Half year results

Premaitha Health plc

("Premaitha" or the "Company")

Half year results

Manchester, UK - 21 December 2016: Premaitha Health (AIM: NIPT), developer of a leading CE-marked non-invasive prenatal screening system, announces its half year results for the six months ended 30 September 2016.

Financial position

· Revenues increased by 130% to £1.5m (H1 15/16: £0.6m) to a diversified international client base

· Gross profit of £0.6m, 41% of revenues (H1 15/16: £0.3m, 41%)

· General administrative expenses of £3.9m (H1 15/16: £2.9m) reflecting investment in development, commercial and operations capabilities

· Loss on ordinary activities before taxation of £3.6m (H1 15/16: £4.4m)

· Cash balance at the period end was £2.7m (H1 15/16: £6.6m)

· Further £4.0m investment by Thermo Fisher in form of loan extension and warrants

Operational highlights

· Transformative acquisition of Yourgene Bioscience, Taiwan, please see separate announcement

· The IONA® test is now installed in 13 laboratories across Europe, Russia, the Middle East and Asia

· Premaitha now supplies over 50 UK hospitals through client laboratories and in-house clinical service

· NHS to make non-invasive prenatal screening tests ("NIPT") available for high risk cases from 2018

· Reshaping European distribution network:

o Advanced talks with major European laboratory chain

o Swiss customer, Genoma, facing financial challenges

o Extending successful distributor coverage

· Sizeable growth opportunities in the Middle East and Asia

· Litigation hearings scheduled for summer 2017, EU Competition Commission investigation into Illumina ongoing

· Appointment of Adam Reynolds as Chairman

Dr Stephen Little, CEO of Premaitha, said:

"We are very pleased with the progress being made with the IONA® test in the regions where we are operational, and we have positioned ourselves to take advantage of the exceptional opportunities emerging in the Middle East and Asia. A combination of awareness of NIPT along with the reputation of the IONA® test for reliability and accuracy, has resulted in the IONA® test being adopted by both new laboratories and by customers who have already tried offering NIPT through alternative providers.

"Within Europe and the Middle East we continue to make excellent progress with a substantial pipeline of new customers that we believe will generate significant revenues in the medium term. Although Genoma's financial difficulties will affect current year sales, the momentum of other contracts from our diversified customer base will more than compensate for this in the next financial year and beyond."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For more information, please contact:

About Premaitha

Premaitha is a molecular diagnostics company which uses the latest advances in DNA analysis technology to develop safer, faster and regulatory approved non-invasive screening tests for pregnant women.

Premaitha's lead test - the IONA® test - was launched in February 2015 and is the leading CE marked complete system which estimates the risk of a fetus being affected with Down's syndrome or other genetic conditions. The IONA® test is performed on the mother's blood sample - which contains traces of fetal DNA - and then analysed using next generation DNA sequencing technology from Thermo Fisher Scientific.

Unlike existing prenatal screening methods, due to its high level of accuracy, the IONA® test can significantly reduce the number of women subjected to unnecessary stressful and invasive follow up diagnostic procedures which are costly, resource intensive and carry a risk of miscarriage.

Non-invasive prenatal screening is an emerging, multi-billion dollar global market and Premaitha's complete CE Marked system enables laboratories and health care practitioners to offer an approved, non-invasive prenatal screening system in-house.

Premaitha is based in Manchester Science Park, United Kingdom and its shares trade on the AIM market of the London Stock Exchange (AIM: NIPT). For further information please visit www.premaitha.com. Follow us on twitter @PremaithaHealth.

Chairman's statement

I am pleased to report Premaitha's half year results for the six months to 30 September 2016. During the period and subsequently we have converted a number of contract wins to live laboratory installations which now service significant populations of pregnant women across Europe, Russia, the Middle East and now into Asia. Furthermore, we were pleased to extend our relationship with Thermo Fisher Scientific through an extended loan facility and associated warrants.

