Half Yearly Report
Interim Results for the six months ended 30 September 2018
Delivering on our growth strategy
Collagen Solutions plc (AIM: COS), the developer and manufacturer of biomaterials and regenerative medicines for the enhancement and extension of human life, announces results for the six months ended 30 September 2018.
- Nine new customer contracts secured (H1 2017: eight) and began supply to sixteen new customers (H1 2017: eight)
- New distribution agreements for ChondroMimetic® in Europe and Asia.
- Two new distribution partners in China
- New Zealand restructuring and manufacturing consolidation into Glasgow substantially completed
- Proprietary products on track to deliver against plans. ChondroMimetic® CE Mark final data submission to be completed this month
- New Tissue business unit established, tissue product line extended and four new tissue customers secured (included within the sixteen new customers referred to above)
- Delivered on key development projects with our customers accounting for 50% of our revenue in H1 2018 (H1 2017: 8%)
- Group revenue and other income grew 13% to £2.10m (H1 2017: £1.86m); adjusted for the previously disclosed expiration of a contract with a Korean customer the balance of our business grew at 55%
- Gross margin 73% (H1 2017: 64%)
- LBITDA of £0.66m (H1 2017: £0.96m or £1.23m once adjusted for separately identifiable items - see Note 4 in accounts)
- Pre-tax loss of £1.06m (H1 2017: £1.38m or £1.64m once adjusted for separately identifiable items - see Note 4 in accounts)
- Cash and cash equivalents of £2.56m (31 March 2018: £5.02m)
- Cash used in operations £0.67m (H1 2017: £1.54m)
- Full settlement of earn-outs on acquisition of £0.56m for Collagen Solutions NZ Limited and Collagen Solutions LLC
- Post period end, variation of the Bond Subscription Agreement with Norgine Ventures providing for a six-month principal repayment holiday
Jamal Rushdy, CEO of Collagen Solutions, commented: "We remain on track to meet our key initiatives for the year including achieving our commercial execution plans and financial performance objectives in line with market expectations. Commercialisation of our proprietary products remains a key focus. Our planned rolling submission of data to support our goal of obtaining the CE Mark for ChondroMimetic® this financial year continues and we have successfully concluded agreements with new European and Asian distributors. Discussions continue with several more with the aim of completing these ahead of the limited user release planned to follow the ChondroMimetic® CE Mark.
"Financially, we are performing well. The variation of the Bond Subscription Agreement with Norgine Ventures will allow us greater flexibility to exploit growth opportunities for future years.
"Operationally, our New Zealand restructuring initiative is delivering the expected synergies and benefits and the New Zealand team has delivered four new customers in the first half. Finally, we will continue to deliver more visibility and metrics to our investors relating to the value and progress within our core business."
I am pleased to present Collagen Solutions' interim results for the six-month period ended 30 September 2018. During the period, we saw the Group returning to growth as we diversified our customer base, growing both the volume and more importantly the value of customer acquisitions year-on-year. We continue to make strong progress towards commercialisation of our proprietary products that will create additional value in the coming years. This continues the momentum for the Group in striving to be the industry's first choice for regenerative biomaterials.
During this six-month period, revenue (including other income) grew 13% when compared to the prior period. The nine new customers who we signed up in the first half of this year come at an average value significantly increased on the prior year, reflecting our ability to acquire larger and higher value customers. Adjusted for the previously disclosed expiration of a contract with a Korean customer the balance of our business grew at 55%.
Operationally we are on track to deliver against key milestones and crucially our aims of commercialising our proprietary products and expanding into new geographic regions are all the closer with the signing of new distribution partners for ChondroMimetic® and two new partners in China.
We previously announced our participation in two Horizon 2020 grant-funded research programmes related to cell-based tissue regeneration techniques and a collagen-based drug delivery system for the treatment of Parkinson's' disease and funding of approximately €1 million was granted from the European Union to support these projects.
The Group's results for the six months ended 30 September 2018 are set out in the Consolidated Statement of Comprehensive Income. Revenue (including other income) for the first six months was £2.10m (H1 2017: £1.86m). Administrative expenses including research and development costs were £1.70m (H1 2017: £1.94m or £1.68m once adjusted for separately identifiable items of £0.26m (see Note 4 in the accounts) reflecting an increase in our commercial investment in the period offset by cost savings in various areas and in particular cost reduction from the restructuring of our operations in New Zealand. Selling and marketing expenses were £0.49m (H1 2017: £0.48m). LBITDA for the first six months was £0.66m (H1 2017: £0.96m and adjusted for separately identifiable items £1.23m). Diluted loss per share was (0.32p) (H1 2017: (0.42p)).
