Strong revenue growth and reduced operating losses as momentum builds

IXICO plc (AIM: IXI), the digital technologies company serving neuroscience, today announces its final results for the year ended 30 September 2017.

Highlights

Commercial

Multi-year contracts in a broad range of neurological diseases to drive future top line growth

· $1.2m phase IIa clinical study in progressive supranuclear palsy ('PSP')
· $1.5m phase IIb clinical study in PSP
· Contract with Araclon Biotech for phase II clinical study in Alzheimer's Disease
· £1.2m phase II clinical study in Huntington's Disease
· $0.7m phase II clinical study in Huntington's Disease
· Expansion of existing phase II/III contract increasing total value from $6.8m to $7.7m

Financial

· Revenue of £4.1m (2016: £3.3m restated*) or 26% growth at transaction exchange rates
· Revenue of £3.7m (2016: £3.1m) or 20% growth at Project Exchange Rates ('PER')**
· Reduced operating loss of £1.9m (2016: £2.9m) combining commercially led growth with cost control
· Reduced loss per share of 5.7 pence (2016: 8.7 pence)
· Cash of £2.4m (2016: £3.1m)

Post year-end highlights

First biosensor contracts demonstrating continued commercial momentum

· £0.5m phase II clinical trial for a neurological disorder
· £0.8m late phase clinical trial for a psychiatric disorder

* An element of the foreign exchange gain previously reported in general and administrative expenses has been reclassified to revenue
** PER revenue is recognised from multi-year contracts with fixed Project Exchange Rates. PER revenue demonstrates the underlying performance of the business, excluding the impact of foreign exchange.

Giulio Cerroni, CEO of IXICO, said: 'I am pleased to report that in 2017, the business delivered robust revenue growth strengthened by the entry into a number of new commercial contracts in a broad range of neurological diseases. These multi-year contracts underpin our confidence in building further commercial momentum and I am excited about the goals we have set ourselves in our drive to achieve profitability. I look forward to the new year with confidence'.

Notice of AGM

IXICO also announces that its AGM will be held at 9.30am on 22 January 2018 at the offices of FTI Consulting, 200 Aldersgate Street, London EC1A 4HD. The full annual report and accounts will be posted to shareholders on 15 December 2017.

For further information please contact:

IXICO plc

Giulio Cerroni, Chief Executive Officer

Tel: +44 20 3763 7499

Susan Lowther, Chief Financial Officer

Shore Capital (Nomad and Broker)

Edward Mansfield / Anita Ghanekar

Tel: +44 20 7408 4090

FTI Consulting Limited (Investor Relations)

Simon Conway/Mo Noonan

Tel: +44 20 3727 1000

About IXICO

IXICO is the digital technologies company serving neuroscience. Our mission is to transform the pursuit of improving brain health through the application of digital technologies to neuroscience. IXICO's specialist data analytics services are used by the global pharmaceutical industry to select participants for clinical trials, assess the safety and efficacy of new drugs in development and in post marketing surveillance. Our neurological disease focus includes Alzheimer's disease, Huntington's disease, Multiple Sclerosis, Parkinson's disease and our integrated digital platform encompasses the entire drug development lifecycle. It is a scalable and secure infrastructure for the capture and analysis of regulatory compliant clinical data to enable sponsors to make rapid, better informed decisions. IXICO is also collaborating with partners to develop new companion digital health products targeted at improving patient outcomes.

To learn more about IXICO, please visit: www.IXICO.com

Chairman's Statement

Delivering shareholder return

I am pleased to report a strong performance with increased revenue and reduced operating losses. This has been a year of change and a renewed focus on our biopharmaceutical customers.

Board

We were delighted to welcome Giulio Cerroni as he joined the Board in the year. He has extensive experience in both scaling operations to build businesses and supplying sophisticated products and services to the pharmaceutical and research communities. In his first Chief Executive's report, Giulio has set out his strategy for accelerating commercially led growth.