Overview

The first half of the year to 30 September 2016 saw significant market penetration for the IONA® test, in particular in the UK, France and the Middle East. These markets are expected to continue to grow strongly with two new laboratories recently opened in France and with UK clients expanding their penetration across the NHS and private clinics. The Middle East offers significant scale opportunities as countries seek to offer NIPT screening across all risk categories. Premaitha is building a significant franchise in this region, and we expect volumes to surpass those in Europe in the medium term. In addition, we are now offering the IONA® test to women across Russia, Italy, Germany, Sweden, Thailand and South Africa and expect to continue to diversify our customer base in the second half and beyond.

Premaitha is in the process of reshaping its European distribution strategy - particularly within France, Switzerland, Spain and Portugal. This is to reduce dependence on Genoma, a financially weak centralised laboratory partner, and to target the markets in which they were previously operating through the IONA® test's growing distributor network. The Company is also in advanced talks with a major diagnostics service group to install IONA® in at least two European laboratories in the near future. These laboratories will then provide NIPT services to the group's international network.

The Company's Swiss customer, Genoma, and its parent company Esperite NV (Euronext: ESP), are experiencing financial difficulties despite announcing a significant fundraising in August 2016 which has not yet been completed. These issues and associated erratic market behaviour by Genoma have recently curtailed commercial activity in the NIPT space. Premaitha is protecting its interests and, while the potential loss of Genoma's business is likely to impact Premaitha's current year sales, the Board believes its reshaped European distribution strategy will limit the impact to the current year only and will generate a more diversified customer base and superior quality of earnings from next year and beyond.

The Illumina litigation remains a distraction to ourselves and to customers, but also increasingly to competitors. Despite the litigation, which will not reach the UK courts until summer 2017, we continue to provide high quality service to our growing network of customers and it is very heartening to see so many of them building their own NIPT networks and bringing life to the "hub and spoke" model enabled by the IONA® test. The EU anti-trust investigation continues and we remain confident that our position will ultimately be vindicated. Despite this confidence, we are not resting on our laurels and continue to seek opportunities to de-risk the Company through geographic and product diversification. The acquisition of Yourgene is a significant step forward in this regard.

Financial position

The Group's results for the six months to 30 September 2016 are presented in the financial statements and show trading revenues of £1.5m (H1 15: £0.6m) and a gross profit of £0.6m (H1 15: £0.3m). General administrative expenses increased to £3.9m (H1 15: £2.9m) reflecting increases in the development, commercial and operational capabilities of the Group in the second half of the 2016 financial year. The total comprehensive loss was £3.6m (H1 15: £4.4m) and the loss per share was £0.02 (H1 15: £0.02).

In September 2016, the Group announced an extension of its loan facilities whereby Thermo Fisher will make available to Premaitha an additional secured loan facility of £4.0m (the "Loan"), which will be drawn down against future milestones. The new loan facility follows on from the existing facility, announced on 14 December 2015, on similar terms. Premaitha also issued £2.0m of warrants to Thermo Fisher with an option for a further £2.0m warrants as described in Note 7.

In the reporting period the Group used £4.3m cash in operating activities (H1 15: £2.9m) and a further £0.3m (H1 15: £0.9m) in investment in new property, plant and equipment. Proceeds from financing activities were £1.1m of loan drawdowns (H1 15: £7.7m from an issue of equity).

Today, the Company has also announced the conditional acquisition of Yourgene of Taiwan. This acquisition will enable Premaitha to access the Asian NIPT market, and to enhance the Group's offering in the region. Yourgene has NIPT customers in Taiwan, India, Thailand, Indonesia and Malaysia which operate on the same Thermo Fisher next-generation sequencing platform as Premaitha's IONA® test. Yourgene also provides research services and is a contracted participant in the Taiwan Biobank Project.

This acquisition brings significant benefits through expanded market access in Asia, the world's fastest growing NIPT market; and opportunities for cross-selling. In addition, the combination enables joint development of expanded NIPT test content as well as further content beyond NIPT, such as pre-implantation genetic screening. The combination also offers the potential to reduce intellectual property risks through geographic diversification and product enhancements.

Furthermore, the combination with Yourgene creates a platform for a strategic drive into mainland China where there are approximately 17 million births per annum and a strategy to decentralise NIPT testing over the coming years as part of the Chinese government's healthcare reform plans.

