RNS Number:4548H
Axis-Shield PLC
17 March 2000
Axis-Shield plc
Preliminary Results for the Year Ended 31 December 1999
Axis-Shield plc ("Axis-Shield") announces its preliminary results for the year
ended 31 December 1999.
Highlights
- Merger of Axis Biochemicals with Shield Diagnostics completed in May 1999
- Merger integration successfully completed with significant benefits
already accruing
- Several important distribution agreements signed during 1999/2000 with:
1999
Bio-Rad Laboratories for Activated Factor XII (AFT)
Abbott Laboratories for homocysteine
2000
Bayer Corporation for AFT and homocysteine
- Patents received for homocysteine and %CDT and US FDA 510k approval for
%CDT
- #4.5m acquisition of Medinor in October 1999 gives direct sales presence
in Scandinavia
- #22m acquisition of the diagnostics division of Nycomed Pharma in
February 2000 brings strength in point-of-care diagnostics market
- Project X now disclosed as Holo-Tc, a test used to measure levels of
cobalamin for the diagnosis of neurological and psychiatric disorders, as
well as anaemias, fatigue syndromes and common gastric disorders. (A
copy of the patent application is available on the Company's website -
www.axis-shield.com)
Commenting on the results, Svein Lien, Chief Executive of Axis-Shield, said:
"Axis-Shield has had an extremely active year and has made very considerable
progress during the period. The major highlight was the merger of Axis and
Shield which has been successfully integrated and which gives the Group real
critical mass in the in-vitro diagnostics market. We have also announced
several major partnerships for the distribution of our diagnostics kits and
two key acquisitions (Medinor and the diagnostics division of Nycomed Pharma)
to strengthen our presence in the sector. With the successes achieved over
the past twelve months, Axis-Shield is well placed to make further good
progress during the coming year."
Enquiries:
Axis-Shield plc Today: +44 (0) 772 0292152
Svein Lien, Chief Executive Officer Thereafter: +44 1382 422000
Jane Karwoski, Finance Director
Financial Dynamics Tel: +44 207 831 3113
David Yates / Sophie Pender-Cudlip
An analyst conference call will take place at 9.30am, please call Mo Noonan on
0207 269 7116 for further details.
CHAIRMAN'S STATEMENT
My first year as Chairman of Shield Diagnostics and then Axis-Shield has
coincided with a dramatic year of growth for the organisation. This period has
seen Axis-Shield emerge as a powerful new entity in global in-vitro
diagnostics with the capacity to deliver innovative products both to the
traditional laboratory market and to the developing near patient or point-of-
care sector.
During the first half of the year, we completed the merger between Shield
Diagnostics Group plc and Axis Biochemicals ASA to form Axis-Shield plc. This
created critical mass and consolidated our product portfolio with a
particularly strong position in the area of cardiovascular disease risk
prediction, and a highly talented and focussed R&D capability. Our strategy is
to develop proprietary new markers of real utility to both our direct end-user
customers and to the major players with global sales and marketing
organisations. We also intend to grow our presence in the burgeoning market
for rapid diagnostic testing at the time of patient referral/consultation.
This approach has already resulted in two acquisitions. In October, the
Company purchased Medinor AS, Norway's largest distributor of diagnostic
products and medical supplies. The acquisition provided Axis-Shield with a
direct sales force in Norway, our second home market, which complemented the
Company's existing direct sales force in the UK. In February 2000, Axis-
Shield strengthened its position in the point-of-care (PoC) market by
acquiring the diagnostics division of Nycomed Pharma AS. The division is one
of Europe's leading developers, producers and marketeers of PoC diagnostic
products. By merging its regional PoC sales forces into Medinor, the
acquisition will also facilitate the expansion of Medinor as a pan-
Scandinavian sales organisation.
Throughout this period of expansion, the Company has continued with the
commercialisation of its existing portfolio of innovative patent-protected
products for the laboratory market. It has entered into several important
license agreements for the development of new tests, received further patent
protection and key regulatory approvals for its existing novel analytes. It
has also entered into major commercial arrangements to adapt these markers
onto the widely placed high throughput instrumentation of the leading global
IVD companies. The most recent of these agreements was announced on March 1
2000 with Bayer Corporation to commercialise its two main value drivers, tests
for measuring homocysteine and Activated Factor XII, on Bayer Diagnostics'
diagnostics instrumentation. Importantly, Bayer also agreed to employ AFT in
clinical trials of its new statin, to assess drug efficacy in lowering
elevated levels of AFT and in the reduction of cardiovascular events in
various at-risk populations.
