Third consecutive profitable quarter with continued strong growth

Transcription

1 Interim report for the period 1 January 30 September 2015 Announcement No. 10/2015 To NASDAQ Copenhagen Exiqon A/S Skelstedet Vedbæk Denmark 26 October 2015 Phone: Fax: exiqon@exiqon.com Third consecutive profitable quarter with continued strong growth Exiqon A/S (NASDAQ OMX Copenhagen: EXQ ) today announced results for the third quarter and first nine months of 2015: Q3 YTD Q3 YTD Q3 YTD Financial Highlights (DKK million) Q Q Q3 change change Revenue % % Gross profit % % EBITDA % % EBIT % N/A Net profit % % Cash flows from operating activities N/A N/A Summarized financial numbers are compared to full year outlook on p.3. Revenue highlights Exiqon successfully continues to execute its growth strategy towards becoming the leading provider of flexible solutions for RNA analysis by leveraging existing capabilities and capture new markets. RNA services and product sales (excluding OEM) are the key drivers for Exiqon s growth. In the third quarter products and services sales increased 17% to DKK 30.7 million (DKK 26.3 million): o Products sales offer high potential for growth as Exiqon increasingly targets new sizable markets for RNA sequencing and RNA functional analysis. At the end of the second quarter, Exiqon launched a new advanced qpcr product portfolio, ExiLERATE, for real-time PCR detection of mrna and lncrna as part of the XploreRNA initiative. In the third quarter, product sales increased 29% to DKK 24.7 million (DKK 19.1 million). o Services pave the way for the development of new proprietary products. The Company s current capacity for RNA sequencing services is already fully booked until year-end. In the third quarter, however, sales decreased 17% to DKK 5.9 million (DKK 7.1 million) due to a seasonal short fall in qpcr services. Other income include license income and grant funding of Exiqon s development of novel diagnostics within prostate and colorectal cancers that hold promise of transforming current healthcare practices and improve patient care. In the third quarter other income decreased 12% to DKK 4.5 million (DKK 5.1 million). Operational highlights Exiqon today provides an update on the diagnostic programs that were recently exclusively licensed from Aarhus University Hospital, Department of Molecular Medicine (MOMA); The sales channel will be commercially marketed beginning next month following a significant update and new functionality. In a comment CEO Lars Kongsbak said: I am extremely pleased with the 29% strong growth in our product sales this quarter following recent product launches. We are also excited about beginning marketing of the platform next month, which will help position our products for validation of NGS data. Feedback from our first customers has been overwhelmingly positive and we have high expectations to this innovative new sales channel targeting RNA sequencing customers. Exiqon maintains its full year guidance of revenues of DKK million and EBITDA around DKK 10 million based on an average USD/DKK exchange rate of DKK 6.50.

2 KEY FIGURES AND RATIOS EXIQON GROUP (UNAUDITED) (DKK 000 except key figures and ratios) Basic and diluted EPS have been calculated in accordance with IAS 33 Earnings per share. Other ratios have been calculated in accordance with Recommendations & Financial Ratios 2015 issued by the Danish Society of Financial Analysts, dated April (*) EBITDA (defined as Earnings Before Special Items, Interest, Tax, Depreciation and Amortization) includes non-cash costs of share-based payment of tdkk 829 in the first nine months of Income statement Revenue 38,364 34, ,402 98, ,392 Production costs -14,920-14,009-41,190-34,939-47,193 Gross profit 23,444 20,816 74,212 63,079 85,199 Research and development costs -7,459-5,977-23,511-19,115-26,283 Sales and marketing costs -10,736-9,991-34,867-30,892-43,087 Administrative costs -3,940-4,025-12,754-13,305-18,911 EBITDA *) 3,131 2,522 8,366 4,230 3,107 Operating profit/(loss) (EBIT) 1, , ,082 Profit/(loss) for the period 618 1, ,780 Total Comprehensive profit/(loss) for the period 727 1,742 1,263 1,338-2,058 Balance sheet Assets Intangible assets 61,025 60,836 60,433 Property, plant and equipment 11,701 12,684 12,023 Non-current assets 75,468 76,812 75,211 Cash and cash equivalents 25,411 21,955 20,084 Current assets 66,619 60,786 62,451 Total assets 142, , ,662 Equity and liabilities Equity 80,107 80,436 78,015 Non-current liabilities 2,791 18,736 18,155 Current liabilities 59,189 38,426 41,492 Total liabilities 61,980 57,162 59,647 Total equity and liabilities 142, , ,662 Cash flow statement Depreciation, amortization and impairment 5,286 4,468 6,197 Cash flows from operating activities 10, ,434 Cash flows from investing activities -3,818-4,322-4,831 Cash flows from financing activities -2,047-2,669-2,859 Cash and cash equivalents at the end of period 25,411 21,955 20,084 Key figures and ratios Number of shares, average 36,874,082 36,874,082 36,874,082 Basic EPS (DKK) Diluted EPS (DKK) Gross margin 61.1% 59.8% 64.3% 64.4% 64.4% Assets/Equity (gearing) Average number of employees Market price per share (DKK) Market capitalisation (DKK million) Price / net asset value Net interest bearing debt / Equity Net interest bearing debt / EBITDA Interest coverage Page 2 of 9

