RNS Number:3223J
Provalis PLC
3 September 2001
For Immediate Release 3rd September 2001
Provalis plc
Preliminary Results for the Year Ended 30th June 2001
Provalis plc, the integrated healthcare company, has pleasure in reporting its
preliminary results for the year ended 30th June 2001.
KEY HIGHLIGHTS
Provalis Financial Results in Line with Expectations
* Provalis operations perform strongly with Group turnover (continuing
operations) increased by 18% to #7.8m (2000: #6.6m)
* Healthcare division achieves record sales of #6.2m (2000: #5.1m) with
an operating profit of #0.2m (2000, #0.5m) reflecting major investment
in sales force
* Medical Diagnostics division sales increase by 44% to #1.3m (2000:
#0.9m)
* Net loss for the Group reduced by #3.1m (41%) to #4.4m (2000: #7.5m);
the second year that a significant reduction has occurred
* Loss per share decreased by 52% to 2.0p (2000: 4.2p)
* Successful placing and open offer completed in October 2000 raising
#10.8m net of expenses: cash of #8.7m at 30th June 2001 (2000: #4.6m)
KEY ACHIEVEMENTS IN THE YEAR
* GlycosalTM, the 'point of care' diagnostic for glycated haemoglobin
in diabetics, launched, and regulatory and marketing approvals received
for the USA and Japan
* Glycosal achieves important NGSP certification assisting USA
marketing of product and USA government contract won for Glycosal in
National Institute of Health 8-year ACCORD trial to monitor control of
diabetes
* Greater than 1,500 Glycosal instruments and 320,000 tests shipped to
orders and first major theranostic order for OsteosalTM from major
pharmaceutical company to add to European pharmacy/distributor sales
* Pennsaid (R) acquired for Healthcare division and launched in late
March 2001
* Healthcare sales force expanded to 42 representatives from 29 in March
2001
* Streptococcus pneumoniae and Group B streptococcus proprietary
antigen selection essentially complete and ready for development of
vaccines
* Grant of US patent for OMP26 Haemophilus influenzae antigens used in
otitis media vaccine licensed to GlaxoSmithKline
* Option to acquire legacy drug delivery technology granted to
Pharmaceutics International Inc.
PROGRESS SINCE JUNE 2001
* Leasing of new facilities for Provalis operations near to Deeside
Headquarters - larger warehouse for the Healthcare business to support
order shipment and new manufacturing facility for Glycosal and G5 to
meet demand for Diabetes diagnostics products
Commenting on the results, Frank Harding, Chairman of Provalis, said "Last
year was one of considerable development at Provalis - it saw the completion
of the transition into an integrated healthcare company spanning therapeutic
product development, medical diagnostics and pharmaceutical sales.
The Company has an experienced management group heading up teams of highly
motivated and capable employees.
Provalis is now an emerging pharmaceutical company with its own sales
division, novel R&D programmes and a medical diagnostics division servicing
therapy and diagnosis of chronic disease."
Phil Gould, Chief Executive Officer, added, "Provalis' focus is to deliver a
broad product range, grow revenues and thereby create earnings to fund and
drive an expanded R&D effort. This year has seen substantial achievements for
the Company with major marketing approvals, a product acquisition and patent
grants providing the base from which to achieve these objectives. There are
many challenges ahead, but the directors are confident of the long-term
sustainability and growth of Provalis."
For further information: -
Dr Phil Gould, Chief Executive, Provalis plc, Tel: 01244 833463
Mr Neil Kirkby, Finance Director, Provalis plc, Tel: 01244 833552
Lisa Baderoon, Buchanan Communications, Tel: 020 7466 5000
Provalis' Internet Website ; http://www.provalis.com
"Safe Harbor" Statement under the US Private Securities Litigation Reform Act
of 1995: Statements in this announcement 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. Such factors include,
among others: the success of the Group's research and development strategy;
uncertainties related to future trial results and the regulatory process; the
execution and success of collaborative agreements with third parties; the
impact of future laws, regulations and policies; the Group's intellectual
property position and the success of patent applications for its products and
technologies; stock market trends in the Group's sector; the Group's
dependence on key personnel; general business and economic conditions; and
other factors beyond the Group's control that may cause the Group's available
capital resources to be used more quickly than expected. These and other
factors that could affect the Company's future results are more fully
described in its filings with the US Securities and Exchange Commission, in
particular the latest 20-F filing, copies of which are available from the
Company Secretary at the Company's registered address.
