REG - Provexis PLC - Half-year Report
30/12/2022 09:00
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RNS Number : 3258L Provexis PLC 30 December 2022
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.
30 December 2022
Provexis plc
UNAUDITED INTERIM RESULTS FOR SIX MONTHS TO 30 SEPTEMBER 2022
Provexis plc ("Provexis" or the "Company"), the business that develops,
licenses and sells the proprietary, scientifically-proven Fruitflow®
heart-health functional food ingredient, announces its unaudited interim
results for the six months ended 30 September 2022.
Highlights
· Two new agreements secured with DSM in June 2022 for Fruitflow,
to replace the Alliance Agreement: (i) a Transfer of Business agreement and
(ii) a Premix and Market-Ready Solutions supply agreement, both to take effect
from 1 January 2023.
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient will transfer to become direct customers of Provexis
WEF 1 January 2023, and Provexis will take over the outsourced supply chain /
production process for Fruitflow at that time. The customer transfer process
from DSM to Provexis is currently ongoing, and thus far it has seen a number
of positive interactions with existing and prospective new customers for
direct sales of Fruitflow by Provexis in 2023 and beyond.
· New patent application filed in June 2022 relating to the use of
Fruitflow to confer health benefits in modulating the gut microbiome of
humans, following the completion of a successful human study.
· New partnership with DSM has been agreed relating to the gut
microbiome patent, subject to certain milestones which have been agreed
between the parties. Provexis and DSM are keen to progress this encouraging
new technology towards an early commercial launch of products based on it.
· Planned launch by By-Health, a circa £5bn listed Chinese dietary
supplement business, of a number of Fruitflow based products in the Chinese
market is progressing well, with potential sales volumes remaining at a
significant multiple of existing Fruitflow sales. The exclusive Fruitflow
supply and distribution agreement which was agreed with By-Health in 2021 will
take full effect from 1 January 2023.
· By-Health continues to work on an extensive regulatory submission
to the Chinese State Administration for Market Regulation (SAMR) for
Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect,
addressing the aberrant blood clots which can lead to heart attacks and
strokes.
· By-Health has made a significant investment in eight separate
studies in China, at its sole expense, in support of the Fruitflow based
products which it plans to launch in China. The five studies which have been
completed by By-Health showed excellent results in use for Fruitflow, and
provide strong evidence for By-Health in its regulatory submissions to the
SAMR for Fruitflow.
· Total revenue for the period of £179k, 15% behind the prior six
month period (2021: £211k), primarily due to short term lockdowns and other
COVID-19 disruptions in some of the growing markets for Fruitflow in the Asia
Pacific region.
· Cash of £745k at 30 September 2022 (30 September 2021: £982k).
Provexis Chairman Dawson Buck and CEO Ian Ford commented:
'The Company was delighted to announce the completion of two significant
agreements with DSM in June 2022, which will position the Company extremely
well for the next stage of its development.
The Company was also pleased to announce the filing of a new patent
application for Fruitflow in June 2022, relating to the use of Fruitflow to
confer health benefits in modulating the gut microbiome of humans. The patent
application follows the completion of a successful human study, the results of
which strongly support the use of Fruitflow for modulating gut microbiota to
confer a number of health benefits, to include a reduction in TMAO. It is
particularly encouraging to note that some potential new uses for Fruitflow
were identified in the study, and have been highlighted in the patent
application, looking to treat some major health conditions which are beyond
Fruitflow's long established and proven use in heart-health.
The Company and DSM have had a strong long-term relationship over the past
twelve years, with the shared interest of both companies always having been to
maximise the commercial returns that can be achieved from Fruitflow. The
Company remains appreciative of DSM's past help and support, and it looks
forward to building on this relationship in the coming years through the new
gut microbiome partnership, and through ongoing sales of Fruitflow to DSM's
Premix and Market-Ready Solutions businesses.
The Company looks forward to welcoming and serving the majority of DSM's
existing customers for Fruitflow from January next year, and is pleased to be
taking over control of the supply chain / production process for Fruitflow at
the same time. There will be some clear synergies from January 2023 as the
Company will be looking to sell Fruitflow to: (i) former DSM customers for
Fruitflow; (ii) DSM and its Premix and Market-Ready Solutions businesses;
(iii) new customers for Fruitflow as a straight ingredient; and (iv) By-Health
and its customers, through the Company's long term supply and distribution
agreement for Fruitflow with By-Health. Provexis will continue to sell its
Fruitflow+ Omega-3 dietary supplement product direct to consumers, and serve
its Chinese Cross-Border e-commerce distributor for this product in China.