3 MANAGEMENT REPORT Reported figures are for the full reporting period unless otherwise stated. Figures for the comparable reporting period in the previous year are stated in parenthesis. In the first nine months of 2015 the average USD/DKK exchange rate applied to translate revenue and expenses was DKK 6.71 (DKK 5.53). Revenue In the first nine months of 2015 total revenue increased 18% to DKK million (DKK 98.0 million). Services and product sales (excluding OEM) drive growth. Sales increased 21% to DKK 92.4 million (DKK 76.0 million) excluding OEM sales of DKK 8.8 million (DKK 7.8 million) in the first nine months of In Europe services and product sales (excluding OEM) increased 8% to DKK 41.2 million (DKK 38.1 million), and in North America sales increased 40% to DKK 39.0 million (DKK 27.8 million) benefitting from an improved pricing situation following recent increase in the USD/DKK exchange rate. Rest of World sales increased 21% to DKK 12.2 million (DKK 10.1 million). Services sales initially drive growth as the company targets new markets for RNA sequencing and RNA functional analysis. In the first nine months of 2015 services sales increased 25% to DKK 18.4 million (DKK 14.7 million) and product sales (excluding OEM) increased 21% to DKK 74.0 million (DKK 61.3 million). License income accounted for DKK 6.6 million (DKK 7.3 million) and contract research income, reflective of third party funding of Exiqon s development of novel diagnostics, totaled DKK 5.4 million (DKK 5.1 million). Gross profit and margins In the first nine months of 2015 gross profit increased 18% to DKK 74.2 million (DKK 63.1 million) as a result of higher sales volumes. In the same period gross margins on product sales and services excluding other income increased marginally to 60.2% (59.2%). Improved economies of scale and automated solutions will allow for continued improvement of margins over time as the company continues to execute its growth strategy. In the third quarter of 2015 gross profit increased 13% to DKK 23.4 million (DKK 20.8 million) and gross margins on product sales and services excluding other income improved to 55.9% (52.9%). Operating costs In the first nine months of 2015 operating costs excluding production costs increased 12% to DKK 71.1 million (DKK 63.3 million) in line with the company s strategy to maximize investment in R&D and S&M without compromising EBITDA profitability. In the third quarter of 2015 operating costs excluding production costs increased 11% to DKK 22.1 million (DKK 20.0 million). EBITDA and EBIT EBITDA improved to DKK 8.4 million (DKK 4.2 million) whereas EBIT was affected by higher depreciations following increased investments and improved to DKK 3.1 million (DKK -0.2 million). In the third quarter of 2015 EBITDA improved to DKK 3.1 million (DKK 2.5 million) and EBIT to DKK 1.3 million (DKK 0.8 million). Tax Net results for the first nine months of 2015 have been positive. The company continues to monitor whether to capitalize part of Exiqon A/S tax-asset in Summarized financial numbers compared to full year outlook In the table below, the company's realized performance for the first nine months of 2015 is summarized and compared to the outlook for the full year; including an adjustment of the realized numbers to the exchange rate used as basis for the full year outlook (USD/DKK 6.50): (DKK million) Realized 2015 (USD/DKK 6.71) Realized 2015 adjusted to USD/DKK 6.50 Outlook 2015 (USD/DKK 6.50) Revenue EBITDA ~10 Cash flows Cash flows from operating activities were DKK 10.7 million (DKK -1.0 million) primarily reflective of cash flows from primary activities of DKK 13.4 million (DKK -1.9 million) whereas net interest and value gains amounted to DKK -2.7 million (DKK 0.9 million). Page 3 of 9