Notes to Editors
Provalis plc (LSE.PRO and NASDAQ.PVLS) is an integrated healthcare business
with three separate divisions focused on the supply and sale of prescription
medicines, the development, manufacture and sale of medical diagnostics
worldwide, and the development of new therapeutic products such as vaccines to
combat infectious diseases.
The three divisions are: -
Healthcare - This division sells and markets branded, third party,
prescription medicines in the UK to GPs and hospitals through its own
regionally managed sales force. This division sells products in the areas of
gastroenterology, osteoarthritis, osteoporosis, migraine and dermatology.
Medical Diagnostics - This division develops and sells medical diagnostic
products to world markets through distributors. The division has an
established business in diagnostic products, including the innovative products
GlycosalTM and OsteosalTM in the areas of diabetes and osteoporosis
respectively.
Therapeutics R&D - This division develops a range of recombinant surface
protein based antigen vaccines for serious infectious diseases. It has a
number of candidate vaccines at the pre-clinical stage of development.
CHAIRMAN'S REPORT
Last year was one of considerable development at Provalis - it saw the
completion of the transition into an integrated healthcare company spanning
therapeutic product development, medical diagnostics and pharmaceutical sales.
The Company also showed growth in turnover, expanded its product range and
progressed its vaccines development. In addition, and very importantly, the
Group raised further capital to fund its continued growth.
The year to June 2001 saw progress in all three of the Provalis operating
divisions. The Group was successful in acquiring a new product and obtaining
important new product and patent approvals. Significant further investment was
made in the Group's R&D, manufacturing base and sales capability.
During the year the Company raised #10.8m net of expenses from existing and
new shareholders and significantly cut its cash outflow. The post tax loss
was reduced, for the second year running, from #7.5m in 2000 to #4.4m in 2001.
The new Board members at Provalis have now had a full year to work with each
other, to support the executive management team and monitor the Company's
strategy. Now that this has happened, the most senior non-executive director,
Dr Dudley Earl, has decided to step down from the Board at the forthcoming
AGM. Dr Earl has been a director of the Company since 1993, and was
instrumental in encouraging the restructuring of the Group and its re-launch
as Provalis. The Board wishes to thank him for his efforts and great support
to the Company.
I would also like to express my gratitude to Provalis' shareholders, both old
and new, for their support during the year. The Board attaches great
importance to communication with both institutional and private shareholders
and encourages them to use the web site www.provalis.com for up to date
information about the Company.
The Company has an experienced management group heading up teams of highly
motivated and capable employees. The Board is deeply indebted to all the
employees for their commitment and is proud of what they have achieved this
year. Their success has laid the strong foundations on which Provalis is now
based.
The Group will seek to increase shareholder value as it makes the transition
from a loss making company to one with a broader portfolio of marketed
products, increased revenues and a positive cash flow enabling more rapid
progress in the development of new therapeutic and diagnostic products.
Provalis is now an emerging pharmaceutical company with its own sales
division, novel R&D programmes and a medical diagnostics division servicing
therapy and diagnosis of chronic disease. The Board looks forward to the
future with confidence.
Frank Harding
Chairman
CHIEF EXECUTIVE'S REPORT
Overview
The year to June 2001 has been an important one for Provalis. Progress was
achieved in all three divisions and the Group is now getting closer to the
goal of being a business sustainable through product sales, whilst building
high long term upside through the vaccines biotech business. I must thank my
Executive for their dedicated efforts and hard work on this performance .
Much of the early part of the year was dominated by getting GlycosalTM to
market and making the first sales. Regulatory and marketing approvals for the
product were achieved ahead of schedule, a prestigious US government contract
was won with the Company's partner, Bio-Rad Laboratories Inc, and it was
externally accredited with a third party NGSP endorsement reflecting
Glycosal'sTM high technical merit.
