Genedrive PLC (GDR.L) Audited Final Results

genedrive plc (AIM: GDR), the near patient molecular diagnostics company, announces its audited Final Results for the year ended 30 June 2021.

Financial Highlights

· Revenue for the year to 30 June 2021 £0.7m (2020: £1.1m)

· Loss for the year of £0.7m (2020: £19.4m loss)

· Year-end cash of £2.6m (2020: £8.2m)

· Balance sheet debt free following conversion of £2.5m Loan Notes

· Unaudited cash of £7.3m at 31 October 2021 after successful equity fundraise of £7.1m (gross) announced in September 2021

Operational Highlights

· Antibiotic Induced Hearing Loss trials successfully completed in June 2021 with 750 babies tested, accuracy confirmed at 100% and Key Opinion Leader launch ongoing

· Post year end new Genedrive® system CE marked and product launched 29 September 2021

· Mountain Horse Solutions appointed as specialist US military distributors in March 2021 to drive US military adoption

· Point of care COVID-19 studies to support final CE submission stage due to complete imminently

David Budd, CEO of genedrive plc, said: “We are at an exciting phase for the Company with both the AIHL and CoV-POC products about to enter their commercial stages. Our balance sheet is strengthened following the recent equity raise and we are well placed to drive shareholder value going forwards.”

For further details please contact:

genedrive plc

+44 (0)161 989 0245

David Budd: CEO / Matthew Fowler: CFO

About genedrive plc ( http://www.genedriveplc.com )

genedrive plc is a molecular diagnostics company developing and commercialising a low cost, rapid, versatile, simple to use and robust point of need molecular diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications. The Company has assays on market for the detection of HCV and certain military biological targets. The Company recently released a high throughput SARS-CoV-2 assay and has a point of care version of the SARS-Cov-2 test due on market during 2021.

Chairman’s Statement

Resilient and innovative

The Company is well funded and at an exciting stage with the imminent launch of two new products.

During the past 12 months our development focus was on creating our POC COVID-19 test and completing the trials on our AIHL product. We are poised at an exciting position on both. 2020 did however bring challenges around sales of our high throughput COVID-19 test. Our commercial activities have been focused on seeking market opportunities for this COVID-19 test as well as our Military assays.

On Market Performance

It’s appropriate that I first address our high throughput COVID-19 test that was the foundation of our equity raise in May 2020. We decided in early 2020 to bring a COVID-19 assay to market to capitalise on the emerging demand for PCR testing during the pandemic. The product, the Genedrive® 96 SARS CoV-2 Kit, was CE marked in May 2020 and during the summer of 2020 we sought regulatory approvals in various territories. We had high expectations for the product that performed well in independent studies, but our commercial traction fell short of our expectations. In hindsight our product was too late to the market to benefit from the rapid wave of regulatory approvals, despite the subsequent engagement of Beckman Coulter Life Sciences. The Company had focused on the US market owing to the commercial nature of that market, the high reimbursement rates and the number of private labs. Our distribution agreement with Beckman Coulter in late 2020 was designed to engage that market however without FDA ‘Emergency Use Authorisation’ customers were unwilling to use non-authorised product, when other authorised products were available in the market. As such, we were unable to make any material progress in the US market. Looking forwards we see small pockets of demand globally and as we enter the winter months we are hopeful for additional sales. We are disappointed with falling short on expectation with this new product, but are taking the lessons learned into our commercial plans for our POC COVID-19 product.

The remainder of our revenues in the period came from our Military assays, sold to the US DoD. Our product for the DoD was initially developed in 2015 and we successfully incorporated their requirements to the Genedrive® unit. When the development ended in 2020 we moved to a commercial arrangement. Mountain Horse Solutions were appointed in March 2021 to support this commercial stage. Revenue in the year was £0.3m (2020: £0.4m) and we are working with Mountain Horse to try and successfully close the indictive order opportunity (previously announced as approximately 500 units over three years). We remain hopeful for this assay set in the medium term.