This latest agreement means Axis-Shield has collaborations in place with the
top three IVD companies in the world for homocysteine (Roche, Abbott and
Bayer) and with Abbott and Bayer for AFT. It is also selling both analytes
through Bio-Rad, another significant participant in the global market. Further
agreements can be expected, reflecting the growing enthusiasm for novel and
effective markers of cardiovascular risk, and Axis-Shield's strong
intellectual property position. The acquisition of Nycomed Diagnostics, now
known as Axis-Shield PoC, will facilitate the adaption of these value drivers
onto PoC platforms, as well as accelerating the penetration of Axis-Shield
into the fragmented but rapidly growing near patient arena.
Because of the merger in May, Axis-Shield has prepared its reports and
accounts using the principles of merger accounting. This means the accounts
and comparative figures of the two merged companies have been combined from
the beginning of each financial period (the full year for 1999 and the nine
months ended 31 December 1998). Shareholders will recall that we changed our
year-end from March to December as a result of the merger and the last audited
accounts were for the nine month period to 31 December 1998.
The financial performance of Axis-Shield during 1999 saw turnover grow to
#14.7 million, nearly a 100% increase from the #7.4 million turnover during
the nine month period ended 31 December 1998. The figure not only reflects
the wider mix of the Axis-Shield product offering but also the rapid growth of
one of our flagship products, homocysteine, representing 20% of our total 1999
turnover and continues to grow significantly.
The results for the year ended 31 December 1999 yielded an operating loss from
continuing operations of #6.8 million which includes exceptional costs of #1.8
million. After accounting for an additional #3.4 million of non-operating
exceptional costs, mostly associated with the merger and acquisitions, the
loss before tax was #9.9 million.
To enable Axis-Shield to maximise the opportunities available in the
laboratory and PoC sectors, the Company has reorganised its operating
structure. David Evans remains Deputy CEO and leads our laboratory
diagnostics division in both the UK and Norway. Olav Steinnes, who managed
Nycomed Diagnostics, leads our Norway-based PoC diagnostics division. Erling
Sundrehagen leads the R & D division which has facilities in both Dundee and
Norway. This division will continue to develop analytes for both laboratory
and PoC formats. Njaal Baardson, who joined us as a result of the
acquisition of Medinor AS, will lead our Nordic region direct sales force.
These business division leaders and the Finance Director will report to Svein
Lien, our Chief Executive Officer. Together this group forms our Executive
Committee which is represented on the Axis-Shield Board of Directors by Svein
Lien, Erling Sundrehagen and David Evans, along with the Finance Director. We
intend to introduce a new medium-term option scheme and shareholders will be
asked to approve this at an Extraordinary General Meeting to be held on the
same date as the Annual General Meeting.
Jane Karwoski, our Finance Director, has resigned from the Company and will be
leaving towards the end of April. We are sorry to lose her and thank her for
her contribution to Axis-Shield. We wish her well in her new position in
charge of a dot com company.
After many years of serving on The Axis-Shield Board of Directors, Peter
Smedvig has decided to step down as a non-executive director at the
forthcoming AGM. We thank Peter for his advice and support during the
Company's period of development and growth.
With a solid corporate strategy and effective operational structure in place,
new analytes and diagnostic test formats under development and key commercial
contracts signed, I am confident of future progress. We continue to make
investments in R&D and Sales and Marketing, and therefore we expect to report
operating losses during 2000 but at a continually reducing level. Thereafter
our revenue stream should reflect substantial market penetration of our key
products and we expect to report sustainable and increasing profitability. I
look forward to continuing to report on our achievement of strategic
objectives and focussed expansion, which I believe the current management team
is well placed to deliver. We believe healthcare providers are becoming
increasingly aware of the value of early and accurate diagnosis in disease
management and that potential cost savings in identifying a disease process in
advance of symptomatology and hospitalisation will represent an important
consideration in future health care economics.