The Alliance Agreement business for Fruitflow is effectively now in a period
of transition and handover; the customer transfer process from DSM to
Provexis, for sales of Fruitflow from 1 January 2023 onwards, is currently
ongoing and thus far it has seen a number of very positive interactions with
existing and prospective new customers for direct sales of Fruitflow by
Provexis in 2023 and beyond.
The Company's supply and distribution agreement for Fruitflow with By-Health,
which was announced in November 2021, will take full effect from 1 January
2023. By-Health will file its regulatory submission to the SAMR for Fruitflow
at the appropriate time, seeking to obtain a new permitted health function
claim for foods such as Fruitflow that can demonstrate an anti-platelet
effect. If By-Health is successful in obtaining a new permitted health
function claim, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
Fruitflow is well placed to play an important role in the Chinese
cardiovascular health market under the permitted health function claim
legislation, and we look forward to working closely with By-Health seeking to
maximise the commercial success of this agreement for the benefit of both
companies.
The Company has developed a strong, long lasting and wide-ranging patent
portfolio for Fruitflow, and it owns outright four existing patent families
for Fruitflow. The new microbiome patent application takes this to a potential
total of five patent families, with potential patent protection now running
out to 2042. The four existing patent families have a truly global footprint,
and the Company also holds other valuable intellectual property and trade
secrets for Fruitflow. The intellectual property for Fruitflow is of
fundamental importance to the Company and its current and future commercial
partners, to include DSM and By-Health, and it underpins the numerous
commercial opportunities which the Company and its partners are pursuing for
Fruitflow.
The Company expects that the new gut microbiome patent application, and the
other significant changes announced in June 2022 to the sales and supply chain
structure for Fruitflow, will have a strongly beneficial effect on the current
and future commercial prospects for Fruitflow and the business worldwide.
The Company would like to thank its customers and shareholders for their
continued support, and the Board remains positive about the outlook for
Fruitflow and the Provexis business for the second half of the financial year
and beyond.'
For further information please contact:
Provexis plc Tel: 07490 391888
Ian Ford, CEO enquiries@provexis.com
Dawson Buck, Non-executive Chairman
Allenby Capital Limited (Nominated Adviser and Broker) Tel: 020 3328 5656
Nick Naylor / Freddie Wooding
Chairman and CEO's statement
The Company has had an active first six months of the year, and it has made
some further significant progress with the commercial prospects of its
innovative, patented Fruitflow® heart-health ingredient.
DSM Nutritional Products
The Company's Alliance partner DSM Nutritional Products ('DSM') has continued
to develop the market for Fruitflow in all global markets. More than 100
regional consumer healthcare brands have now been launched by direct customers
of DSM, and a number of further regional brands have been launched through
DSM's distributor channels.
The Company's alliance agreement with DSM dates back to June 2010, with a
contractual term which runs to 31 December 2022.
In September 2021 the Company announced that it was engaged in constructive
negotiations with DSM, working towards a new agreement for Fruitflow for the
period after 31 December 2022 to replace the Alliance Agreement; in June 2022
the Company announced that the parties had concluded their negotiations and
had entered into (i) a Transfer of Business agreement for Fruitflow and (ii) a
Premix and Market-Ready Solutions supply agreement for Fruitflow, both to take
effect from 1 January 2023.
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits, to include a
reduction in TMAO (trimethylamine-n-oxide).
Under the terms of the two new agreements with DSM, and the new patent
application:
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a Premix or Market-Ready solution) will transfer
to become direct customers of Provexis WEF 1 January 2023.
· DSM will help facilitate the transfer of its wholly outsourced
supply chain / production process for Fruitflow from DSM to Provexis with
effect from 1 January 2023.
· A royalty will be payable to DSM on the gross profits generated
from Fruitflow sales to customers transferred from DSM over the first four
years of the Transfer of Business agreement.
· From 1 January 2023 the net profit accruing to Provexis on sales
of Fruitflow in the calendar year - on a pro-forma basis, assuming like for
like sales and margins - would be materially ahead of the net share of the
profit that would have accrued to Provexis with like for like sales and
margins under the existing 2010 Alliance Agreement; on the same pro-forma
basis, assuming like for like sales and margins, the net profit accruing to
Provexis would further increase in each of the subsequent three calendar
years.
· A new partnership with DSM has been agreed relating to the gut
microbiome patent. This partnership will give DSM preferential access to the
use, marketing, and sale of Fruitflow based products which are based on the
patent, subject to certain milestones which have been agreed between the
parties. Provexis and DSM are keen to progress this encouraging new technology
towards an early commercial launch of products which are based on it.
