4basebio Plc - Half-year Report

4basebio Plc - Half-year Report

PR Newswire

London, September 29

4basebio PLC
("4basebio", the "Company" or the "Group")

Half-year Report
for the six months ended 30 June 2022

4basebio PLC (AIM: 4BB), the specialist life sciences group focused on exploiting intellectual property in the field of cell and gene therapies and DNA vaccines, announces its unaudited half-year results for the six months ended 30 June 2022.

Operational Highlights (including post period end)

• Clean rooms for DNA manufacturing commissioned
• Commercial sale of proprietary DNA
• Strengthening IP with three further patent filings
• Development of application specific suite of proprietary DNA constructs
• Evaluation and collaboration agreements signed

Financial Highlights

• Cash balances of £5.6 million at period end
• Cash runway into 2023 before utilisation of available debt facility
• Loss for the period of £2.4 million (H1 2021 loss: £1.7 million)
• Net cash outflow from operating activities of £2.5 million (H1 2021: £1.7 million)

Commenting on the interim results, Dr Heikki Lanckriet, CEO and CSO, said "We continue to make excellent progress and are pleased to report our first DNA sales in the period. While revenues will remain modest for 2022, we have now made multiple sales and we are confident in the overall commercial prospects of both our synthetic DNA and non-viral vector technology.

"We have also now taken possession of our manufacturing suites and are working hard to implement systems and processes which will enable the manufacture of GMP DNA as early as possible in 2023. Alongside this, we continue to develop our intellectual property, with three further patents filings in July 2022.

"We are very excited to be demonstrating the flexibility of our DNA technology having developed a suite of proprietary application specific synthetic DNA constructs optimised for the AAV, mRNA, gene editing and DNA vaccine markets.

"We continue to invest in our technology platforms, with overall cash expenditure during the period as expected. Looking forward to 2023, further funding will be required. We remain open to a possible capital increase where this is at a meaningful premium to the Company's prevailing share price; however, at this time, we expect to draw down on our available debt facilities during H1 2023."

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

For further enquiries, please contact:

4basebio PLC	[phone]
Heikki Lanckriet, CEO and CSO
Cairn Financial Advisers LLP (Nominated Adviser)	[phone]
Jo Turner / Sandy Jamieson
finnCap Ltd (Broker)
Geoff Nash/Richard Chambers/Charlotte Sutcliffe	[phone]

Notes to Editors

4basebio (AIM: 4BB) is a specialist life sciences group focused on therapeutic DNA for cell and gene therapies and DNA vaccines and providing solutions for effective and safe delivery of these DNA based products to patients. It is the intention of the Company to become a market leader in the manufacture and supply of high purity, synthetic DNA for research, therapeutic and pharmacological use and develop non-viral vectors for the efficient delivery of payloads. The immediate objectives of 4basebio are to continue the validation of its DNA products and Hermes technology and commence revenue generation during 2022. 4basebio also continues to advance its collaborations to facilitate the functional validation of its DNA based products and cell and gene delivery solutions.

Chairman's Statement

Introduction

The Board is pleased to report that 4basebio continued to make good progress in the first half of the year in validating and commercialising 4basebio DNA and targeted nanoparticle delivery technologies. Both technologies have broad application in gene and cell therapy as well as vaccines; and as reported previously, we see particular near-term opportunities in AAVs (adeno-associated viral vectors) for gene therapy and in-vitro transcription (IVT) for the production of mRNA vaccines.

During the period, as noted above, 4basebio also recorded its first DNA revenues and completed the development of its manufacturing facility comprising seven DNA production suites.

As expected, and as indicated in our 2021 Annual Report, 4basebio continued with its investment in its technologies with the result that the Group incurred a net loss for the first half of 2022.

Operational Review

4basebio continues to operate from three locations near Cambridge, UK and Madrid, Spain and has established strong R&D groups in both countries. These groups remained focussed on enhancing and scaling processes around its synthetic DNA manufacture, its targeted nanoparticle technology, as well as product and process innovation, strengthening the 4basebio's intellectual property.