Development Update

AIHL; we developed our Genedive® MT-RNR1 ID Kit in 2019 with funding from the National Institute of Health Research, and the assay’s performance trial commenced at two Manchester neonatal settings in 2020. Despite extensions to the trial duration owing to COVID-19, our partners in the NHS worked throughout the pandemic and completed the study in June 2021. The study demonstrated that the test performed very well and can be accommodated in the care processes for urgent admissions prior to administering antibiotics. Various practical outputs from the trials were incorporated in the new Genedrive® system that was CE marked on 29 September 2021. We are now moving into the commercial stage with key opinion leader launches across a small number of sites in the Autumn of 2021, followed by a targeted site commercial plan in the new calendar year. We are complimenting Inspiration Healthcare’s capabilities with targeted investments in our own business development team. The unique AIHL assay is new to the market and we will be proactive in promoting and educating clinicians and creating reimbursement/payment opportunities where needed, and see this investment in our own team as the best way to take ownership to drive adoption.

CoV-POC; at the same time as the opportunistic development of a high throughput Coronavirus test in 2020 we announced the planned introduction of a POC COVID-19 test to exploit fully the opportunity for molecular testing for COVID-19. The Board sees the creation of a POC COVID-19 test on the Genedrive® as an excellent opportunity to exploit the fast, small and simple to use characteristics of our genedrive technology platform. Development began in late 2020 following the launch of the high throughput test. The product has a number of key competitive advantages that when taken together, we believe provides a very compelling product. We expect to complete the clinical studies imminently, after some delays in collecting clinical samples to support our studies. With positive performance data, we would then apply for CE marking, a process that now takes approximately two weeks. Following this we will begin the commercial plan, and will be looking to sell the system to testing providers. The Company will continue to recruit and test clinical samples to meet the new and expanding requirements on the UK’s DHSC. Based on preliminary interest received to date we are confident that we can make inroads into this market opportunity and generate attractive revenues in the short term and will provide shareholders with further updates in due course.

Governance and People

It is vital to focus on governance and control during periods of rapid change and the Board has continued to review its governance framework to ensure that internal controls, values and culture align with our strategy and the objectives of the Company.

The Board remains focused on ensuring the effectiveness of the governance processes in the Group and that of its own performance. We will continue to review its effectiveness and believe we have a Board that appropriately reflects our strategy and ambition.

Funding

We completed a placing and open offer in early October 2021. The net proceeds of £6.6m extend our cash runway into 2023 using a prudent forecasting basis that excludes all material revenues and position us well to successfully launch our two POC products. Clearly generation of material revenues will further extend the Group’s cash runway.

Outlook

Our short term outlook is centered on the launch of two POC products: AIHL and CoV-POC.

The AIHL product is being launched in the Autumn of 2021 with appropriate short term expectations. We expect the assay to generate sales immediately and have targets for the number of settings that we will drive with Inspiration Healthcare. We expect reasonable penetration in the UK and the EU building on our pilot site in Greece. The true ramp in revenue will arrive when the product is written into UK care guidelines and we are working with our commercial and NHS partners to educate and promote these new capabilities to achieve this. We are also actively assessing opportunities for the AIHL test beyond the UK and will build a go to market strategy for these territories.

For CoV-POC we are truly excited by the potential of the product to make a short term impact. The expectation is that molecular testing will continue to move away from mass testing sites and more towards faster point-of-care testing, closer to the sample. While we still need to finalise the CE marking process and launch the product, we believe our product profile is well positioned to capture this shift in requirements. As we learn to live with COVID-19, we believe this demand will continue for a considerable period of time and we will continue to maintain focus on commercialising our rapid point-of-care solution. Despite the continued use of lateral flow tests in the UK, given the published limitations of lateral flow COVID-19 tests, we still believe there is a significant market for molecular tests offering highly accurate results within rapid timescales both abroad and in the UK.