Performance

The results for the year represent a positive first step on our path to profitability.

Revenue growth to £4.1 million (2016: £3.3 million restated*) represents 26% growth at actual exchange rates and underlying 20% growth on a Project Exchange Rate (PER) basis. PER represents the fixed foreign exchange rate applied to each individual customer project.

The revenue performance reflected an increased number of projects and new contract wins. Furthermore, the Assessa PML collaboration with Biogen expanded in the year as the project scope broadened to include pharmacovigilance reporting and the on-boarding of additional clinical sites to the pilot.

This momentum in top-line growth positively impacted gross profit which improved to £2.3m (2016: £1.6m restated*) which represents an improvement of £0.7m or 46%. The gross profit percentage increased by 8% to 57% (2016: 49% restated*). Importantly, the revenue growth was achieved without a commensurate growth in our cost base as the underlying operating expenditure (excluding non-recurring administrative expenses) reduced by £0.1m to £4.4m (2016: £4.5m restated*).

The operating loss reduced by £1.0m to £1.9m (2016: £2.9m) which reflects our objective of combining commercially led growth with appropriate cost control.

Net cash at 30 September 2017 was £2.4m (2016: £3.1m) reflecting careful cash management together with grant reimbursement and R&D tax credits received in the second half of the year.

Following the Group's change in its commercial focus and strategy, the value of the behavioural health technology, associated marketing know-how and commercialisation of the technology assets has been de-emphasised. Consequently, as at 30 September 2017, the foreseeable recoverable amount was estimated to be £nil (2016: £0.3m), resulting in an impairment loss of £0.3m for the year.

*An element of the foreign exchange gain previously reported in general and administrative expenses has been reclassified to recognised revenue. More details are set out in note 2 of the consolidated financial statements.

Key Performance Indicators (KPIs)

The KPIs used to monitor the business are financial and relate to revenue, gross profit, operating losses and cash resources as shown below:

KPI

2017 result

2016 result

Movement

Comments

Revenue at project exchange rate

£3.7m

£3.1m

£0.6m increase (20%)

Increased number of projects and a broadening biopharmaceutical customer base

Revenue at actual rates

£4.1m

£3.3m

£0.8m increase (26%)

Gross Profit

£2.3m

£1.6m

£0.7m increase (46%)

Increased revenue and operational efficiencies

Gross profit margin %

57%

49%

8% increase

Operating loss

£1.9m

£2.9m

£1.0m decrease

Improved gross profit performance, reduced underlying operating costs

Cash balance

£2.4m

£3.1m

£0.7m decrease

Reduced operating loss, receipt of R&D tax credits and reimbursement of grant expenditure

Revenue KPIs are reported at actual exchange and PER which demonstrate the underlying performance of the business, excluding the impact of foreign exchange.

The Board monitor progress on a regular basis and it is planned to establish other key performance indicators including operational and delivery KPIs reflecting our four core values:

· Technological and scientific Expertise which has been developed over the last 13 years,
· Innovativeand talented people,
· Driving Quality in business operations and practices,
· Conducting our business relationships with Integrity as a trusted partner of choice.

Outlook

We made demonstrable progress executing our business strategy in the year. We announced two new contracts in September and two new contracts post year end, which together with existing projects, means that we look forward with enthusiasm and confidence.

Our partnerships with biopharmaceutical companies demonstrate their trust in us as a partner and their interest in our digital technologies and services. We are particularly pleased with the progress made in our new wearable biosensors offering and believe that we are at the forefront of remote data capture of real world data.

We will continue to work closely with our customers, collaborators and business partners to realise our vision and would like to thank them as well as all our staff, shareholders and advisers for their continued commitment, enthusiasm and support.

Chief Executive's Statement

I was delighted to join IXICO in February 2017 as Chief Executive Officer, and I am pleased to share the goals we have set ourselves.

