund our future diagnostics and therapeutic R&D programmes.
PL GOULD F HARDING
Chief Executive Officer Chairman
28 March 2000 28 March 2000
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31st December 1999
Unaudited Unaudited Audited
six months six months year
ended ended ended
31-Dec-99 31-Dec-98 30 June-99
#m #m #m
Turnover 3.4 3.2 9.2
Cost of Sales (1.8) (1.5) (4.7)
Gross Profit 1.6 1.7 4.5
Selling, distribution and (4.5) (5.8) (9.9)
administration costs
Research and development costs (2.0) (8.1) (16.5)
Operating Loss (4.9) (12.2) (21.9)
plc restructure costs - - 0.5
Profit on disposal of part - - (1.9)
interest in subsidiary
Loss before interest (4.9) (12.2) (23.3)
Interest receivable and similar 0.2 0.8 1.3
income
Interest payable and similar (0.1) (0.1) (0.3)
charge
Loss on ordinary activities before (4.8) (11.5) (22.3)
taxation
Taxation on loss on ordinary - - -
activities
Loss after taxation (4.8) (11.5) (22.3)
Minority interests - 0.1 0.2
Loss for the period attributable (4.8) (11.4) (22.1)
to ordinary shareholders
Loss per ordinary share (2.9p) (7.2p) (13.9p)
CONSOLIDATED BALANCE SHEET
As at 31 December 1999
Unaudited Unaudited Audited
as at as at as at
31-Dec-99 31-Dec-98 30-Jun-99
#m #m #m
Fixed Assets
Intangible assets 0.1 0.1 0.1
Tangible assets 1.5 6.2 2.5
Investments - restricted 9.6 8.2 9.7
deposits
11.2 14.5 12.3
Current Assets
Stocks 0.6 1.1 0.8
Debtors 1.9 1.4 3.3
Assets held for resale - - 1.1
Cash and cash equivalents
Short term deposits 6.8 18.4 3.4
Cash at bank and in hand 0.6 1.6 2.4
9.9 22.5 11.0
Creditors: amounts falling due (4.1) (8.3) (6.3)
within one year
Net Current Assets 5.8 14.2 4.7
Total Assets less Current 17.0 28.7 17.0
Liabilities
Creditors: amounts falling due after
more than one year (0.5) (1.9) (0.6)
Provision for liabilities and
charges
R&D syndications (9.6) (8.2) (9.7)
(10.1) (10.1) (10.3)
Net Assets 6.9 18.6 6.7
Capital and Reserves
Called up share capital 45.2 39.6 39.7
Share premium account 0.1 0.1 0.1
Merger reserve 96.3 96.3 96.3
Profit and loss account (134.7) (118.5) (129.4)
Equity Shareholders' Funds 6.9 17.5 6.7
Minority interest - equity - 1.1 -
Total Capital Employed 6.9 18.6 6.7
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 December 1999
Unaudited Unaudited Audited
six six Year
months months Ended
ended ended 30-Jun-99
31-Dec-99 31-Dec-98
#m #m #m
Net cash outflow from operating (4.7) (9.8) (19.5)
activities
Returns on investments and servicing
of finance
Interest received 0.2 0.9 1.3
Interest element of finance - (0.1) (0.2)
lease rentals (0.1) - (0.1)
Interest paid on unsecured
loans
Net cash inflow from returns on
investments and servicing of finance 0.1 0.8 1.0
Capital expenditure and financial
investment
Purchase of tangible fixed (0.1) (0.4) (0.7)
assets
Proceeds on sale of fixed
assets 0.4 - -
Net proceeds on sale of
business - - 1.0
Proceeds of assets held for
resale - 1.0 1.0
Net proceeds on disposal of
part interest in subsidiary
Net cash inflow from capital
expenditure and financial investment 1.4 0.6 1.3
Net cash outflow before management
of liquid resources and financing (3.2) (8.4) (17.2)
Management of liquid resources
(Increase) Decrease in short term (3.4) 6.7 17.5
deposits
Financing
Issue of ordinary shares 5.5 - 0.1
Share issue costs (0.5) - -
New unsecured loan - 1.0 1.0
Unsecured loan repayment (0.1) (0.1) (0.2)
Capital element of finance (0.1) (0.8) (2.1)
lease rental payments
Net cash inflow (outflow) from 4.8 0.1 (1.2)
financing
(Decrease) in cash (1.8) (1.6) (0.9)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 31 December 1999
Unaudited Unaudited Audited
six six Year
months months Ended
ended ended 30-Jun-99
31-Dec-99 31-Dec-98
#m #m #m
Loss for the period (4.8) (11.4) (22.1)
Exchange difference on translation
of net assets of foreign subsidiary - - (0.2)
undertakings
Capital raising costs (0.5) - -
Total recognised loss for the period (5.3) (11.4) (22.3)
Nature of Financial Information
The interim figures for the six months ended 31 December 1999 and for
the six months ended 31 December 1998 are unaudited.
The financial information set out above does not comprise full
accounts within the meaning of section 240 of the Companies Act 1985.
The comparative figures for the year ended 30 June 1999 are extracted
from the audited accounts for that year which have been filed with the
Registrar of Companies. The auditors report was unqualified and did
not contain any statement under s237(2) or (3) of the Companies Act
1985.
END
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