RNS Number:6628R
Provalis PLC
28 September 2000
Part 1
PROVALIS PLC
Preliminary Results For the Year Ended 30th June 2000
Provalis plc, the integrated healthcare company,
has pleasure in reporting its preliminary results
for the year ended 30th June 2000.
HIGHLIGHTS
. Group restructured, Provalis launched and Group
beginning to perform strongly
. Net loss for the Group reduced by #14.6m (66%) to
#7.5m (1999, #22.1m)
. Loss per ordinary share decreased by 70% to 4.2p
(1999, 13.9p)
. Loss in second half of #2.7m; (first half, #4.8m)
. Turnover of #6.8m including #0.2m revenue from
disposed businesses (1999: #9.2m including #1.6m
revenue from disposed non-core businesses and #1.6m
R&D lump sum receipt)
. Healthcare division achieves record sales of
#5.1m (1999, #4.7m) and first ever operating profit of
#0.5m (1999 loss #0.1m)
. Medical Diagnostics division now approaching break-
even on a monthly basis excluding R&D expenditure
. #3.3m investment in R&D for diagnostics and
therapeutic products to drive new product programmes
. Successful placing and open offer completed in
November 1999 raising #5.0m net after expenses
. Cash of #4.6m at 30th June 2000
. New capital raising of approximately #10.8m net
announced to fund corporate expansion programme.
KEY ACHIEVEMENTS IN THE YEAR
. Launch of Glycosal(TM)achieved in world markets with
Bio-Rad Laboratories Inc and Drew Scientific Group plc
as main distributors
. Glycosal (TM)registration application made in USA and
Japan
. Osteosal (TM)launched in European and Far-East
markets
. Licence secured with SmithKline Beecham for otitis
media vaccine
. Dr Les Davies appointed R&D director
. Dr David Bloxham and Christine Soden appointed as
new non-executive directors
. Scientific Advisory Board formed to support
Therapeutics R&D
. Drug delivery technologies undergoing disposal.
PROGRESS SINCE JUNE 2000
. Regulatory approval (510(k)) of Glycosal(TM) in USA
and product launch in September 2000
. Marketing approval of Glycosal(TM) in Japan and
launch scheduled for October 2000
. Approximately 800 Glycosal(TM) instruments and 50,000
tests shipped in the six months following product
launch in March 2000
. Sales and forward orders in the Medical
Diagnostics division approaching the turnover figure
for the whole of the last year
. Healthcare division sales growth maintained at
above industry average
. Neil Kirkby appointed Group Finance Director.
Commenting on the results, Frank Harding, Chairman of
Provalis plc said
'During the year Provalis has met a number of
significant commercial and technical milestones and has
substantially strengthened its financial position
providing a strong platform from which to achieve
future growth.
With the two operating businesses growing strongly, we
are now ready to accelerate the growth of the Company.
We today announce a capital raising, through a placing
and open offer, to raise additional funds in order to
support the growth of the Company through an expansion
of our supply capability, to pursue further new product
development, in particular to follow on from Glycosal(TM),
and to acquire new products for the Healthcare division'.
Phil Gould, Chief Executive Officer, added
'Provalis' strategy is to fund its long-term
therapeutic and diagnostic product R&D out of funds
generated from the operating businesses of Provalis
Healthcare and Provalis Diagnostics. The Company
intends to drive its growth by the sale and
distribution of prescription medicines, the
introduction of innovative new diagnostic products in
point of care or consumer markets and the global
introduction of vaccines against infectious disease.
The implementation of our business model of driving our
new product development spend from cash flow rather
than capital has enabled Provalis to make significant
progress in its first year of operation since
restructuring. Key diagnostics products have been
introduced, sales and margin management targets have
been achieved and an integrated global healthcare
business is being built. The Company is now ready for
substantial growth as Glycosal(TM) is launched on world
markets and further products are developed or acquired.
The directors plan now to accelerate the growth of the
business by developing further diagnostic products
using both existing and new technology platforms,
acquiring further products and brands and expanding
distribution for the Healthcare division and
maintaining a commitment to develop new vaccines for
infectious diseases. '
For further information:-
Dr Phil Gould, Provalis plc, Tel: 01244 833463
Mr Neil Kirkby, Provalis plc, Tel: 01244 833552
Lisa Baderoon, Buchanan Communications,
Tel: 020 7466 5000
CHAIRMAN'S STATEMENT
The financial year just ended saw major changes in the
strategy and operations of the Group. With the
'launch' of Provalis, the development of a new
strategic direction, the completion of the
restructuring necessary to contain cash burn and the
raising of new capital to ensure the continuing
development of the Group, a line was drawn in the sand
to put the Company's past behind it. Provalis is now
a smaller, tighter and more focused operation which is
developing its products, processes and sales in
healthcare and medical diagnostics whilst carrying out
research which could lead to novel vaccines in key
areas of medical need.