This has been a year of transition for the business. Having completed a strategic and operational review, we have defined our commercially led growth plan to deliver double-digit top-line growth. I am pleased to highlight that in 2017, the business delivered 20% organic revenue growth at Project Exchange Rate (PER), with currency gains resulting in reported revenue growth of 26%. PER represents the fixed foreign exchange rate applied to each individual customer project. This underpins our confidence in building further commercial momentum.

An attractive growth market

Starting with the market that we operate in, there are a number of macro and micro market factors, which support and influence our strategy for sustained growth. The global trend of rising life expectancy and an ageing population is unprecedented. The growing awareness and impact of this demographic shift on the global healthcare system is driving the need for effective, safe new medicines for people whose lives are, unfortunately, increasingly impacted by neurological diseases.

Against this backdrop, there is the continuous impact of technological advances, which could improve the efficiency of the drug development process and the way that medical care is delivered. IXICO's digital technology platform has matured to a point where we have demonstrated our capability, scale and experience to provide new technology led specialist services across all phases of drug development and into post marketing surveillance. We understand the evolving needs of our customers and are committed to provide highly differentiated and valued digital technology solutions.

The combination of these demographic, scientific and technological drivers provide a runway of commercial opportunities and growth for IXICO.

Targeting double-digit revenue growth

We have established a five-point growth plan led by our objective of delivering double-digit revenue growth:

1. Focus on delivering scale and operational excellence

2. Accelerate penetration of clinical trials market

3. Target later clinical phases

4. Innovate: Commercialise IXICO's proprietary digital technologies

5. Enhance organic growth through selective M&A

Our organic growth projections are based on our detailed analysis of how we can better leverage the commercial and scientific assets that IXICO has established as a trusted partner to the biopharmaceutical industry. Specifically, we have identified three key value segments where our technology platform and capabilities provide mission critical value:

· Selecting patients for clinical trials
· Assessing safety and efficacy in every phase of drug development
· Post marketing surveillance of marketed medicines

Our primary route to market will remain a direct contractual relationship with our biopharmaceutical customers. However, as a U.K. headquartered business, we will give further consideration to our partnering strategy to accelerate traction, with a particular focus on improving our commercial and operational reach in North America.

Commercialising new digital technology tools to accelerate growth

In the last two years, as part of a commercial collaboration with Biogen and including European clinical centres as part of a multi-territory pilot, we have made excellent progress in development of our Assessa PML companion technology platform in post marketing surveillance. The pilot was expanded during the year and since September 2017, we have been on-boarding sites in Germany, Netherlands and Spain, ahead of planning the roll out and deployment in 22 different countries.

I am also very pleased with our recent progress in expanding our services to include wearable biosensors as potential digital biomarkers to measure sleep disturbance. Here we are providing innovative new tools by combining our longstanding experience of compliant data collection and management with our new, proprietary artificial intelligence data analytics. Our approach is to be device neutral to ensure that our services utilise the most appropriate device for our customer's needs and build the value we derive from our proprietary algorithms. We recently announced our first commercial contracts for adoption in phase II clinical trials and have a healthy pipeline of identified opportunities. Our trusted partner position in providing specialist neuro-imaging services to both our current and new biopharmaceutical customers, means we are well placed to cross sell these highly valued new digital tools. I have identified this as an exciting new business area for IXICO to generate significant growth and further accelerate our commercially led growth plan on our path to profitability.

Management and organisation

I would like to thank Derek Hill for his support in the first months of my new role.

Our Company values of Expertise, Innovation, Quality and Integrity are demonstrated in many ways every day by our staff. The success of the business is built upon our ability to understand our current and prospective customer's needs and be responsive to changes in the market and competitive environment. We do this through our highly talented colleagues who support our customers in their quest to develop and provide safe, effective treatments to improve brain health. As such, we recognise that our greatest assets are our people.

Moving forward

Our mission is to transform the pursuit of improving brain health through the application of digital technologies. I am pleased with the momentum built in these early months and our five-point growth plan sets out how we will deliver on our commitment to our stakeholders.