· The results of the successful gut microbiome human study are in
the process of being submitted for publication in a peer reviewed scientific
journal. The patent application (i) states that the results of the human study
strongly support the use of Fruitflow for modulating gut microbiota to confer
a number of health benefits, and (ii) sets out some potential new uses for
Fruitflow in treating a wide variety of human health conditions, beyond
Fruitflow's existing established use in heart-health. The global digestive
health market size was US$38 billion in 2019 and it is projected to grow to
US$72 billion in 2027 at a high single-digit CAGR in the 2020-2027 period (see
www.fortunebusinessinsights.com/digestive-health-market-104750
(http://www.fortunebusinessinsights.com/digestive-health-market-104750) ).
· Provexis will sell Fruitflow as a straight ingredient to DSM
exclusively for use in DSM's Premix Solutions and Market-Ready Solutions
businesses, with DSM then looking to sell the resulting Premix and
Market-Ready Solutions products on to its customers. DSM's Premix and
Market-Ready Solutions businesses are part of DSM's Customized Solutions
business which also offers personalised nutrition solutions to customers, a
rapidly developing growth area. The Company looks forward to supporting DSM
and its Premix and Market-Ready Solutions customers for many years to come.
· A number of DSM's customers for Fruitflow which are set to be
transferred to Provexis have been Fruitflow customers for several years,
including some distributor customers which sell Fruitflow on to third parties.
The Company has been progressing these sales relationships since the Transfer
of Business agreement was announced in June 2022, and confirms it will be able
to generate new customers for Fruitflow outside the royalty arrangements with
DSM, in addition to its existing supply and distribution agreement for
Fruitflow with By-Health. The Company is in discussions with a number of third
parties seeking to progress new sales and distribution opportunities for
Fruitflow.
From 1 January 2023 the Group's sales channels for Fruitflow will therefore
include:
1. Former DSM customers for Fruitflow;
2. DSM and its Premix and Market-Ready Solutions businesses, which will
leverage the resources and relationships of DSM in some of the major global
markets;
3. New customers for Fruitflow as a straight ingredient;
4. By-Health and its customers, through the Company's long term supply and
distribution agreement for Fruitflow with By-Health; and
5. The Group's Fruitflow+ Omega-3 dietary supplement product which is sold
direct to consumers, the Group will also look to serve its Chinese
Cross-Border e-commerce distributor for this product in China.
An increasing number of commercial projects have been initiated by DSM with
prospective customers in recent years, including some prospective customers
which are part of global businesses, and the total projected annual sales
value of the prospective sales pipeline for Fruitflow continues to stand at a
substantial multiple of existing annual sales.
The Alliance Agreement business for Fruitflow is now in a period of transition
and handover; the customer transfer process from DSM to Provexis, for sales of
Fruitflow from 1 January 2023 onwards, is currently ongoing and thus far it
has seen a number of very positive interactions with existing and prospective
new customers for direct sales of Fruitflow by Provexis in 2023 and beyond.
The Company can be contacted for all Fruitflow sales enquiries by email at
fruitflow@provexis.com.
Trading summary - six months ended 30 September 2022
In the six months ended 30 September 2022 total revenues were £179k, 15%
behind the prior six month period (2021: £211k), reflecting:
· A decrease in the net income received from the Company's Alliance
Agreement with DSM, which fell by 28% to £97k in the period (2021: £135k).
The decrease was primarily due to short term lockdowns and other COVID-19
disruptions in some of the growing markets for Fruitflow in the Asia Pacific
region, leading to more erratic demand in the short term; and
· An increase in revenue, net of sales rebates, from the Company's
Fruitflow+ Omega-3 business, including the Company's website
www.fruitflowplus.com (http://www.fruitflowplus.com) , Amazon UK, Holland
& Barrett, and the Company's distributor for Fruitflow+ Omega-3 in China
through the CBEC channel. This business grew by 8% to £82k in the period
(2021: £76k).
Loss from operations for the period was £174k, 20% higher than the prior
period (2021: £145k).
By-Health Co., Ltd.
In November 2021 the Company announced it had entered into a supply and
distribution agreement (the 'By-Health Agreement') for Fruitflow with
By-Health, a listed Chinese dietary supplement business with a market
capitalisation of approximately £5 billion.
The By-Health Agreement, which followed the Company's extensive work with
By-Health over the last five years, will take full effect from 1 January 2023
and it gives By-Health exclusive supply and distribution rights to
commercialise Fruitflow in Mainland China, Hong Kong, Macau, Taiwan and
Australia (the 'Territories').