4 Equity and capital resources Equity amounted to DKK 80.1 million (DKK 80.4 million). Trade receivables increased to DKK 19.8 million (DKK 18.3 million) and trade payables increased to DKK 11.5 million (DKK 10.8 million) as a result of continued cash management efforts. On 30 September 2015 cash and cash equivalents totalled DKK 25.4 (DKK 22.0 million) including DKK 10 million in credit that is subject to repayment by 10 January 2016 and proceeds of DKK 15 million from the company's corporate bond that is subject to repayment by 1 March Management expects that the company s future capital needs are covered by existing arrangements. Any requirement for additional capital in the future, we will seek to cover by new arrangements, or by increasing the current share capital under existing authorizations to the Supervisory Board. UPDATE ON DIAGNOSTICS Today Exiqon provides an update on the diagnostic programs for which the Company exclusively licensed two sets of validated prostate cancer mirna biomarkers from Aarhus University Hospital, Department of Molecular Medicine (MOMA) on 2 September Prostate cancer constitutes ~14% of all diagnosed cancers with about incidences in Europe annually. Non-invasive diagnosis of prostate cancer based on urine samples (early detection): One biomarker profile relates to non-invasive diagnosis of prostate cancer based on urine samples. The objective of Exiqon s program for early detection is to correctly diagnose individuals with intermediate levels of Prostate Specific Antigen (PSA) in the blood. Today, a PSA test is the most widely used diagnostic and screening tool for prostate cancer, however, it is not specific for prostate cancer, and may lead to unnecessary biopsy testing. Up to 70% of PSA positive tests turn out to be false positives. Besides, not all prostate cancer cases result in elevated PSA levels, and up to 15 % of PSA negative cancers may today go by undetected. In a collaboration with MOMA, Exiqon has applied its sensitive LNA based qpcr technology to identify mirna biomarkers in urine samples which allow for highly accurate diagnosis of individuals with intermediate levels of PSA. These mirna biomarkers have now been validated in independent cohorts. As a result, Exiqon has acquired all commercial rights. A final retrospective validation study is currently ongoing and scheduled to be completed by summer 2016 upon which results will be published. Provided results are in line with previous validation studies, this diagnostic test will be positioned for commercial partnering next year. Patient stratification for improved treatment selection based on tissue samples: The other biomarker profile relates to patient stratification for improved treatment selection based on tissue samples collected as fine needle biopsies. Exiqon conducts two parallel programs together with MOMA. The objective of Exiqon s programs is to significantly improve the clinical management of prostate cancer patients. Fine needle biopsies are difficult to interpret and analyse. This may lead to undetected and misdiagnosed cases. Particular challenging, however, is the differentiation between indolent (nonaggressive) tumours from aggressive prostate cancer that requires treatment. In consequence, indolent (non-aggressive) tumours may be over-treated with serious consequences for the patients and considerable costs to the health care systems. One treatment selection program is based on the analysis of methylation of DNA. The methylation biomarkers have been retrospectively validated in independent cohorts and the results are published. Exiqon acquired all commercial rights in November To further increase sensitivity and specificity of a test, Exiqon is in the process of converting the current detection assays to Exiqons LNA based qpcr technology. Once the assays have been migrated, clinical cross-validation studies will be conducted on relevant cohorts. The other treatment selection program is based on mirna biomarkers which originally were identified and since validated in two independent cohorts using Exiqon s LNA based qpcr technology. A scientific publication of the results is under preparation. As was announced on 2 September of 2015 Exiqon has acquired all commercial rights. These biomarkers may prove an alternative to the above mentioned test, or further strengthen such test by use of complementary biomarkers. The potential synergistic value of the methylation and the mirna based tests will be concluded in H Prospective validation of this prognostic test may be required before commercial partnering and necessary third party funding will be required to conduct such a study. Page 4 of 9