Put simply, our growth strategy is based on building on our core strengths and growing our capabilities and technologies into every stage of the drug development process and into post marketing surveillance for neurological disorders. To support our commercially-led accelerated growth plan, we are investing in our operational delivery and innovation roadmap to commercialise new products and services to capitalise on the inflection point reached by digital health technology.

Along the path to profitability, my personal goal is to ensure that IXICO fully captures its entitlement to the value being created by disruptive digital health tools gaining adoption for remote patient monitoring in chronic health conditions.

Principal Risks and Uncertainties

We face a number of risks and uncertainties, which reflect the business environment within which we operate. We also face risks as we look to scale up our operational and commercial footprint.

The following are the principal risks and uncertainties that the Board considers could have a material impact on the Group's operational results, financial condition and prospects.

Financial

The Group has a history of operating losses, due to investment in new product development. The Group has a stated objective of a path to profitability, which depends upon the success of our products and services together with the execution of our commercial strategy. The Group carefully monitors costs and cash flow to ensure that the losses are commensurate with the Group's strategic plans and ensuring that the Group continues to operate as a going concern. The Group has instigated financial risk management policies and procedures in respect of financial instruments, which are set out in, note 23 of the consolidated financial statements.

There can be no guarantee that the grant funding or the Research and Development Expenditure Credit ('RDEC') will continue to be available to the Group, which could affect the level of investment in new product development.

Management and employees

The Group's success reflects our stated values and the contribution of key management and employees. The loss of key employees could weaken the Group's scientific, technical and management capabilities and negatively impact our business. It could also slow down the pace at which we can grow. All employees are on permanent employment contracts and the remuneration includes salary, pension and a performance related bonus. The Business Development team receive performance related sales commission. The leadership team and key individuals are granted share options in accordance with the IXICO EMI Share Option Plan 2014.

Industry and competition

A significant proportion of the Group's revenue is dependent on the biopharmaceutical industry and therefore there is a risk of reduced revenues resulting from the timing or reduction of expenditure by customers in this sector. Biopharmaceutical companies may change their strategic focus away from neurodegenerative diseases, which could negatively impact our accessible market. Clinical trials can be stopped at any time if the drug is deemed not effective or unsafe which could negatively impact the revenue derived from customer projects.

We face competition in this sector from larger companies or from consolidation in the market. We face continuous pricing competition from commercial service providers and academic institutions. As a technology services provider there is always the risk of new disruptive technologies that could render IXICO's technology uncompetitive.

We aim to strengthen our market position and sustain our competitive advantage by building collaborative, commercial partnerships. We have been successful in broadening our customer base and have invested in innovative technology and product development to build upon a long-standing expertise in Alzheimer's disease by broadening our therapeutic focus in neurodegenerative diseases.

Reliance on key customers

We value our customers and work closely with them to ensure that we meet their timelines, requirements and deliver a quality service. To maintain an equitable balance we continue to broaden our customer base to manage the risk of being overly dependent on any one customer. We have won new contracts with new biopharmaceutical customers, to mitigate this business risk.

Regulatory and compliance

We operate in a highly regulated environment and any change in that environment could negatively impact our growth strategy, revenues and path to profitability. We maintain oversight of potential changes and participate in collaborative consortia and industry bodies so that we can anticipate and manage change accordingly.

We have a project team in place to address the requirements of the General Data Protection Regulation ('GDPR'). This team is responsible for reviewing and updating our standard operating policies and procedures, as required, before the enforcement date of 25 May 2018.

Macroeconomic conditions

Like many companies we continue to monitor the impact of the United Kingdom's relationship with the European Union, particularly in respect of patent protection and data protection regulations within which we operate.

This year we have reported revenue at actual exchange rates and also project exchange rates to reflect the impact of foreign exchange movement. Most of our customer projects are multi-year contracts and include individual fixed project exchange rate mechanisms. Revenue reported at the fixed project exchange rates allows management to focus on the underlying performance excluding the impact of foreign exchange, which it cannot control.