Alongside its R&D activities, the Group has scaled up its manufacturing and quality assurance teams significantly during the period. This coincides with 4basebio taking full control of its manufacturing facility near Cambridge and progressing with its operational validation. The next objective is to implement GMP processes and procedures during the second half of 2022 with a view to manufacturing first GMP batches in 2023.

In order to support both its research and manufacturing activities, the Group continues to recruit, principally in the UK, with overall headcount increasing from 33 at 31 December 2021 to 51 at 30 June 2022. It is anticipated this will grow further during the second half of the year.

The commercial development of the Group also continued apace, with first synthetic DNA revenues recorded in H1 2022. 4basebio is now working to develop a pipeline of commercial opportunities. Currently, these are typically early-stage projects where customers are evaluating 4basebio technology with their customer specific application needs. The Group expects its pipeline to grow with further DNA and nanoparticle revenues in H2 2022. Visibility on the impact on revenue and overall financial performance is however limited.

During the half year, 4basebio also announced further collaborations:

• research collaboration with Teesside University and the University of Alabama for the treatment of Neurofibromatosis Type 1;
• joint development agreement with Heqet Therapeutics for the development of a non-viral vector therapy for cardiac regeneration; and
• strategic research collaboration with eTheRNA immunotherapies relating to the evaluation of linear DNA for mRNA production.

(The Group also has further evaluation projects ongoing which are subject to non-disclosure agreements.)

In summary, during the first half of 2022 4basebio has built critical mass in its R&D and manufacturing teams as well as progressing its commercial objectives. The Directors consider the Group to be extremely well placed to continue the commercial exploitation of its DNA and nanoparticle technology.

Business outlook

Overall revenues are expected to be consistent with previous periods, reflecting some revenues from DNA and Hermes services, offsetting a decline in legacy revenues with certain historic one-time orders now not expected to repeat.

The Group expects to continue investing in its technologies and staff team during the remainder of 2022. The ongoing expenditure will continue to be much greater than revenues, with the Group reporting a loss for the full year. This is as previously indicated.

Financial Review

The results for the period ended 30 June 2022 and the consolidated balance sheet at that date reflect the consolidated performance and position of 4basebio PLC and all its subsidiary companies.

Revenue

Revenue in the first six months of 2022 ("H1 2022") was £0.15 million (H1 2021: £0.18 million). This reflects a fall in legacy revenue from kit sales and licence income offset by modest sales from DNA.

Cost of sales

Cost of sales in H1 2022 was £37k (H1 2021: £38k). Cost of sales reflects a combination of amortisation on previously capitalised intangible assets linked to kit sales and inputs for DNA production.

Selling and administration expenses

Selling, general and administrative expenses were a combined £1.4 million in H1 2022 (H1 2021: £1.2 million) reflecting the underlying growth in the scale of the business.

Operations expense

Operations expense is a new expenditure line for the Group, capturing expenditure relating to manufacturing and quality assurance. Operations expense includes primarily payroll and consumables spend.

Research and development

Overall research and development expenditure for H1 2022 was £1.6 million (H1 2021: £0.86 million), of which £0.55 million was capitalised in the period (H1 2021: £0.23 million). Overall expenditure increased due to the ongoing expansion of the UK team and investment in R&D programs. Capitalised expenditure relates to platform research undertaken in Spain.

Tax

Tax represents R&D tax credits expected to be recovered in relation to expenditure during the first half of the year.

Balance sheet

Non-current assets increased to £5.5 million at 30 June 2022 from £4.1 million at 31 December 2021; this related to additions of tangible fixed assets in the UK and capitalised R&D expenditure in Spain as shown in notes 6 and 7 to the half year results. Current assets fell to £6.9 million at 30 June 2022 from £10.6 million at 31 December 2021, due primarily to cash outflows during the first half of 2022. As a result, closing cash balances at 30 June 2022 stood at £5.6 million (31 December 2021: £9.6 million).

Current liabilities increased to £1.6 million at 30 June 2022 from £1.5 million at 31 December 2021 due primarily to an increase in trade payables associated with fixed asset additions. Long term financial liabilities reduced due to reclassification of soft loans from long term to short term liabilities. As a result, overall long term liabilities stood at £1.3 million as at 30 June 2022 (31 December 2021: £1.5 million). Other long term liabilities represent deferred grant income in Spain.