Net cash used in operations during the period was £0.67m (H1 2017: £1.54m). The Group's cash balance at 30 September 2018 was £2.56m (31 March 2018: £5.02m). Cash consumption during the period included the final payments of the deferred considerations on the Southern Lights Biomaterials and US acquisition totalling £0.56m. There was no draw down of debt during the period (Year to 31 March 2017: £1.00m) and we concluded an arrangement to delay capital repayments on the Bond facility with Norgine on 31st October 2018. This arrangement will help provide funding should any major customer opportunities present themselves during the back end of the year.
Board and Management
In the first six months we are benefiting from the new appointments of Lou Ruggiero, CBO, and Tom Hyland, COO, to the Board. Lou is driving the increased success in commercialisation that we had hoped for and Tom is focused on delivering the expected synergies from consolidation of our manufacturing efforts into Glasgow.
The underlying business trend is positive and we are on track to deliver against our key objectives this year: Financial performance, Proprietary Products, Commercial Execution, Operational Execution (Tissue) and Investor Relations.
David E Evans
3 December 2018
I am pleased to report substantial progress in the first six months of this year in our financial performance, core business growth, proprietary product pipeline, and other key initiatives. Financial performance was driven by 13% growth in income and efficiency gains realised from our restructuring earlier in the year. Our core business leading indicators include a record high number of new customer agreements, and an increase in development revenue to 50% of our mix. Our proprietary products programmes continue to advance, including preparations for launching ChondroMimetic® shortly following receipt of the CE Mark anticipated this financial year, subject to external regulatory review process timing.
Revenue and Core Business Growth
Revenue and other income for the first six months was £2.10 million, including £1.95 million in revenue and £0.15 million in other income. This represents 13% growth over the prior year comparable period and is notable in that if adjusted for the loss of sales from expiration of a key South Korean customer contract, revenue growth was 55%. Notably, we achieved nine new customer agreements (vs. eight in the prior year comparable period), which is a record high since we began tracking this metric in the six-month period ending September 2016.
Revenue from North America grew by £0.67 million to £1.45 million, an increase of 86%. This significant growth is due to new customer agreements and commercial focus in this critical region. While Asia Pacific declined by 71% to £0.18 million due to the aforementioned contract expiration, the underlying commercial activities in this region are promising with three new customer contracts and four new customers in Asia Pacific including two new channel partners in China. The EMEA region had sales of £0.31 million, slightly down (2%) on prior year although up on H2 2018 by 15%, and we remain positive with respect to the pipeline of new customer business and commercial management in this region.
We are progressing to plan in preparing for the launch of our ChondroMimetic® implant for the repair of cartilage defects primarily in the knee. In February of this year, we announced the successful results of an eight-year clinical study demonstrating high quality regeneration of cartilage tissue and sustained clinical benefits. We will have submitted what we believe to be our final data and documentation to our notified body by the end of this month and have successfully completed a quality systems audit related to the submission in support of obtaining the CE-mark, anticipated to occur by 31 March 2019.
Commercially, we have signed up new distribution partners in Europe and Asia, this on top of the South Korean partnership with Insung Medical Co. Ltd announced in December of last year. Once we receive the CE Mark, we are planning for the first-in-man cases at a single centre, followed by a controlled launch and training programme in the various initial countries.
While ChondroMimetic® is our primary focus, we also have made progress with our other proprietary product programmes. We completed comprehensive pre-clinical testing for our bone graft substitute family for use in spine, trauma, and extremities procedures. Results from these trials proved encouraging and we are in active discussions with potential distribution partners for this product. Our wound healing programme is also in progress and we are expecting pre-clinical results later this financial year.
The Company continues to participate in various research programmes including our two Horizon 2020 grants; the Development of Biomaterial-based Delivery Systems for Parkinson's disease (BrainMatTrain) and Multisystem Cell Therapy for Improvement of Urinary Continence (MUSIC). Together these grants total approximately €1 million in funding through 2021.
Restructuring Initiative and New Tissue Business Unit
In March of this year, we announced a proposed restructuring of our New Zealand operations to focus that team on tissue opportunities and deliver cost savings related to duplicative collagen production operations. We have substantially completed the transition of collagen production operations to our Glasgow facility and realised an approximate annual saving of £0.20m.
In addition, with the New Zealand team now fully focused on growing our tissue business, we have diversified our offering to include multiple types of tissues including pericardium, dermis, bone, and other materials and also expanded the offering to include porcine tissues in addition to bovine. While the customer acquisition process is often lengthy due to abattoir and process qualification, we have already acquired four new customers with this diversified offering and are optimistic for additional business once several qualification processes are completed early next financial year.
In summary, we are pleased with our financial and operational progress from last year and are on track with all the initiatives we set to achieve during this financial year, including achieving our financial results and preparing for a successful launch of, ChondroMimetic®. I would also like to thank our employees, Board, and investors for their continued support on our journey to be the industry's first choice in regenerative biomaterials.