We continue to closely monitor the impact of the movement of Sterling against other currencies in which we trade which include U.S. Dollar, Euro and Swiss Franc.

Intellectual property and proprietary technology

We actively seek to manage, develop and protect our intellectual property portfolio. Our technologies are based on software and data analytics, which are considered to be less of a barrier to competitors than other patents related to hardware devices. Copyright in the software incorporated into our products is a further form of potential protection.

We maintain business know-how and knowledge in our quality management system and standard operating procedures.

Financial review

The financial performance for the year ended 30 September 2017 was in line with expectations. The comparatives refer to the year ended 30 September 2016.

Revenue

Revenue for the period of £4.1 million (2016: £3.3 million restated) was generated from clinical trials services, preliminary revenues related to Assessa PML and licensing revenues from BioTelemetry Research (Cardicore &VirtualScopics).

The prior year restatement is due to a reclassification which is detailed in note 2 of the consolidated financial statements.

Other income

Other income comprised income from grants of £0.5 million (2016: £0.6 million) and RDEC of £0.1 million (2016: £0.1 million). The £0.1 million reduction in grant income reflected the completion of a project which had been ongoing in the prior year.

Operating expenditure

Operating expenditure in the year reflected investment in people and product development

· Research and development expenses of £1.3 million (2016: £1.6 million) were in line with Group's plans to innovate by improving existing products and investing in new product development.
· Sales and marketing expenses were unchanged at £0.8 million (2016: £0.8 million).
· General and administrative expenses of £2.3 million (2016: £2.2 million restated) were in line with expectations.

Non-recurring administrative expenses of £0.5 million (2016: £0.7 million) comprised intangible asset impairment charge, professional fees and reorganisation costs.

Taxation

The Group has elected to take advantage of the RDEC, whereby a company may surrender corporation tax losses incurred on qualifying research and development expenditure for a corporation tax refund. In addition, the Group has claimed research and development tax credits under the small or medium enterprise research and development credit scheme.

The corporation tax refund due for the year of £0.4 million (2016: £0.6 million) has been recognised as a current tax receivable.

Non-current assets

Non-current assets at 30 September 2017 included property, plant and equipment of £0.1 million (2016: £0.1 million) and intangible assets of £0.1 million (2016: £0.6 million). The net book value of the behavioural health technology and marketing know-how has been reviewed as part of the Group's commercial strategy and focus. As at 30 September 2017, the recoverable amount is estimated to be £nil, resulting in an impairment loss of £0.3 million (2016: £0.6 million) being recognised for the year ended 30 September 2017.

The Directors will continue to monitor the investment in IXICO Technologies Limited if the company's net liabilities continue to increase.

Current assets

Current assets at 30 September 2017 of £4.3 million (2016: £5.0 million) reflected a decrease in cash and cash equivalents to £2.4 million (2016: £3.1 million).

The Group holds all cash and cash equivalents in Sterling and U.S. Dollar accounts with institutions with a recognised high rating (typically AA or above) or with one of the major clearing banks.

Current liabilities

Total current liabilities at 30 September 2017 were £1.6 million (2016: £1.5 million).

Equity

Total equity of £2.9 million at 30 September 2017 (2016: £4.1 million) reflected additional accumulated losses of £1.5 million.

Cash flow

Operating cash outflows of £1.2 million in the year were offset by an inflow of £0.6 million from research and development tax credits. This resulted in a closing cash balance of £2.4 million (2016: £3.1 million).

Results and dividends

The Group's net loss after tax for the year decreased to £1.5 million (2016: £2.2 million).

The Directors do not recommend the payment of a dividend.

Financial risk management

The financial risk management and objectives of the Group are set out in note 23 of the consolidated financial statements.

Political donations

The Group made no political donations during the period (2016: £nil).

For the full RNS announcement, please click here.

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