Share Capital at both 30 June 2022 and 31 December 2021 reflects the capital contributions arising from the 2020 spin out process as explained in note 3.2 to the financial statements included in the Annual Report for 2021.

Cash flow

Net cash outflows from operations were £2.5 million for the period ended 30 June 2022 (period ended 30 June 2021: outflows of £1.7 million). This reflects an increase in operating cashflows directly arising from the growth in operations between the periods as presented in the profit and loss account.

Cash outflows from investing activities increased significantly with the investment in tangible fixed assets £1m for the period ended 30 June 2022 (period ended 30 June 2021: £0.1 million) relating to both the manufacturing facility and expansion of R&D laboratories. In addition, capitalised development expenditure in 4basebio S.L.U. increased to £0.4 million from £0.2 million in period ended 30 June 2021.

Cashflows from financing for the period ended 30 June 2022 were relatively flat against the previous period, with the change dictated by the level of Spanish soft loan repayments.

Exchange differences for the period represent changes in the British pound value of cash balances held in foreign currency, almost entirely euro denominated.

Tim McCarthy
Chairman
29 September 2022

Consolidated statement of profit or loss and other comprehensive income
for the six months ended 30 June 2022

[in £'000]					Note	Six months ended 30 June 2022 (unaudited)	Six months ended 30 June 2021 (unaudited)		Year ended 31 December 2021 (audited)
Revenues						152	179		338
Cost of goods sold						(37)	(38)		(69)
Gross profit						115	141		269
Sales and marketing expenses						(97)	(81)		(132)
Administration expenses						(1,306)	(1,155)		(1,725)
Operations expense						(367)	-		-
Research and non-capitalised development expenses						(1,024)	(633)		(1,622)
Other operating expenses						(37)	(103)		(400)
Other operating income						2	15		83
Loss from operations						(2,714)	(1,816)		(3,527)
Finance expense						(16)	(31)		(113)
Loss before tax						(2,730)	(1,847)		(3,640)
Income tax credit / expense					4	300	197		405
Loss for the period						(2,430)	(1,650)		(3,235)
Items that may be reclassified to the income statement in subsequent periods
	Exchange rate adjustments					173	(393)		(608)
Total comprehensive income						(2,257)	(2,043)		(3,843)
	Loss per share
	Basic and diluted (in £/share)				5	(0.20)	(0.13)		(0.26)

All of the loss for each period is from continuing operations.

Consolidated statement of financial position
30 June 2022

[in £'000]				Note	30 June 2022 (unaudited)		31 December 2021 (audited)
Assets
Intangible assets				6	1,695		1,271
Property, plant and equipment				7	3,488		2,759
Other non-current assets					331		30
Non-current assets					5,514		4,060
Inventories					148		156
Trade receivables					85		46
Other current assets					1,041		854
Cash and cash equivalents				8	5,597		9,586
Current assets					6,871		10,642
Total assets					12,385		14,702
Liabilities
Financial liabilities					(362)		(432)
Trade payables					(664)		(353)
Other current liabilities					(589)		(738)
Current liabilities					(1,615)		(1,523)
Financial liabilities					(1,108)		(1,326)
Other liabilities					(173)		(158)
Non-current liabilities					(1,281)		(1,484)
Total liabilities					(2,896)		(3,007)
Net assets					9,489		11,695
Share capital					11,130		11,130
Share premium					706		706
Merger reserve					688		688
Capital reserve					13,230		13,179
Foreign exchange reserve					(260)		(433)
Profit and loss reserve					(16,005)		(13,575)
Total Equity				9	9,489		11,695

Consolidated statement of changes in equity
for the six months ended 30 June 2022