In the financial year, over 1500 Glycosal instruments were shipped to
distributors, and over 320,000 GlycosalTM test cartridges supplied. Whilst the
placement of instruments is gathering pace, the expected 'pull' of cartridges
has been somewhat slower than originally anticipated, largely as a result of
the protracted selling process involving trials and demonstrations in the
market. The product has entered a global market currently estimated at $1
billion and growing at 5% per year and the Company looks forward with eager
anticipation to its first full year of commercial sales, and further market
launches in 2002.
The launch orders for the Glycosal test cartridges have been supplied by
semi-automated production, which is now operating close to capacity. A new
operations facility, to support both Healthcare warehousing and Medical
Diagnostics production, has been leased close to the Company's headquarters in
Deeside. Over the course of autumn/winter 2001, automated assembly and
significant additional manufacturing capacity for Glycosal test cartridges are
due to come on stream, improving the Group's supply capability, productivity
and margins. In the run up to instigating this automated process there have
inevitably been "teething" difficulties in gearing up to full scale production
and a degree of volatility of product supply to, and demand from,
distributors. However, the current trend in sales and order activity and
instrument placement continues to support the significant potential
contribution to Group cash flow this product is expected to provide in the
short to medium term.
In the latter part of the year good progress was made by the Healthcare
division. This division continued to operate profitably, in spite of an
investment of approximately #0.5m in the second half of the year on
sales-force expansion and the Pennsaid(R) launch.
The acquisition of Pennsaid, in the face of fierce competition for this
commercially attractive product, was a key milestone for the division and
reinforces its ability to grow this important medicine sales business.
Pennsaid should be a significant product for the division following its launch
at the end of March 2001 and subsequent selling by the expanded sales-force of
42 representatives. A high level of initial stocking and a number of repeat
orders for this product have already taken place.
In the Therapeutics R&D division, which is a much longer-term activity, a
number of important stages were reached in the vaccine R&D programmes.
Protein antigen candidates were selected or short listed for development and
key patents were granted on these in the important USA and European markets.
Development activities leading up to the start of clinical evaluation of these
candidates is due to begin in the next financial year.
Operational Performance
Group sales from continuing activities in 2001 grew to #7.8m; an 18% increase
over 2000. The Group's Healthcare division, which made up the bulk of these
sales, saw its sale of medicines increase by 22% to #6.2m. Although this only
includes a small contribution from the new product Pennsaid and a modest
effect from the expanded sales force that has only been in place from April
2001, this growth was still over twice the industry average. The division
remained in profit (#0.2m; 2000 #0.5m) despite the significant costs
associated with the major increases in the sales force and infrastructure, and
the launch costs of Pennsaid.
In Medical Diagnostics, sales were #1.3m, 44% ahead of last year. As
expected, the bulk of the sales were of GlycosalTM and largely came from
European and Far East markets. With the USA and Japanese approvals and NGSP
accreditation coming in late 2000, mid way through the financial year,
followed by sales preparation and training of our distributors' sales
representatives, product launches in these and other markets using these
approvals only began in earnest at the beginning of Spring 2001, and so made
only a modest contribution to this year. Sales of Glycosal are expected to
grow strongly in the year ahead. Following an increase in R&D spend of #0.5m
the division recorded a loss for the year of #2.4m which was #0.3m greater
than 2000. With the changing sales mix towards GlycosalTM operational
performance is expected to improve further as the new automated manufacturing
facility comes on stream in 2002.
Losses for the Group (after tax and exceptional items) decreased substantially
from #7.5m to #4.4m, a #3.1m (41%) reduction. Corporate administrative costs
were reduced by over #1.0m and reflect the Group's significantly refocused,
streamlined and purposeful business approach. The loss per share reduced by
52% to 2.0p.
Overall therefore, Provalis' operating divisions - the Healthcare division
with the new product Pennsaid and its expanded sales force, and the Medical
Diagnostics division with the growing sales of GlycosalTM and OsteosalTM - are
laying the foundations to take them towards operational cash generation in
line with our stated strategy. This will allow the Group to meet and
subsequently expand Therapeutics and Medical Diagnostic R&D expenditure using
internal cash resources.