5 FINANCIAL OUTLOOK 2015 Exiqon expects revenues between DKK million and EBITDA around DKK 10 million in The outlook for 2015 is based on an average USD/DKK exchange rate of DKK In addition to exchange rates, the outlook depends primarily on organic growth in Exiqon s services and product sales, excluding OEM sales to licensees. Exiqon continues to pursue license and commercial partnering opportunities during No significant one-time costs are included in the outlook for 2015, nor are any expected. Any costs related to new warrant grants are not included in the guidance for STATEMENT BY THE EXECUTIVE BOARD AND SUPERVISORY BOARD ON THE INTERIM REPORT The Supervisory Board and the Executive Board have today considered and approved the interim report of Exiqon A/S for the period 1 January 30 September The interim report has been prepared in accordance with IAS 34 and additional Danish disclosure requirements for the presentation of financial statements by listed companies. The interim report is unaudited. We consider the accounting policies to be appropriate, the accounting estimates made to be reasonable and the overall presentation of the interim report to be adequate, so that the interim report, in our opinion, gives a true and fair view of the assets, liabilities, financial position and results of operations and cash flows of the group for the period 1 January 30 September We consider the Management s report to give a true and fair description of the development in the Group s activities and economic situation, the results of operations and the Group s financial position as a whole and a description of the significant risks and uncertainty factors, which the Group faces. Vedbaek, 26 October 2015 Executive Board Lars Kongsbak, CEO Hans Henrik Chrois Christensen, CFO Supervisory Board Erik Walldén, chairman Thorleif Krarup, deputy chairman Michael Nobel Per Wold-Olsen Rodney Turner Additional information Lars Kongsbak, CEO, phone (cell: ) Hans Henrik Chrois Christensen, CFO, phone (cell: ) Forward-looking statements Certain parts of this release contain forward-looking information with respect to the plans, projections and future performance of the company, each of which involves significant uncertainties. The company s actual results may differ materially from the information set forth in these statements. Timelines relating to collaborative diagnostic programs should be considered approximate. Page 5 of 9

6 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) Note Revenue 2,3 38,364 34, ,402 98, ,392 Production costs -14,920-14,009-41,190-34,939-47,193 Gross profit 23,444 20,816 74,212 63,079 85,199 Research and development costs -7,459-5,977-23,511-19,115-26,283 Sales and marketing costs -10,736-9,991-34,867-30,892-43,087 Administrative costs -3,940-4,025-12,754-13,305-18,911 Operating profit/(loss) (EBIT) 1, , ,082 Financial income 710 1,031 4,292 1,683 2,210 Financial expenses -1,512-1,398-7,235-3,234-5,111 Profit/(loss) before tax ,784-5,983 Tax on profit/(loss) for the period ,646 3,203 Profit/(loss) for the period 618 1, ,780 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange adjustments relating to foreign subsidiaries Total comprehensive income for the period 727 1,742 1,263 1,338-2,058 Earnings per share Earnings per share Diluted earnings per share Page 6 of 9

7 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) Note 30 Sep Sep Dec Goodwill 49,368 49,368 49,368 Acquired patent rights 4,198 5,149 4,887 Acquired software licenses 6,118 6,015 5,932 Intangible assets under construction 1, Intangible assets 61,025 60,836 60,433 Leasehold improvements Production and laboratory equipment 7,671 10,043 9,474 Fixtures and fittings, tools and equipment 3,253 1,884 1,777 Tangible assets under construction Property, plant and equipment 11,701 12,684 12,023 Deferred tax assets 1,383 1,563 1,430 Deposits 1,359 1,729 1,325 Financial assets 2,742 3,292 2,755 Non-current assets 75,468 76,812 75,211 Inventories 12,482 13,463 13,963 Trade receivables 19,762 18,335 22,147 Other receivables 2,829 1,589 1,200 Refund from Tax Authorities 4,321 4,250 3,690 Prepayments 1,814 1,194 1,367 Receivables 28,726 25,368 28,404 Cash and cash equivalents 25,411 21,955 20,084 Current assets 66,619 60,786 62,451 Total assets 142, , ,662 Share capital 36,874 36,874 36,874 Reserves 43,233 43,562 41,141 Equity 80,107 80,436 78,015 Corporate Bonds 0 15,000 15,000 Financial lease liabilities 2,791 3,736 3,155 Non-current liabilities 2,791 18,736 18,155 Corporate Bonds 15, Financial lease liabilities 2,534 2,495 2,439 Trade payables 11,544 10,788 10,505 Short term bank loan 9,983 9,978 10,018 Other payables 10,674 6,852 10,394 Deferred revenue 9,454 8,313 8,136 Current liabilities 59,189 38,426 41,492 Total liabilities 61,980 57,162 59,647 Total equity and liabilities 142, , ,662 Page 7 of 9