Chief Executive Officer
3 December 2018
months ended 30
months ended 30
|Cost of sales||(525,812)||(628,744)||(1,039,401)|
|(excluding separately identifiable items)||(1,699,885)||(1,944,461)||(3,412,092)|
|Separately identifiable items||4||-||264,532||(81,402)|
|Total Administrative expenses||(1,699,885)||(1,679,929)||(3,493,494)|
|Selling and marketing costs
(excluding separately identifiable items)
|Separately identifiable items||4||-||-||(41,046)|
|Total Selling and Marketing costs||(491,324)||(482,926)||(938,354)|
|LOSS BEFORE INTEREST TAX|
|DEPRECIATION AND AMORTISATION||(663,666)||(962,935)||(1,707,423)|
|Amortisation and depreciation||(238,981)||(233,905)||(526,946)|
|LOSS BEFORE TAXATION||(1,060,660)||(1,379,708)||(2,618,939)|
|LOSS FOR THE PERIOD||(1,047,743)||(1,366,736)||(2,591,563)|
|Owners of the parent||(1,047,743)||(1,349,920)||(2,569,474)|
|Currency translation difference||107,922||(520,647)||(876,014)|
|Other comprehensive income/(loss)||107,922||(520,647)||(876,014)|
|TOTAL COMPREHENSIVE (LOSS)/GAIN FOR THE PERIOD||(939,821)||(1,887,383)||(3,467,577)|
|Owners of the parent||(939,821)||(1,867,610)||(3,442,209)|
|Basic and diluted loss per share - pence attributed to owners of the parent||3||(0.32p)||(0.42p)||(0.79p)|
|Property, plant and equipment||1,120,527||1,231,726||1,228,530|
|Trade and other receivables||760,877||946,187||1,085,783|
|Cash and cash equivalents||2,556,502||6,739,105||5,022,314|
|EQUITY AND LIABILITIES|
|Equity attributable to equity holders of the parent company|
|Share-based payment reserve||248,120||167,809||205,820|
|Shares to be issued reserve||106,581||106,581||106,581|
|Equity attributable to non-equity holders of the parent company||15,984,690||18,347,010||16,882,211|
|Non-controlling interest reserve||-||77,384||-|
|Provision for other liabilities and charges||132,696||-||151,753|
|Trade and other payables||761,783||899,933||802,394|
|Provision for other liabilities and charges||105,551||949,152||1,041,520|
|Total liabilities and equity||19,646,781||23,395,608||21,994,423|
|Shares to be
|As at 1 April 2017||3,287,991||14,851,092||137,809||131,934||4,531,798||1,539,676||(4,291,319)||20,188,981||97,157||20,286,138|
|Issue of shares on acquisition of assets||2,175||23,178||-||(25,353)||-||-||-||-||-||-|
|Share issue costs||-||(4,361)||-||-||-||-||-||(4,361)||-||(4,361)|
|Total transactions with owners in their capacity as owners||2,175||18,817||-||(25,353)||-||-||-||(4,361)||-||(4,361)|
|Share Based Compensation||-||-||30,000||-||-||-||-||30,000||-||30,000|
|Loss for period||-||-||-||-||-||-||(1,349,920)||(1,349,920)||(16,816)||(1,366,736)|
|Currency translation difference||-||-||-||-||-||(517,690)||-||(517,690)||(2,957)||(520,647)|
|Loss and total comprehensive income for period||-||-||-||-||-||(517,690)||(1,349,920)||(1,867,610)||(19,773)||(1,887,383)|
|As at 30 September 2017||3,290,166||14,869,909||167,809||106,581||4,531,798||1,021,986||(5,641,239)||18,347,010||77,384||18,424,394|
|Non-controlling interest transfer of shares to Company||-||-||-||-||-||8,958||62,831||71,789||(71,789)||-|
|Loss for the period||-||-||-||-||-||-||(1,219,554)||(1,219,554)||(5,273)||(1,224,827)|
|Currency translation difference||-||-||-||-||-||(355,045)||-||(355,045)||(322)||(355,367)|
|Loss and total comprehensive loss for the period||-||-||-||-||-||(355,045)||(1,219,554)||(1,574,599)||(5,595)||(1,580,194)|
|At 31 March 2018||3,290,166||14,869,909||205,820||106,581||4,531,798||675,899||(6,797,962)||16,882,211||-||16,882,211|
|Loss for the period||-||-||-||-||-||-||(1,047,743)||(1,047,743)||-||(1,047,743)|
|Currency translation difference||-||-||-||-||-||107,922||-||107,922||-||107,922|
|Loss and total comprehensive loss for the period||-||-||-||-||-||107,922||(1,047,743)||(939,821)||-||(939,821)|
|At 30 September 2018||3,290,166||14,869,909||248,120||106,581||4,531,798||783,821||(7,845,705)||15,984,690||-||15,984,690|
The notes to the financial statement are available in the PDF download.
Page last updated: 4 December 2018