Product Development
Medical Diagnostics
In the past year Provalis made good progress with the development of the home
use HbA1c product, G5. This product, which will expand the Group's diabetes
testing franchise, is now progressing through the prototype/final design stage
and is targeted to enter a major clinical trial programme later this financial
year. The Board expects to complete these trials and apply to international
regulatory agencies for clearance to sell the product for professional and
home use by the end of the financial year.
The Board believes the home use HbA1c market will be very significant. G5
will position Provalis in this market for the long term. Last year the
diabetes testing market, largely based on conventional home glucose
monitoring, was valued at approximately $5bn. G5 is expected to be
complementary to, rather than in competition with, current products in this
market and to become a major product for the Group.
Vaccines
The Therapeutics R&D division is now a largely outsourced operation and has
achieved some significant successes. Importantly, as well as achieving four
granted US patents for the OMP26 Haemophilus influenzae protein antigen, which
is the basis of the licensing agreement with GlaxoSmithKline for development
of an otitis media vaccine, Provalis was granted a European patent for one of
its H. pylori antigens. The R&D division also completed the antigen selection
for the Group B streptococcus vaccine development programme, and short listed
a number of Streptococcus pneumoniae antigen development candidates. Final
selection should be complete by late 2001. The division has begun discussing
these programmes with potential development and marketing partners.
New Facilities and Operational Efficiency
The Group has now secured additional facilities to expand its operational
base. A new 11,000 sq ft facility is presently being fitted out to provide
additional warehousing for the rapidly expanding Healthcare business and a new
assembly facility for the diabetes diagnostic product range of GlycosalTM and
G5. This new facility is close to the existing facility and will share a
number of infrastructure services in order to minimise overhead cost.
In the last year the Group also completed the installation of its information
technology infrastructure, including a new materials resource planning (MRP)
system, which will allow it to manage more effectively its growing diagnostics
business.
Funding
Following the fund raising of #10.8m net of expenses in October 2000, with a
tightly managed cost base and growing operating income, the Company is now
ready to continue its growth both organically and by acquisition.
The Group has adhered to its commitments given to investors at the time of the
fund raising; the Healthcare division continues to grow with the major
acquisition of Pennsaid and the expansion of the sales force; additional
capacity is being put in place for Medical Diagnostics to meet future Glycosal
TM demand; and additional focus is being given to new therapeutic and
diagnostic product development and portfolio enhancement.
Strategic Intent and Future Prospects
Provalis' focus is to deliver a broad product range, grow revenues and
thereby create earnings to fund and drive an expanded R&D effort. This year
has seen substantial achievements for the Company with major marketing
approvals, a product acquisition and patent grants providing the base from
which to achieve these objectives. There are many challenges ahead, but the
directors are confident of the long-term sustainability and growth of
Provalis.
Phil Gould
Chief Executive Officer
Consolidated Profit and Loss Account
For the year ended 30 June 2001
Before Exceptional Before Exceptional
Exceptional Items Total Exceptional Item Total
Items Note 3 2001 Items Note 3 2000
2001 2001 #'m 2000 2000 #'m
#'m #'m #'m #'m
Turnover
- Continuing 7.8 - 7.8 6.6 - 6.6
activities
- Discontinued - - - 0.2 - 0.2
activities
7.8 - 7.8 6.8 - 6.8
Cost of sales (4.7) - (4.7) (3.6) - (3.6)
Gross profit 3.1 - 3.1 3.2 - 3.2
Selling & (2.6) - (2.6) (2.2) - (2.2)
distribution
expenses
Administration (3.2) 0.8 (2.4) (4.4) (0.4) (4.8)
costs
Research & (3.3) - (3.3) (3.3) (0.6) (3.9)
development costs
Operating loss
- Continuing (6.0) 0.8 (5.2) (6.5) (0.9) (7.4)
activities
- Discontinued - - - (0.2) (0.1) (0.3)
activities
(6.0) 0.8 (5.2) (6.7) (1.0) (7.7)
Loss before (6.0) 0.8 (5.2) (6.7) (1.0) (7.7)
interest
Interest receivable
and similar income 0.5 - 0.5 0.3 - 0.3
Interest payable
and similar charges - - - (0.1) - (0.1)
Loss on ordinary
activities before
taxation (5.5) 0.8 (4.7) (6.5) (1.0) (7.5)
Tax on loss on 0.3 - 0.3 - - -
ordinary activities
Loss for the (5.2) 0.8 (4.4) (6.5) (1.0) (7.5)
financial year
Loss per share - (2.0p) (4.2p)
basic
There are no recognised gains or losses in either year other than the loss for
each period.