Under the By-Health Agreement Provexis will be responsible for the
manufacture, supply and sale of Fruitflow to By-Health, and By-Health will be
responsible for the manufacture, marketing, and sale of Fruitflow based
functional food and dietary supplement finished products in the Territories,
through By-Health's extensive sales network. By-Health will also have
exclusive rights to act as the distributor of Fruitflow as an ingredient in
the Territories.
Provexis and By-Health will seek to collaborate on research and development
projects which may result in the development and approval of Fruitflow as a
drug, for potential sale and distribution in the Territories.
Regulatory progress in China - new permitted health function claim
The Company has previously announced it has been working with By-Health to
support the planned launch of a number of Fruitflow based products in the
Chinese market, with potential volumes at a significant multiple of current
Fruitflow sales.
The planned launch of Fruitflow based products in the Chinese market has been
progressing well. Clinical studies conducted in China are typically required
to obtain the necessary regulatory clearances in China, and a significant
investment in eight separate Fruitflow studies has been undertaken at
By-Health's expense.
Five studies have been successfully completed in China, and two clinical
studies and one animal study are currently ongoing.
The five completed studies showed excellent results in use for Fruitflow, and
they provide strong evidence for its efficacy on platelet function. The
Chinese regulatory system for functional health food ingredients such as
Fruitflow is governed by the State Administration for Market Regulation
(SAMR), China's top market regulator, and it is based on a defined list of 27
permitted health function claims which brand owners are permitted to use on
product labels.
Health function claims are based on test methods and criteria that have been
systematically evaluated and verified, and it is currently envisaged that the
existing list of 27 permitted health function claims might be reduced to a
revised list of 24 permitted claims. The SAMR provides the possibility of
adding new health function claims to the list, as long as the claim can be
evaluated and verified by the SAMR.
Under SAMR regulations functional health foods need to indicate a relationship
between a food or nutrient and a consequent health improvement which falls
under one of the permitted health function claims.
SAMR certified functional health foods are required to use a blue cap / blue
hat logo on their product packaging, which identifies products as approved
functional health foods.
By-Health's regulatory clearance preparations for Fruitflow were originally
focussed on obtaining blue cap health claim status for some Fruitflow based
products in China, under the existing 27 permitted health function claim
structure.
By-Health is now working on an extensive regulatory submission to the SAMR for
Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect,
inhibiting platelet function and conferring beneficial effects for people who
are at risk of platelet hyperactivity-associated thrombosis.
By-Health has recently updated its website (see www.by-health.com/en/aboutus
(http://www.by-health.com/en/aboutus) ) stating that it has completed:
'Research comprehensively in the cardiovascular health area. We have developed
a new product made with Fruitflow®, popularly known as 'natural Aspirin'. It
helps to maintain normal platelet aggregation.'
By-Health will file its regulatory submission to the SAMR for Fruitflow at the
appropriate time, seeking to obtain a new permitted health function claim
which would be in addition to the currently defined list of 27 (reducing to
24) permitted claims. Subject to the timing the new anti-platelet claim, if
approved, would therefore represent the 28th - or the 25th - permitted health
function claim in China.
If By-Health is successful in obtaining a new permitted health function claim
for functional health foods such as Fruitflow that can demonstrate an
anti-platelet effect, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
COVID-19
Fruitflow was recognised in a review article by the Frontiers in Nutrition
journal www.frontiersin.org/articles/10.3389/fnut.2020.583080/full
(http://www.frontiersin.org/articles/10.3389/fnut.2020.583080/full) in 2020
which stated that nutraceuticals such as Fruitflow may serve as:
'A safe antiplatelet prophylactic treatment for those at high risk of COVID-19
who may also be at increased risk of thrombotic complications and an
alternative to pharmacological compounds that may cause greater risk of
bleeding.'
A review article, titled 'Platelet hyperactivity in COVID-19: Can the tomato
extract Fruitflow® be used as an antiplatelet regime?'
www.sciencedirect.com/science/article/pii/S0306987720333715
(http://www.sciencedirect.com/science/article/pii/S0306987720333715) was
published in 2021 by the peer-reviewed journal Medical Hypotheses, a leading
journal which advances new discussion and innovation in medical treatments.
The article was written by Professor Asim K Duttaroy, the original inventor of
Fruitflow, and Dr Niamh O'Kennedy, Provexis plc's Chief Scientific Officer,
and it concluded with the suggestion that:
'Consuming Fruitflow®, especially before or during the early stages of
COVID-19 illness, may have an effect on the severity of illness experienced.
It may particularly benefit people who are more vulnerable to the development
of endothelial / platelet dysfunction. It is a safe dietary antiplatelet and
should be investigated as a potentially useful intervention for prevention of
thrombotic disorders in COVID-19.'