Outlook

Now that the Company is starting to achieve revenue scale it is important we operate on a sustainable cost base, and we intend to achieve cashflow breakeven in the second half of next year. A sizeable proportion of our development costs are nearing completion and with the addition of the Yourgene team we see further growth opportunities within Asia. There has been a significant increase recently in the awareness of the benefits of NIPT, with the UK's NHS to offer the test as standard to high risk women from 2018. We now have a significant geographic presence and partners in place to ensure the IONA® test forms a fundamental and key role in the uptake of NIPT testing internationally and we look forward to the future with confidence.

Consolidated statement of comprehensive income for the six months ended 30 September 2016

Consolidated statement of changes in equity for the six months ended 30 September 2016

Consolidated statement of changes in equity for the six months ended 30 September 2016

Consolidated statement of financial position as at 30 September 2016

Consolidated statement of cash flows for the six months ended 30 September 2016

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1 General information

The principal activity of Premaitha Health PLC (the "Company") and its subsidiaries (together, the "Group") is that of that of a molecular diagnostics business for research into, and the development and commercialisation of gene analysis techniques for pre-natal screening and other clinical applications in the early detection, monitoring and treatment of disease. The Company is incorporated and domiciled in the United Kingdom. The address of its registered office is St James' House, St James' Square, Cheltenham, Gloucestershire, GL50 3PR. The registered number is 03971582.

As permitted, this Interim Report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 "Interim Financial Reporting".

The consolidated financial statements are prepared under the historical cost convention.

This Consolidated Interim Report and the financial information for the six months ended 30 September 2016 does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. This unaudited Interim Report was approved by the Board of Directors on 20 December 2016.

The Group's financial statements for the period ended 31 March 2016 have been filed with the Registrar of Companies. The Group's auditor's report on these financial statements was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Electronic communications

The Company is not proposing to bulk print and distribute hard copies of this Interim Report for the six months ended 30 September 2016 unless specifically requested by individual shareholders.

The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to shareholders.

News updates, Regulatory News and Financial statements can be viewed and downloaded from the Group's website, www.premaitha.com. Copies can also be requested from; The Company Secretary, Premaitha Health PLC, Rutherford House, Manchester Science Park, Manchester M15 6SZ or by email: [email protected].

2 Accounting policies

Basis of preparation

This financial information has been prepared in accordance with International Financial Reporting

Standards (IFRS), including IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and in accordance with the accounting policies which will be adopted in presenting the Group's Annual Report and Financial Statements for the year ended 31 March 2017. These are consistent with the accounting policies used in the Financial Statements for the year ended 31 March 2016.

Going concern 

These interim financial statements have been prepared on a going concern basis. The Directors have reviewed the Group's going concern position taking account of its current business activities, anticipated performance and the factors likely to affect its future performance.

Following ongoing review of the Group's financial plans, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The review process considers key commercial and operational drivers of financial performance and in particular liquidity. Operational plans are regularly monitored to ensure cash efficiency, to control discretionary expenditure and to enhance margins in light of revenue progression. The Group has also identified potential funding facilities for additional resilience if and when required.

The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Taxation

Taxes on income in the interim periods are accrued using the rate of tax that would be applicable to expected total annual earnings.

3 Taxation

The Research and development tax credit of £531,896 is shown as a deduction against general administrative expenses.

4 Loss per share

Basic

Basic loss per share is calculated by dividing the total comprehensive loss for the period of £3,592,090 (2016: loss £12,130,461) by the weighted average number of ordinary shares in issue during the period 228,163,709 (2016: 218,109,064).

Diluted

Diluted earnings per share dilute the basic earnings per share to take into account share options and warrants. The calculation includes the weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive share operations and warrants into ordinary shares. 75,898,942 options and warrants (2016: 58,993,088) have been excluded from this calculation as the effect would be anti-dilutive.

5 Trade and other receivables 

On 11 December 2015, the Group entered into a loan agreement with Life Technologies Corporation ("Life Technologies"), part of the Thermo Fisher Scientific Group ("Thermo Fisher"), under the terms of which Thermo Fisher provided a loan facility of £5m to the Group. At 22 September 2016 this facility was extended by a further £4m under an additional agreement.