8 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Operating profit/(loss) (EBIT) 3, ,082 Depreciation and amortization 5,286 4,468 6,197 Non-cash adjustments (warrants) 829 2,879 3,854 Change in working capital 4,201-9,028-9,403 Profit on sale of assets Cash flows from primary activities 13,396-1,914-2,580 Net interest and value gains -3,251-2,006-3,497 Current tax 574 2,954 3,643 Cash flows from operating activities 10, ,434 Acquisition of intangible assets -3,044-1,998-2,382 Acquisition of property, plant and equipment ,324-2,595 Sale of assets Cash flows from investing activities -3,818-4,322-4,831 Repayment of lease debt -1,990-2,577-3,215 Repayment of deposit and loans Short term bank loan Cash flows from financing activities -2,047-2,669-2,859 Change in cash and cash equivalents 4,854-7,957-10,124 Unrealised currency gain/(loss) ,018 Cash and cash equivalents at the beginning of the period 20,084 29,190 29,190 Cash and cash equivalents at the end of the period 25,411 21,955 20,084 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) Other reserves Number of shares Share capital Reserve for exchange adjustments Sharebased payment Retained profit Total Consolidated No. Equity at 1 January ,874,082 36, ,195 20,848 78,015 Profit/(loss) for the period Exchange adjustments relating to foreign subsidiaries Total comprehensive income ,263 Share-based payment Other transactions Equity at 30 September ,874,082 36, ,024 21,510 80,107 Equity at 1 January ,874,082 36, ,341 23,628 76,219 Profit/(loss) for the period Exchange adjustments relating to foreign subsidiaries Total comprehensive income ,338 Share-based payment 2,879 2,879 Other transactions , ,879 Equity at 30 September ,874,082 36, ,220 24,490 80,436 Page 8 of 9

9 NOTES TO THE INTERIM FINANCIAL STATEMENTS Note 1 Accounting policies The interim report of the Exiqon Group for the period 1 January 30 September 2015 is presented in accordance with IAS 34 and additional Danish disclosure requirements for the presentation of financial statements by listed companies. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group s Annual Report for The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in preparation of the Group s annual consolidated financial statements for the year that ended 31 December Management has not made new significant accounting estimates and assumptions on topics besides those listed in the Annual Report for Note 2 Revenue Product sales 27,940 22,594 85,018 70,904 96,269 Services 5,914 7,132 18,400 14,709 20,507 License income 2,302 3,623 6,618 7,292 8,912 Contract research and grants income 2,208 1,476 5,366 5,113 6,704 38,364 34, ,402 98, ,392 In the third quarter product sales includes OEM of DKK 2.4 million (DKK 2.9 million) and shipping and handling of DKK 0.8 million (DKK 0.6 million). Note 3 Segment information Exiqon s Management has organized the reporting in two reportable operating segments: Exiqon Life Sciences and Exiqon Diagnostics. The Group divides its revenue into three geographies: North America, Europe and Rest of World. The split is based on the registered offices of the customers. Management monitors the operating results of its business segments separately to decide the resource allocation and performance assessments. Segment performance is monitored on operating results (EBITDA/EBIT) as presented in the table below. Financial items and taxes are managed on a corporate level and not allocated to the operating segments. Life Sciences Diagnostics Group eliminations Other 1) Consolidated Revenue: External customers 113,015 2, ,402 Internal customers 27,844-27, Total revenue 140,859 2,387-27, ,402 EBITDA 20,615-12, ,366 Operating profit/(loss) (EBIT) 16,106-13, ,080 Net non-operating cost ,943-2,943 Profit (loss) before tax 16,106-13, , Assets 58,620 53, , ,087 1) The item Other includes net non-operating items. Geography Revenue of the Exiqon Group is distributed on geographical segments as follows: North America 15,597 12,052 45,257 33,683 45,576 Europe 18,750 19,583 56,922 53,404 72,000 Rest of World 4,017 3,190 13,223 10,931 14,816 38,364 34, ,402 98, ,392 --oo0oo-- Page 9 of 9