Outside of these two new assays there remains potential from our COVID-19 high throughput, Military and to a lesser extent HCV products. Each has the potential to provide attractive revenue streams in the short term, but without further clarity from customers our forecasts remain prudent. We expect HCV to provide a stream of revenue, but without funding to the developed world markets we do not foresee significant growth in the medium term. The Military assay set will continue to be promoted by Mountain Horse and we have moderate expectations from the opportunities they are identifying. The large sales opportunity for the product remains the fielding order of approximately 500 units over three years that the customer indicated in early 2020 – we expected the customer to decide on this procurement early in the new calendar year.

With the balance sheet strengthened by the post year end fund raise, our medium term strategy is around our new POC products and with a successful launch of the CoV-POC system we could generate sufficient cash to support the business until such time when we expect the AIHL product to be written into care guidelines. Once AIHL gains traction and momentum I believe we have the potential to grow the Company rapidly on the back of this niche, high margin assay. It has been a difficult period but I see the launch of our two new assays as pivotal for the future growth of the Company.

Dr Ian Gilham

Chairman

8 November 2021

Chief Executive’s Review

Two exciting POC products at launch phase

Overview

Our AIHL test performed well in clinical trials and is now at its launch phase. And our second COVID-19 product, a Point-of-care solution, is expected to come to market approximately at the same time as AIHL with a set of very attractive performance features that we believe will be differentiated in the market and see significant demand.

It has been a disappointing year for revenues and we have been unable to achieve the commercial traction on our high throughput COVID-19 test that we anticipated. There are a number of reasons for the performance and where relevant we are taking these issues forwards to focus and refine the launch of our new products.

Performance

In 2020 following the rapid shift of global healthcare systems towards testing and treatment of COVID-19, the Company made the strategic decision to develop two SARS-CoV-2 tests to detect active COVID-19 infections. The first test was a high throughput laboratory test and the second test a point-of-care test that will run on the Genedrive® instrument.

The high throughput test was CE marked in May 2020 and we commenced modest commercial sales in June 2020. Following the launch we saw the US market as key and applied for FDA emergency use authorisation (EUA) and outside of the US we focused our commercial attention on larger, more strategic opportunities that by their nature are higher risk. After applying for the FDA regulatory approvals in the US we began working with Beckman Coulter to validate their extraction chemistry with saliva and contracted with them to distribute our product shipping an initial £0.3m, which was a significant commendation for genedrive and our product. Despite the backing of Beckman, there was limited sales traction in the US without FDA EUA with customers unwilling to use unauthorised product when those earlier to the market were able to supply fully approved tests – it is our belief that once the FDA had sufficient approvals to supply their market there was little incentive for the regulator to approve more tests for the US market. Our application has not been approved or rejected so we believe our test sits in abeyance, along with many others, despite our continuous and ongoing requests to the FDA. Similarly, our application to the WHO had a preliminary review, but Emergency Use Listing has not yet been received.

Despite encouraging early interest, our opportunities in India were undermined by in-market pricing that saw supply at a level close to our cost of goods. With the previously announced European Ministry of Health opportunity, discussions slowed over the summer months and despite being very positive on this opportunity in early 2021 it looks increasingly unlikely this will come to fruition. Looking to the future we do see small pockets of demand in Africa and we are hopeful for more demand as winter approaches – however we are clearly disappointed with progress made on the high throughput test and we are putting our experiences from this launch into our AIHL and CoV-POC tests.

During the year revenue to the US DoD was £0.3m (2020: £0.4m). The five year development project completed in 2020 bringing to an end the great development relationship we had with the US DoD team. However, now in need of building commercial relationships in the US market, we appointed Mountain Horse Solutions as our exclusive distributor in the US in March 2021. Mountain Horse have existing framework agreements, military contacts and a breadth of experience in the specialised field of Chemical, Biological, Radiological, Nuclear, and high yield Explosives (CBRNE) and interact with the DoD on a frequent basis. Since March 2021 we have been involved in a number of tenders and requests for information developed by Mountain Horse. Mountain Horse have also been following up on the indicative order that was previously announced as a potential of 500 units over three years. There have been COVID-19 delays on this procurement and we are expecting a decision early in the new calendar year. Having Mountain Horse on the ground and close to the customer has been a very positive development and we are confident this new arrangement can help grow our DoD business.