[in £'000]	Share capital	Share premium	Merger reserve	Capital reserve	Foreign exchange	Profit and loss reserve	Total equity
Balance at 1 January 2021 (audited)	11,130	706	688	13,099	175	(10,340)	15,458
Loss for the year	-	-	-	-	-	(3,235)	(3,235)
Foreign Exchange difference arising on translation of 4basebio S.L.U.	-	-	-	-	(608)	-	(608)
Share based payments	-	-	-	80	-	-	80
Balance at 31 December 2021 (audited)	11,130	706	688	13,179	(433)	(13,575)	11,695
[in £'000]	Share capital	Share premium	Merger reserve	Capital reserve	Foreign exchange	Profit and loss reserve	Total equity
Balance at 1 January 2022 (audited)	11,130	706	688	13,179	(433)	(13,575)	11,695
Loss for the year	-	-	-	-	-	(2,430)	(2,430)
Foreign Exchange difference arising on translation of 4basebio S.L.U.	-			-	173	-	173
Share option charge	-	-	-	51	-	-	51
Balance at 30 June 2022 (unaudited)	11,130	706	688'	13,230	(260)	(16,005)	9,489

Consolidated statement of cash flows
for the six months ended 30 June 2022

[in £'000]							30 June 2022 (unaudited)			30 June 2021 (unaudited)	31 December 2021 (audited)
Net loss for the period							(2,430)			(1,650)	(3,235)
Adjustments to reconcile net loss for the period to net cashflows
Income taxes							(300)			(197)	(405)
Interest charge							16			31	113
Depreciation of property, plant and equipment							226			106	242
Amortisation and impairment of intangible assets							13			41	78
Other non-cash items							57			52	12
Working capital changes:
	Trade receivables and other current assets								(216)	(99)	(126)
	Trade payables and other current liabilities						157			24	615
	Inventories						10			26	(34)
Net Cash flows from operating activities							(2,467)			(1,666)	(2,740)
Investments in property, plant and equipment and intangible assets								(969)		(141)	(884)
Investments in capitalised development							(404)			(231)	(628)
Cash flows from investing activities							(1,373)			(372)	(1,512)
Cash in(out)flow due to changes in financing							(272)			(337)	(331)
Interest paid							(17)			(31)	(76)
Capital lease payments							(38)			(64)	(60)
Cash flows from financing activities							(327)			(432)	(467)
Net change in cash and cash equivalents							(4,167)			(2,470)	(4,719)
Exchange differences							178			(467)	(696)
Cash and cash equivalents at the beginning of the period							9,586			15,001	15,001
Cash and cash equivalents at the end of the period							5,597			12,064	9,586

Notes to the financial statements
For the six months ended 30 June 2022

1.General information

4basebio PLC is registered in England and Wales as a public limited company since 20 July 2021. Prior to that date it was registered as a United Kingdom Societas under the name 4basebio UK Societas. The conversion to a public limited company occurred following shareholder approval of the conversion at its Annual General Meeting held on 30 June 2021. With the conversion, the name of the Company changed to 4basebio PLC.

The Company is domiciled in England and the registered office of the Company is 25 Norman Way, Over, Cambridge, CB24 5QE. 4basebio PLC is the parent of a group of companies. The group structure remains the same as that shown in the Company's financial statements for the year ended 31 December 2021. The Group focusses on life sciences and in particular the development of synthetic DNA and nanoparticles suitable for inclusion in, or delivery of, therapeutic payloads for cell or gene therapies and gene vaccines.

The interim report was approved by the board of directors on 29 September 2022.

The Company's shares are traded on London Stock Exchange's AIM market, having been admitted on 17 February 2021. The international securities number (ISIN) number for its AIM traded shares is GB00BLD8ZL39; its ticker symbol is 4bb.l.

2.Significant accounting policies

Basis of preparation

This half year report, which is not audited, has been prepared in accordance with the measurement and recognition criteria of UK adopted International Accounting Standards. It does not include all the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company and its subsidiaries (the "Group") for the year ended 31 December 2021.

The accounting policies applied in this half year report are consistent with those in the financial statements for the year ended 31 December 2021, as described in those financial statements.

Significant judgments

In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The significant judgments made in relation to the financial statements are further set out below.

Going concern

The directors have, at the time of approving the half year report, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Internally?generated intangible assets - research and development expenditure

Development expenditure is capitalised when the conditions referred to in Note 3.2 of the Company's 2021 annual report are met. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

3.Foreign currencies

The functional currency of the Group is British Pounds.