No dilution of loss per share would arise from the exercise of share options.
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 June 2001
2000 2000
#'m #'m
Shareholders' funds at the beginning of the year 4.2 6.7
Share capital issued 11.5 5.5
Share issue costs (0.7) (0.5)
Loss for the financial year (4.4) (7.5)
Shareholders' funds at the end of the year 10.6 4.2
Consolidated Balance Sheet
At 30 June 2001
2001 2000
#'m #'m
Fixed assets
Intangible assets 0.5 -
Tangible assets 1.2 1.1
Investments - restricted deposits 7.1 10.2
8.8 11.3
Current assets
Stocks 0.8 0.8
Debtors 2.8 1.9
Cash and deposits 8.7 4.6
12.3 7.3
Creditors: Amounts falling due within one year (3.3) (3.9)
Net current assets 9.0 3.4
Total assets less current liabilities 17.8 14.7
Creditors: Amounts falling due after more than one year (0.1) (0.3)
Provisions for liabilities and charges (7.1) (10.2)
(7.2) (10.5)
Net assets 10.6 4.2
Capital and reserves
Called-up share capital 2.3 1.9
Share premium account 15.0 4.6
Merger reserve 96.3 96.3
Profit and loss account (103.0) (98.6)
Equity shareholders' funds 10.6 4.2
The accounts were approved by the Board of Directors on 31 August 2001 and
were signed on its behalf by:
N Kirkby
Finance Director
Consolidated Cash Flow Statement
For the year ended 30 June 2001
2001 2000
#'m #'m
Net cash outflow from operating activities (6.0) (7.7)
Returns on investments and servicing of finance
Interest received 0.5 0.3
Interest paid on unsecured loans - (0.1)
Net cash inflow from returns on investments and servicing of
finance 0.5 0.2
Capital expenditure and financial investment
Purchase of intangible fixed assets (0.5) -
Purchase of tangible fixed assets (0.5) (0.2)
Proceeds on sale of fixed assets - 0.9
Proceeds on sale of assets held for resale - 1.1
Net cash (outflow) inflow from capital expenditure and financial
investment (1.0) 1.8
Net cash outflow before management of liquid resources and (6.5) (5.7)
financing
Management of liquid resources
Increase in short term deposits (4.0) (0.6)
Financing
Issue of ordinary shares 11.5 5.5
Share issue costs (0.7) (0.5)
Unsecured loan repayments (0.2) (0.2)
Capital element of finance lease rental payments - (0.3)
Net cash inflow from financing 10.6 4.5
Increase (decrease) in cash 0.1 (1.8)
Consolidated Cash Flow Statement - Notes
For the year ended 30 June 2001
a) Reconciliation of operating loss to operating cash flows
2001 2000
#'m #'m
Operating loss (5.2) (7.7)
Depreciation and impairment of tangible fixed assets 0.4 0.7
Increase(decrease) in trade creditors 0.1 (0.8)
Decrease in other creditors and accruals (0.7) (1.3)
(Increase)decrease in trade debtors (0.7) 0.1
Decrease in other debtors and prepayments 0.1 1.3
Net cash outflow from operating activities (6.0) (7.7)
b) Reconciliation of net cash flow to movements in net funds
2001 2000
#'m #'m
Increase(decrease) in cash in the year 0.1 (1.8)
Lease finance repayments - 0.3
Repayments of unsecured loan 0.2 0.2
Short term deposit 4.0 0.6
Movement in net funds in the year 4.3 (0.7)
Net funds at 1 July 2000 4.0 4.7
Net funds at 30 June 2001 8.3 4.0
c) Analysis of changes in net funds
As at As at
1 July 2000 Cash flow 30 June 2001
#'m #'m #'m
Cash 0.6 0.1 0.7
Short term deposits 4.0 4.0 8.0
Cash and deposits 4.6 4.1 8.7
Unsecured loan due in under one year (0.3) - (0.3)
Unsecured loan due in more than one year (0.3) 0.2 (0.1)
Net funds 4.0 4.3 8.3
1) Basis of accounting and preparation
The financial information in this announcement does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The results in
respect of the year ended 30 June 2000 are an abridged version of the full
accounts for that year which received an unqualified report from the auditors
and have been delivered to the Registrar of Companies.