Included in trade and other receivables is an amount of £1,094,778 which represents the fair value of warrants issued in September 2016 and due to be issued in September 2017 (see note 7) and which have been accounted for as commitment fees incurred by the Group to secure the increased facilities in the period.

The Group's customer Genoma SA, a wholly owned subsidiary of Esperite NV (Euronext: ESP), appears to be experiencing financial difficulties ahead of an announced, but as yet uncompleted, refinancing. A provision for doubtful debts of £231,735 has been recorded whilst the Group pursues debt recovery.

6 Provisions

Premaitha is defending two patent infringement litigation claims which claim that Premaitha's non-invasive pre-natal test infringes patents owned or licensed by the claimants. The first claim was filed in March 2015 by the claimants Illumina, Inc., Sequenom, Inc. and Stanford University. The second claim was filed in September 2015 by the claimants Illumina, Inc. and the Chinese University of Hong Kong. The cases are due to be heard in the UK High Court in 2017.

The Group has assessed the expected costs of defending these claims, and has provided in full for the expected litigation costs. The Group recognised a provision in the financial statements to 31 March 2016 of £5,386,326 for expected litigation costs in respect of these claims. The Group continues to monitor the legal strategy and the litigation costs expected to be incurred in defending both claims, and the provision has not been increased further in the current period. Costs of £1,104,155 have been incurred against the provision in the period and so the provision as at 30 September 2016 totals £4,282,171.

7 Warrants and derivative financial instruments

On 22 September 2016 the Group issued 17,094,118 warrants with a fair value of £559,330 and this amount has been accounted for as an equity instrument in accordance with IAS 32 Financial Instruments: Presentation and as a commitment fee for the provision of increased loan facilities (see note 5).

An amount of £535,448 is also included within liabilities as a derivative financial instrument, being the fair value of warrants which are expected to be issued in April 2017 and which is also accounted for as a further commitment fee for these facilities. The number of warrants is uncertain at the reporting date and so this amount is accounted for as a derivative financial instrument at fair value and is included in liabilities in the Statement of Financial Position.

8 Interest bearing loans and borrowings

A secured loan facility was provided by Life Technologies in December 2015. As at 31 March 2016, there was £1,916,550 remaining to be drawn down from this facility. During the period an additional £1,234,270 was drawn down, with £682,280 remaining for drawdown. On 22 September 2016, the Group entered into a loan facility extension agreement with Thermo Fisher for a further facility of £4,000,000. These loan facilities are secured by way of a fixed and floating charge over intellectual property of the Group. The drawn down portions of these loans are accruing interest at 6% per annum and these loans are repayable in more than 5 years.

9 Share capital

On 22 September 2016, at the same as entering into the LTC loan facility extension the Group simultaneously entered into a further warrant agreement with Thermo Fisher. Under this agreement Premaitha issued Thermo Fisher warrants over 17,094,018 new ordinary shares in the Company exercisable at 11.7 pence ("2016 Warrants"), being a premium of 10% over the closing share price on 21 September 2016 (the last business day prior to issue of the 2016 Warrants). A second tranche of warrants will be issued on 1 April 2017, or earlier if loan drawdowns exceed £2.0m, over new ordinary shares in the Company at a premium of 10% over the closing share price on the last business day prior to the date of issue. Refer also to note 7 above.

10 Events after the reporting period

Following the end of the accounting period, on 21 December 2016, the Company announced that it had agreed to conditionally acquire the entire issued share capital of Taiwan-based Yourgene Bioscience Co., Ltd. The total consideration will be the issue of new shares in Premaitha Health PLC representing one-third of the current ordinary shares in issue, thereby giving the vendors a 25% holding in the newly-enlarged Premaitha Group. In addition, there will be a return of approximately 50% of the acquired cash reserves by way of a cash consideration of US$500,000. Further details will be included in the full year results for the year ending 31 March 2017 when a full fair value review will have been undertaken along with consideration of the accounting treatment for the acquisition. A separate RNS announcement, issued today, outlines the structure of the acquisition.