Nigel Keen
Chairman
FINANCIAL REVIEW
Axis-Shield has prepared its accounts under merger accounting principles,
which means that the accounts are prepared as if Axis Biochemicals AS and
Shield Diagnostics Group plc had been merged throughout the year and the
comparative period. In other words, the profit and loss statements, balance
sheets and cash flows of the companies are combined from the beginning of the
financial period in which the merger occurred and in the period reported in
these financial statements.
The following review of Axis-Shield highlights the financial results for the
year. However, due to the Company's change in year-end, which occurred during
1998, we cannot provide direct, audited comparative information on a year for
year basis.
Turnover for year ended 31 December 1999 was #14.7 million as compared to the
nine-month figure for the period ending 31 December 1998 of #7.4 million. For
a better understanding of the turnover during the year, the following two
tables break down turnover by disease area and geographically.
Turnover by disease area
Year to 9 Months to
31 Dec 99 31 Dec 98
Total Total
#'000 #'000
Cardiovascular 3,062.3 1,608.3
Autoimmune 2,325.7 1,351.0
Infectious Disease 3,118.6 1,973.4
Alcohol-Related 1,216.4 452.8
Distributed Products 3,988.9 761.7
TTP 927.1 1,124.6
Other 23.2 105.3
______ ______
14,662.2 7,377.1
______ ______
Geographical Break down of Turnover
Year to 9 Months to
31 Dec 99 31 Dec 98
#'000s #'000s
UK 2,035.3 1,431.0
Norway 3,227.5 79.4
Rest of Europe 4,641.0 2,413.2
North America 2,580.5 1,499.5
Rest of World 2,177.9 1,954.0
______ ______
14,662.2 7,377.1
______ ______
The table providing the break down by disease area shows that the Company's
turnover reflects the increasing importance of sales from diagnostic tests for
cardiovascular disease risk assessment. These sales accounted for 21% of
turnover for the year.
Gross profit for the year ended 31 December 1999 was #4.8 million as compared
to the nine-month figure for the period ended 31 December 1998 of #3.0
million. Gross margins were impacted by the strength of sterling and a change
in product mix. There have also been increases in the fixed overhead base
involving the expansion of our premises in both Dundee and Oslo that has
impacted margins.
Operating expenses for the period were #9.8 million (the nine-month period to
31 December 1998: #5.1 million). This figure reflects the planned increase in
spending on marketing costs and the commercialisation of our two leading
cardiovascular disease products, tests to measure Homocysteine and Activated
Factor XII, and on new product development, all of which will have a positive
impact on future revenue flows. Administrative costs also rose as a result of
the expansion of our premises in Oslo and new headcount particularly in
manufacturing in Oslo.
The total net operating expenses also include exceptional items of #1.8
million. In part these relate to compensation to senior executives in respect
of changes required as a result of the merger to option schemes in place in
each Company. The remainder of the exceptional costs relates to the investment
the Company made during the year in A/C Diagnostics LLC. A/C Diagnostics has
been accounted for as an investment reflecting the fact that the option
agreement to acquire a further 40% expires in March 2001. It is unlikely the
option will be exercised and in that case, the Group's initial investment
would be repaid at 50 per cent of the initial cost.
The increased costs resulted from the Group's planned investment in the
continued R&D, commercialisation and marketing of its novel products during
the year have meant an operating loss of #5.0 million as compared to #2.0
million during the nine months to 31 December 1998 before exceptional items.
Further non-operating exceptional charges amounted to #3.4 million, the
majority of which were transaction expenses from the merger. Net interest
receivable amounted to #353,300 (for the nine-month period to 31 December
1998: #168,500). There was a taxation credit during the period amounting to
#241,200 (taxation credit of #21,500 in the nine-month period to 31 December
1998) bringing the loss for the year to #9.6 million as compared to the loss
for the nine-month period to 31 December 1998 of #7.0 million.
Axis-Shield's tangible fixed assets at 31 December 1999 were #2.8 million (at
31 December 1998: #2.6 million). The Company's intangible assets increased
during the year as a result of the goodwill arising on the acquisition of
Medinor AS.