The preliminary financial information has been prepared using accounting
policies consistent with those adopted in the previous statutory accounts (to
30 June 2000).
Statutory accounts for the year ended 30 June 2001, in respect of which Arthur
Andersen have made an unqualified report, will be delivered to the Registrar
of Companies and sent to Shareholders. A copy will be available from the
Company's registered office at Newtech Square, Deeside Industrial Park,
Deeside, Flintshire, CH5 2NT in due course.
2) Segmental analysis by class of business
The analysis by class of business segment of the Group's turnover, loss on
ordinary activities before taxation and net assets is set out below.
2001 2000
#'m #'m
Turnover
Continuing business activities:
- Healthcare 6.2 5.1
- Medical Diagnostics 1.3 0.9
- Therapeutics R&D 0.3 0.6
7.8 6.6
Discontinued activities* - 0.2
7.8 6.8
* Discontinued activities relate to the OTC Division of the Healthcare
business, disposed of in January 2000.
2001 2000
Ordinary Exceptional Total Ordinary Exceptional Total
Activities Items Activities Items
#'m #'m #'m #'m #'m #'m
(Loss)profit on
ordinary activities
before taxation
Continuing business
activities:
- Healthcare 0.2 - 0.2 0.5 - 0.5
- Medical Diagnostics ** (2.4) - (2.4) (2.1) - (2.1)
-Therapeutics R&D (1.7) - (1.7) (1.8) (0.6) (2.4)
- Common costs (2.1) 0.8 (1.3) (3.1) (0.3) (3.4)
- Net interest 0.5 - 0.5 0.2 - 0.2
receivable
(5.5) 0.8 (4.7) (6.3) (0.9) (7.2)
Discontinued - - - (0.2) (0.1) (0.3)
activities*
(5.5) 0.8 (4.7) (6.5) (1.0) (7.5)
** Medical Diagnostics loss is stated inclusive of R&D spend of #1.3m (2000:
#0.8m)
2001 2000
#'m #'m
Net assets (liabilities)
- Healthcare 1.5 0.4
- Medical Diagnostics - 1.1
- Therapeutics R&D 0.4 (0.3)
1.9 1.2
Unallocated assets including cash and deposits 8.7 3.0
10.6 4.2
Analysis of continuing and discontinued businesses
2001 2000
Continuing Continuing Discontinued Total
#'m #'m #'m #'m
Turnover 7.8 6.6 0.2 6.8
Cost of sales (4.7) (3.5) (0.1) (3.6)
Gross profit 3.1 3.1 0.1 3.2
Net operating expenses
Selling & distribution expenses (2.6) (2.1) (0.1) (2.2)
Administration costs (2.4) (4.5) (0.3) (4.8)
Research & development costs (3.3) (3.9) - (3.9)
Operating loss (5.2) (7.4) (0.3) (7.7)
Exceptional items
Exceptional items included in operating loss 2001 2000
#'m #'m
Redundancies(1) - (1.0)
Release of accrued for costs associated with the departure of a 0.8 -
former Director(2)
0.8 (1.0)
Notes
1. The redundancies in 2000 resulted from the restructuring of the Group.
2. The release of an accrual for costs associated with the departure of a
former Director resulted from the withdrawal of an assessment made by the the
Inland Revenue in respect of tax claims relating to his contract of
employment.
3. There are no taxation consequences of the above exceptional items due
to the availability of current and prior year tax losses.
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