Two POC products at launch

Antibiotic Induced Hearing Loss

In partnership with NHS clinicians, in 2019 we developed a POC test for the prevention of hearing loss in new-born children when exposed to certain antibiotics. We commenced performance trials of that test in 2020 and the peer reviewed trial results are due to be published shortly. The trial enrolled 750 babies and was a success, demonstrating that the test can be accommodated in the current admission pathways and timescale.

At various stages in the trial we took feedback from nurses as to how the system was configured and operated and incorporated this feedback into a new version of the Genedrive® instrument platform. These changes are mainly ergonomic, providing a larger screen, integrated tablet and a modular ‘single unit’ look. A change was also made to the buffer chemistry of the kit. This product was CE marked on 29 September 2021 and is being launched on a targeted basis in the UK and Ireland with full commercial roll out planned for the new calendar year. In addition to our trial settings we expect a number of sites to adopt the product in the short term, but growth is anticipated to be modest until the test is written into paediatric care guidelines – something we will continue to push as a matter of urgency. To support our UK distributor, Inspiration Healthcare, we are investing in a small business development team to promote, market and drive the product. Inspiration Healthcare have excellent neonatal contacts but we want to supplement their skills with expertise in molecular diagnostics. Once UK care guidelines are updated we expect adoption to be more rapid as this would virtually mandate use of the test in the UK. This process may take a year or more to complete but clearly attaining it as soon as possible is a key objective for the Company and our commercial partner.

The market is potentially very attractive as it has high barriers to competitive entry, is high margin and is a large opportunity relative to genedrive’s size. This opportunity is also well suited to the Genedrive® instrument, where a few, low-cost units can deliver fast testing at a point of need. Our medium term goals are focused on the UK and EU and we will continue to assess FDA entry for AIHL into the US. We remain very excited about the medium term prospects of the product.

CoV-POC

In early 2020 we made the decision to bring two COVID-19 assays to market, a high throughput test designed for use on third party machines and a POC test to run on Genedrive®. The POC product builds on the key characteristics of the Genedrive® being small, easy to use and economic for wide adoption.

Initial development was delayed as we attempted to produce a test on both saliva and nasal swab samples. We decided to bring a first version of the product to market and then review the need for a saliva based test in the future. We are due to bring our swab based testing product to the market in by the end of the calendar year with CE mark due around two weeks after finalising ongoing clinical studies which we expect imminently. The test benefits from a simple viral extraction free workflow, is rapid to report a positive (in as little as 10 minutes) and is anticipated to be as accurate as other gold standard molecular tests.

While first to market opportunities are significant, the underlying qualities and reliability of a test are also of significant importance. I therefore believe that customers are looking for accurate validated products and that the advantages of being deployable and rapid, mean we can address a global market flexibly with the Genedrive® device. Its collective features we believe make it unique among its competitors. To date we have received a good degree of interest in the development product and intend to partner with test providers as soon as clinical data and CE marking are complete. The product will be positioned to opportunities where speed and accuracy are a necessity and where there is a need to pay the premium pricing associated with molecular testing vs antigen testing. The primary focus will be the UK and EU owing to the expected CE mark status. We have a high degree of confidence that a point-of-care COVID-19 testing opportunities will be a critical part of controlling the pandemic for a considerable period of time. We remain fully focused on exploiting the commercial opportunities arising on testing for both assays.

Outlook

Following completion of the £7.1m (gross) fund raise announced in September 2021 we are now in a strong position to launch our two new exciting POC products. There is potential for our high throughput COVID-19 test to generate some demand in the winter months and we are hopeful of a successful outcome on the indicative order with the US DoD however our current key commercial assets are with CoV-POC and AIHL, with the short term strategy for CoV-POC to support the cash requirements of the business until AIHL is sufficiently embedded in clinical process that uptake ramps aggressively. This strategy and our knowledge of these POC products provide us with confidence that we will deliver strong growth and increased shareholder value going forwards.

Read More

David Budd

Chief Executive Officer

8 November 2021


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