During the year the Company raised approximately #5m
net of expenses from existing and new shareholders and
cut its cash outflow from operating activities from
#19.5m in 1999 to #7.7m. The operating loss was
reduced from #21.9m in 1999 to #7.7m after exceptional
items of #1.0m (1999 - #5.0m).
The two operating businesses had a successful year.
The Healthcare division increased sales by 8.5% to
#5.1m and recorded its first year of profit at #0.5m
(1999 - loss of #0.1m). The Medical Diagnostics
division launched two exciting new products towards the
end of the year, which should generate considerable
sales and contribution in the current year. That
division incurred a loss of #2.1m (1999 - loss of
#1.5m). The Therapeutics R&D division successfully
secured a significant corporate licensing deal with
SmithKline Beecham during the year. With the growth of
the two operating businesses, the directors believe
that funds will be generated in the medium term to
finance the activities of Therapeutics R&D. Further
funds will be needed in order to expand more rapidly
the Healthcare division, to expand the manufacturing
and supply capability of, and to continue the research
and development of new products by, the Medical
Diagnostics division and to accelerate the development
into the clinic of at least one of the Group's vaccine
candidates.
I am pleased to welcome three new directors on to the
Board; they bring a variety of experience and expertise
and have already made significant contributions to our
development. Christine Soden and David Bloxham, the
two new non-executive directors, both have business
development and pharmaceutical backgrounds, and Neil
Kirkby, the recently appointed Finance Director, has
held similar financial roles, most recently in another
UK listed company.
As you know, Lord Patten, who chaired the Company
through some major changes including the 1999 strategic
review and fund raising, decided to retire from the
Board at the end of November 1999. On behalf of the
shareholders and other directors, I should like to
thank him for his substantial contribution to the
Company's affairs.
James Long, the previous Finance Director, left the
Company in December 1999 and Erik Penser, a non-
executive director and long-term major shareholder,
left the Board in May 2000. I should like to reiterate
my thanks to them and, in particular, to Erik for his
support for the Company over many years which, I
believe, he will continue to provide.
The Board is fully aware of the need for good corporate
governance. From the launch of Provalis, the directors
took steps to adopt and comply with the BioIndustries
Association Code of Conduct for its member companies.
In addition, the Board will ensure compliance with the
recent guidance notes on internal controls ('The
Turnbull Report'). It has this year taken advantage of
the transitional arrangements provided by the London
Stock Exchange.
Finally, the progress of Provalis is only possible with
the leadership of the Chief Executive Officer and his
management team, and the support of all the Group's
employees. To all of them I offer my thanks for their
unwavering efforts and hard work. I should also like
to thank our shareholders, old and new, who have
supported the launch of Provalis. I look forward to
further exciting developments in 2001 which should
begin to unlock the value created within the business.
Frank Harding, Chairman
CHIEF EXECUTIVE'S REPORT
Introduction
The progress in the first year since the relaunch of
the Company as Provalis has been encouraging, with the
development and performance of both the Healthcare and
Medical Diagnostics divisions meeting expectations in
the reshaped business. The performance of these
divisions is allowing the Group as a whole to move
towards a break-even position and to enable it to
largely fund its R&D efforts from earnings once
stronger profitability from the operating divisions has
been established.
There is no doubt that the launch of Provalis has been
challenging, but the Company's executive team believes
that the Group's promise has started to become reality.
This is exemplified by the significant progress made in
increasing the revenues of, and generating an operating
profit in, our Healthcare division, which is now
focused on promoting prescription pharmaceuticals. The
Medical Diagnostics division launched Glycosal(TM)with
two global distribution alliances giving a stronger
sales platform for the years ahead. Since the end of
the financial year key regulatory approvals for the
product in the USA and Japan have been achieved,
substantially earlier than expected. In Therapeutics
R&D, efforts were focused on vaccine development, and a
significant corporate licensing deal with SmithKline
Beecham - a major player in the vaccine pharmaceutical
industry - achieved. These are all significant
technical and commercial achievements for Provalis.
The executive management team has been strengthened in
the last year with the appointment of Dr Les Davies to
lead the Therapeutics R&D division and the more recent
appointment of a new Finance Director, Neil Kirkby.