Stocks at 31 December 1999 were #3.7 million (at 31 December 1998: #2.1
million) which reflects the minimum holding of raw material in both our Dundee
and Oslo facilities required by certain of our major customers. Debtors at 31
December 1999 include #800,000 of costs relating to the acquisition of Nycomed
Diagnostics.
The cash position at 31 December 1999 was #9 million (at 31 December 1998: #6
million). The cash figure includes money raised from the rights issue in July
1999 but does not reflect the #7.3 million raised in February 2000 through a
cash placing at the time of the acquisition of the diagnostics division of
Nycomed Pharma AS. The proceeds of the rights issue were used to pay the
balance of expenses relating to the merger and the purchase of shares not
accepted under the voluntary offer. The funds raised in cash placing were
used for acquisition expenses and the remaining balance is to be used for the
future expansion of the Group.
The reserves and merger expenses now being reported have changed from the
figures previously reported in the interim statement. Some of the estimates
for merger related items used at the time of preparing the interim report were
based on the best estimates at that time, including estimates of prior year
analyses as the two merging companies did not have co-terminus year-ends.
Looking forward, a number of factors have been identified which could affect
the Group's financial and business performance in 2000. These are highlighted
below:
- The timing of revenue flows for new products is dependent upon those
products meeting the design control specifications of our major OEM
customers. The Group has no control over such processes.
- The Group is committed to the improvement of its management information
systems and in February 2000 began the introduction of an Oracle
Enterprise Resource Planning (ERP) System. The amount contractually
committed during at the year-end was approximately #315,000.
- Research and development spending will increase as a result of the work
required to adapt the Group's novel analytes to the instrumentation
platforms of our major OEM partners as well as the necessity to modify
our HbA1c PoC product in order to achieve CLIA-waived status.
- The increased regulatory climate both within the US and Europe will
result in additional and on-going expenditure relating to validation.
- Increased costs associated with the implementation of CE marking of the
Group's products in relation to the European IVD Directive that becomes
effective in June 2000.
- The non-recurring costs associated with the transfer of certain
production from Oslo to Dundee.
- The Group is currently engaged in a number of commercial discussions
relating to not only its leading products but also to a novel technology
transfer opportunity related to therapeutic drug monitoring. It is not
possible to anticipate the outcome of such discussions but if positively
concluded, they will impact revenues during the year.
Consolidated Profit and Loss Account
For the year ended 31 December 1999
Before
Exceptional Exceptional
Items Items Total Total
(figures presented Year Year Year 9 Months
in #'000s) to to to to
31 Dec 31 Dec 31 Dec 31 Dec
99 99 99 98
Turnover
Continuing operations 11,497.5 11,497.5 7,377.1
Acquired operations 3,164.7 - 3,164.7 -
Group turnover 14,662.2 - 14,662.2 7,377.1
_______ ______ _____
_______ ______ _____ _______
Total Gross Profit 4,752.0 - 4,752.0 3,035.5
______ ______ _____ ______
Operating Expenses
Exceptional
- merger costs - (1,278.9) (1,278.9) -
Exceptional
- provision for
investment - (538.0) (538.0) -
Exceptional
- depreciation
of acquired R & D - - - (5,179.5)
Other operating
expenses (9,796.6) - (9,796.6) (5,068.1)
______ ______ _____
Net operating (9,796.6) (1,816.9) (11,613.5) (10,247.6)
expenses ______ ______ ______ ______
Operating loss
Continuing (5,020.1) - (6,837.0)) (7,212.1)
operations
Acquired operations (24.5) - (24.5) -
Group operating loss (5,044.6) - (6,861.5) (7,212.1)
Share of and associate
operating profit 11.8 - 11.8 -