The principal currency rate of the Group other than the British Pounds is the euro which has developed as follows in relation to the equivalent of one pound (GBP/£):

[in GBP]	Closing exchange rate				Average exchange rate
	30 June 2022	31 December 2021				Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
Euro	0.8582	0.8403				0.8424	0.8678	0.8594

4.Income taxes

The Group anticipates claiming R&D tax credits in both the UK and Spain in relation to the year ended 31 December 2022 and 2021. The quantum of such claims for the first half of 2022 is estimated at £0.3 million (period ending 30 June 2021: £0.2 million).

5.Loss per share

	Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
Numerator [in £'000]
Loss for the period	(2,430)	(1,650)	(3,235)
Denominator [number of shares]
Weighted average number of registered shares in circulation (ordinary shares) for calculating the undiluted earnings per share	12,317,473	12,317,473	12,317,473
Diluted and Undiluted earnings per share (£/share)	(0.20)	(0.13)	(0.26)

6.Intangible assets

[in £'000]	Development costs		Licences	Total
Cost or acquisition value
01 January 2021	1,987		128	2,115
Additions	545		83	628
Exchange differences	(142)		(11)	(153)
31 December 2021	2,390		200	2,590
01 January 2022	2,390		200	2,590
Additions	331		72	403
Exchange differences	56		6	62
30 June 2022	2,777		278	3,055
Cumulative amortisation and impairment
01 January 2021	1,304	26		1,330
Amortisation	69	9		78
Exchange differences	(87)	(2)		(89)
31 December 2021	1,286	33		1,319
01 January 2022	1,286	33		1,319
Amortisation	7	6		13
Exchange differences	27	1		28
30 June 2022	1,320	40		1,360
Net book value
31 December 2021	1,104		167	1,271
30 June 2022	1,457		238	1,695

7.Property, plant and equipment

[in £'000]	Operating equipment	Land and buildings	Right of use assets	Assets under construction	Total
Cost or acquisition value
01 January 2021	598	997	166		1,761
Additions	308	-	478	751	1,537
Transfers	-	-	-	-	-
Exchange differences	(24)	-	(9)	-	(33)
31 December 2021	882	997	635	751	3,265
01 January 2022	882	997	635	751	3,265
Additions	909	43	-	-	952
Transfers	751	-	-	(751)	-
Exchange differences	7	1	3	-	11
30 June 2022	2,549	1,041	638	-	4,228
Cumulative amortisation and impairment
01 January 2021	249	5	29	-	283
Depreciation	124	46	72	-	242
Exchange differences	(16)	-	(3)	-	(19)
31 December 2021	357	51	98	-	506
01 January 2022	357	51	98	-	506
Depreciation	115	67	43	-	225
Exchange differences	5	1	3	-	9
30 June 2022	477	119	144	-	740
Net book value
31 December 2021	525	946	537	751	2,759
30 June 2022	2,072	922	494	-	3,488

8.Cash and cash equivalents

[in £'000]	30 June 2022	31 December 2021
Bank balances and cash in hand	5,597	9,586
Cash and cash equivalents	5,597	9,586

9.Equity

The share capital of 4basebio PLC as of 30 June 2022 and 31 December 2021 amounts to a total of €12,317,473 divided into 12,317,473 shares of €1. These are all registered ordinary shares. There are no shares with special rights or other restrictions on voting rights.

Share-based payments

During H1 2022, 53,000 share options to subscribe for shares in the Company were granted to employees with an average weighted exercise price of £5.59 per share. The share options awarded vest one quarter on the anniversary of grant, over four years. Consistent with previous awards as explained in note 25 to the 2021 financial statements, the awards were valued using a Black Scholes valuation model.

An overall share-based payments charge of £51,000 has been expensed in the period with a corresponding amount recognised in equity based on fair values of between £0.22 and £2.36 per option, as at the dates of grant.

10.Approval of the half year report

The half year report was approved by the board of directors and authorised for publication on 29 September 2022.

Forward-looking statements

This announcement may contain certain statements about the future outlook for the 4basebio. Although the directors believe their expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.