Both Les and Neil have extensive experience and will
contribute to the executive management of the Group
assisted by a dedicated team of people, many of whom
are shareholders.
I am also pleased that we have established a Scientific
Advisory Board for the Company to help guide the
Therapeutics R&D activities. This division will focus
largely on vaccine programmes and use the Scientific
Advisory Board's collective experience in microbiology,
vaccine clinical development, product development and
commercial strategy to help guide these projects.
The business model adopted has proved valid for growing
small companies and will be driven forward vigorously.
Opportunities for organic growth are apparent in each
of the businesses, as is the need to acquire products,
brands, distribution and technologies to help unlock
the full value of Provalis.
Operating Review
The Group's change in strategy with a stronger
operational focus has provided a clear path to future
Group profitability and the ability to fund directly
more of the R&D efforts. The Group comprises three
clearly focused businesses, providing a full spectrum
of earnings and income potential to the Group over the
short-term (Healthcare), medium-term (Diagnostics) and
long-term (Therapeutics). The Group has an experienced
executive team with considerable business development
knowledge, specialist and general healthcare industry
experience and general commercial skills. The Group's
emphasis is now on exploiting this broad healthcare
approach which has been successfully implemented with a
rapid and effective Group restructuring, followed by a
strong commercial performance, and by the completion of
global distribution and technology deals with major
players in the healthcare industry.
The speed of the corporate restructuring, the close and
purposeful cost control and the improving performance
of the Group's operational businesses, have led to a
significant reduction (66%) in the loss for the Group.
Most importantly the Group loss continued to decline in
the second half of the financial year (#2.7m) compared
with the first half (#4.8m) as a result of the success
of the restructuring effort. The cash burn has also
been substantially reduced.
Business Disposals
To continue the programme of streamlining the business
and gaining commercial focus, the Group disposed of its
'Over the Counter' pharmaceutical sales business and
its nutritional supplements and tonics business, both
of which were non-core and had been incurring losses.
Operating performance is now predominantly based on
product sales from the Healthcare and Medical
Diagnostics divisions rather than infrequent R&D
payments.
Operating Effectiveness
During the year, to support tightly managed cost
control, the Group invested further in its information
technology infrastructure to improve communication, the
immediacy of management accounting information and real
time product sales information. Given the growing
importance of diagnostics manufacturing, the need for
improved inventory control with the growing mix of
products, and the extension of the supply chain to a
growing range of distributors, the installation of an
updated material and manufacture resource planning
system, MRPII, is being progressed.
Operating Businesses
The operating businesses of Healthcare and Medical
Diagnostics have performed well. In the refocused
Healthcare division, with 40% more trained sales
representatives in the field than 12 months ago, sales
in the past financial year grew by 8.5% overall, and by
16% on promoted products, leading to a net profit of
#0.5m for that period . This encouraging start
reverses a #0.1m loss over the same period in the
previous year.
Although Medical Diagnostics sales in the year to June
2000 were similar to the previous year, there was an
important change in the product mix with the
introduction of the newer products Glycosal(TM)and
Osteosal(TM). This resulted in a good finish to the
financial year.
First sales of Glycosal(TM) took place on world markets.
In the six months since launch on 15 March, over 800
instruments and nearly 50,000 tests have been shipped
to our distributors. The product is now on the market
in over 15 countries. In recent weeks, and earlier
than expected, the Group has received key regulatory
approvals for the product in the USA and Japan and
launch in those countries is anticipated shortly.
The Group is now selling Osteosal(TM), its product to
monitor osteoporosis, in a number of European countries
as well as the Far East. Early sales suggest a growing
demand for the test from consumers, with the product
now being sold in certain parts of Europe through
pharmacies, via franchising arrangements, supported
by a website www.managingosteoporosis.com.
Therapeutics R&D
Therapeutics R&D effort is focused on vaccines to treat
or prevent infection by a number of pathogenic
bacteria. The division has now been reconfigured to
use a virtual' R&D model, under which most activities
are outsourced, and has progressed the building of pre-
clinical packages and the filing of patents on its
vaccine portfolio.
The research portfolio now numbers six vaccine
programmes, with several antigen development candidates
identified in each. These are being progressed into
development as quickly as possible using a
collaborative/licensing approach similar to the
agreement entered into this year with SmithKline
Beecham, which is based on a reimbursement of R&D costs
and upfront, milestone and royalty payments.