______ ______ ______ ______
Operating loss
including associate (5,032.8) - (6,849.7) (7,212.1)
Exceptional - merger
transaction costs - (3,370.6) (3,370.6) -
______ ______ ______ ______
Loss on ordinary
activities before
interest (5,032.8) (5,187.5) (10,220.3) (7,212.1)
Net Interest receivable 353.3 - 353.3 168.5
______ ______ ______ ______
Loss on ordinary
activities before
taxation (4,679.5) (5,187.5) (9,867.0) (7,043.6)
Taxation credit on
ordinary activities 241.2 - 241.2 21.0
______ ______ ______ ______
Loss for the year (4,438.3) (5,187.5) (9,625.8) (7,022.6)
______ _______ _______ ______
Loss per Ordinary 35p
Share
Basic (23.48p) (18.56p)
Diluted (23.31p) (18.33p)
Balance Sheet
At 31 December 1999
Group Group
(figures presented in #'000s) 31 Dec 99 31 Dec 98
Fixed Assets
Intangible 2,108.0 437.7
Tangible 2,796.6 2,639.4
Other investments 403.3 -
______ ______
5,307.9 3,077.1
Current Assets
Stocks 3,662.6 2,072.4
Debtors 4,982.2 6,251.9
Cash at bank 9,007.0 5,972.7
______ _______
17,651.8 14,297.0
Creditors: Due within one year 6,022.0 4,774.9
______ ______
Net Current Assets 11,629.8 9,522.1
______ ______
Total assets less
current liabilities 16,937.7 12,599.2
Creditors: Due after one year 445.2 499.3
______ ______
Net Assets 16,492.5 12,099.9
_______ _______
Capital and Reserves
Called up share capital 14,765.9 13,319.4
Share premium account 21,271.6 8,825.2
Capital redemption reserve 244.1 244.1
Merger reserve 13,917.1 13,917.1
Profit and loss account (33,706.2) (24,205.9)
______ ______
Equity shareholders' funds 16,492.5 12,099.9
______ ______
Consolidated Cash Flow Statement
For the year ended 31 December 1999
Year 9 Months
(figures presented in #'000s) to to
31 Dec 31 Dec
99 98
Net cash outflow from
operating activities before
reverse lease premium received (4,809.2) (2,070.1)
Reverse lease premium received - 432.5
______ ______
Net cash outflow from
operating activities (4,809.2) (1,637.6)
______ ______
Returns on investments and
servicing of finance
Interest received 467.0 213.4
Interest paid (113.7) (44.9)
______ ______
Net cash inflow from returns
on investments and servicing
of finance 353.3 168.5
______ ______
Taxation - (9.7)
Capital expenditure and
financial investments
Purchase of tangible (958.5)
fixed assets (597.8)
Purchase of intangible
fixed assets (38.6) (5,477.6)
Proceeds of sale of tangible
fixed assets 25.9 24.1
______ ______
Net cash outflow from capital
expenditure and financial
investments (610.5) (6,412.0)
______ ______
Acquisitions
Purchase of subsidiary
undertakings (5,390.7) -
Cash acquired with
subsidiaries 693.5 -
_______ ______
Net cash outflow from
acquisitions (4,697.2) -
______ ______
Net cash outflow before
use of liquid resources
and financing (9,763.6) (7,890.8)
Management of liquid
resources (580.0) -
Financing
Proceeds of share issues 12,982.6 9,390.2
Hire purchase repayments (131.7) (43.9)
______ ______
Net cash inflow from
financing 12,850.9 9,346.3
______ ______
Increase in cash 2,507.3 1,455.5
______ ______
Statement of total
recognised losses
Total recognised losses
after tax for the financial
period (9,625.8) (7,022.6)
Exchange loss (101.0) (62.9)
______ ______
Total recognised losses
relating to the year (9,726.8) (7,085.5)
Notes:
1. The profit and loss account, balance sheet and cash flow statement are an
abridged version of those that will appear in the Group's Annual Report
for the year ended 31 December 1999. The Report will be sent to
shareholders and will be made available for members of the public at the
Group's registered office, The Technology Park, Dundee DD2 1XA and on our
web site, www.axis-shield.com.
2. The loss per ordinary 35p share is calculated on the loss for the period
divided by the weighted average number of shares in issue during the
period (40,378,543) (31 December 1998: 37,584,248). For diluted losses
per share, the weighted average number of shares in issue is adjusted to
assume conversion of potentially dilutive ordinary shares (40,661,478)
(31 December 1998: 38,038,089).
END
FR GUUGGWUPUPWQ
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