The division, following its licensing agreement with
SmithKline Beecham, and option fee arrangements on its
legacy drug delivery portfolio, contributed #0.6m to
Group revenues this year.
Drug Delivery Technology Legacy
Provalis is no longer focusing on drug delivery
technologies, and the Board is seeking to sell most
of the intellectual property held in the area. Option
and other agreements have now been signed with a number
of biotechnology and pharmaceutical companies that
could lead to those companies acquiring the
intellectual property in due course.
However, Provalis intends to retain its intellectual
property on the dispersion-based drug delivery
technology associated with the development of the
product Macrulin(TM) - its oral anti-diabetic therapy
using insulin. Discussions are being conducted with a
number of companies to determine if there is a way for
them to fund the formal Phase II clinical trials for
this product.
Prospects
The Directors' intention for the current year is to use
the increasing operational cash flow from the
Healthcare division and the Medical Diagnostics
division to help progress the Group's R&D programmes in
both diagnostics and therapeutics.
Glycosal(TM) is expected to be an important driver for
growth for the Group with product launches in Europe,
South America and the Far East to be supplemented by
introduction in the USA and Japan. Another focus in
the Medical Diagnostics business will be to expand the
diabetes test franchise by developing a product for
home use. With this in mind, consideration is being
given to e-commerce opportunities for the product and a
website www.livingwithdiabetes.com, has been secured to
allow direct to consumer marketing of a home use
version of the test.
The Healthcare business is actively seeking to in-
license or acquire new products; aggressive targets
have been set for both increasing the UK sales return
and to begin to extend sales and distribution coverage
to other countries in Europe starting with the Republic
of Ireland.
The next year should also see the Therapeutics R&D
division completing pre-clinical work on a number of
vaccine candidates and preparing for the start of
volunteer and clinical studies.
Philip Gould,
Chief Executive Officer
Placing and Open Offer
Provalis has today announced that it proposes to raise
approximately #10.8m after expenses through a Placing
and Open Offer, which is fully underwritten. The net
proceeds of the Placing and Open Offer will be used to
support the development of the business. The funds
will largely be used to allow a more rapid growth of
the Healthcare business through product and brand
acquisition, to secure the worldwide roll out of
Glycosal(TM) and the development of further medical
diagnostic products, including a version of Glycosal(TM)
for home use, and for accelerating vaccine development.
The Placing and Open Offer is subject to shareholder
approval, which will be sought at an extraordinary
general meeting to be held on 23 October 2000.
This release is not an offer of securities for sale in
the United States. The new Ordinary Shares to be issued
in the Placing and Open Offer have not been and will
not be registered under the US Securities Act of 1933
and may not be sold in the United States in the absence
of registration or an applicable exemption from the
registration requirements of the Securities Act.
Consequently, neither the Placing nor the Open Offer
will be made in the United States or to US persons. In
addition, the Placing and Open Offer are not being made
to shareholders in Canada, Australia, Japan or the
Republic of Ireland.
'Safe Harbor' Statement under the US Private Securities
Litigation Reform Act of 1995: Some or all of the
statements in this document that relate to future
plans, expectations, events, performances and the like
are forward looking statements as defined in the US
Private Securities Litigation Reform Act of 1995.
Actual results of events could differ materially from
those described in the forward looking statements due
to a variety of factors, including those set forth in
Provalis plc's filings with the US Securities and
Exchange Commission.
Notes to Editors
Provalis PLC (LSE.PRO and NASDAQ.PVLS) is an integrated
healthcare company with three separate divisions
focused on the supply and sale of prescription
medicines, the development and global sale of medical
diagnostics, and the development of new therapeutic
products, such as vaccines to combat infectious
diseases.
The three divisions are:-
Healthcare - This division supplies, sells and markets
branded, third party, prescription medicines in the UK
to GP's and hospitals through its own regionally
managed sales force. Its current product range
includes products for use in the medical areas of
gastroenterology, osteoporosis, migraine and
dermatology.
Medical Diagnostics - This division develops and sells
innovative medical diagnostic products to world markets
through distributors. The division has recently
launched the innovative diagnostic products Glycosal(TM)
and Osteosal(TM), in the areas of diabetes and
osteoporosis respectively, and also has a world-wide
franchise in medical diagnostic products for infectious
diseases.
Therapeutics Research & Development - This division
develops new therapeutic products, focusing
particularly on vaccine candidates for infectious
diseases. A number of vaccine candidates are at the
pre-clinical stage.
MORE TO FOLLOW
FR IFFSIAIIDFII
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