Market opportunity
A study backed by scientists from the National Center for Cardiovascular
Diseases in China which was updated in 2020
(www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/#
(http://www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/) ) stated that:
· the prevalence of Cardiovascular Disease ('CVD') in China has
been increasing continuously since 2006; approximately 290 million patients in
China now have CVD; and
· two in five deaths in China are attributed to CVD, with CVD
remaining the leading cause of death in 2016.
In December 2020 the World Health Organisation reported
(www.who.int/news/item/09-12-2020-who-reveals-leading-causes-of-death-and-disability-worldwide-2000-2019
(http://www.who.int/news/item/09-12-2020-who-reveals-leading-causes-of-death-and-disability-worldwide-2000-2019)
): 'Heart disease has remained the leading cause of death at the global level
for the last 20 years. However, it is now killing more people than ever
before. The number of deaths from heart disease increased by more than 2
million since 2000, to nearly 9 million in 2019. Heart disease now represents
16% of total deaths from all causes. More than half of the 2 million
additional deaths were in the WHO Western Pacific region.' The WHO Western
Pacific region includes China.
By-Health's long-term goal of science-based nutrition is to achieve
'comprehensive intervention for human health' (www.by-health.com/en/aboutus
(http://www.by-health.com/en/aboutus) ), and Fruitflow is well placed to
provide such intervention in the Chinese cardiovascular health market.
Fruitflow+ dietary supplement products
Fruitflow+ Omega-3 is available to purchase from the Company's subscription
focussed e-commerce website www.fruitflowplus.com
(http://www.fruitflowplus.com) , Amazon UK and Holland & Barrett.
The Fruitflow+ Omega-3 business grew by 8% to £82k in the period (2021:
£76k), reflecting further growth in subscriber numbers on the
www.fruitflowplus.com website, and a further order from the Company's Chinese
Cross-Border e-commerce ('CBEC') channel.
The CBEC distribution agreement in China is separate but wholly complementary
to the Company's work with By-Health, with the CBEC regulations enabling sales
of Fruitflow+ Omega-3 in China now, prior to the health function claim which
By-Health is seeking to secure.
Fruitflow+ Omega-3 has a social media presence on Facebook
www.facebook.com/FruitflowPlus (http://www.facebook.com/FruitflowPlus) ,
Instagram www.instagram.com/fruitflowplus
(http://www.instagram.com/fruitflowplus) and Twitter
https://twitter.com/FruitflowPlus (https://twitter.com/FruitflowPlus) .
The Company is seeking to expand further its commercial activities with
Fruitflow+ Omega-3 and other Fruitflow+ combination products, and it is
currently in dialogue with some other potential international direct selling
customers.
Intellectual property
The Company is responsible for filing and maintaining patents and trade marks
for Fruitflow, and patent coverage for Fruitflow now includes the following
patent families which are all owned outright by Provexis:
Patent family
Improved Fruitflow / Fruit Extracts
Improved Fruitflow / Fruit Extracts, with patents granted by the European
Patent Office in January 2017 and September 2020.
Patents have been granted in eleven other major territories to include China
and USA; and applications are at a late stage of progression in a further six
global territories, with potential patent protection out to November 2029.
Antihypertensive (blood pressure lowering) effects
This patent was originally developed in collaboration with the University of
Oslo, and it has now been granted for Fruitflow in Europe, the US and two
other major territories. Patent applications are being progressed in a further
four major territories to include the US and China, with potential patent
protection out to April 2033.
In August 2020 the Company announced it had agreed to purchase the background
and joint foreground blood pressure lowering IP owned by Inven2 AS, the
technology transfer office at the University of Oslo, and Provexis now owns
these important patents outright, with the licensing option originally held by
Inven2 having been cancelled.
Fruitflow with nitrates in mitigating exercise-induced inflammation and for
promoting recovery from intense exercise
Patents have been granted around Europe and in the US, Australia, Brazil,
China, Hong Kong, Israel, Japan, South Korea, the Philippines, New Zealand and
Mexico.
Further patent protection is being sought in six territories, with potential
patent protection out to December 2033.
Fruitflow for air pollution
The use of Fruitflow in protecting against the adverse effects of air
pollution on the body's cardiovascular system.
Laboratory work has shown that Fruitflow can reduce the platelet activation
caused by airborne particulate matter, such as that from diesel emissions, by
approximately one third.
US, Australian, Indonesian, Israeli and Japanese patents have been secured and
there are pending applications in 12 jurisdictions (including the US where a
further application has been filed) with potential patent protection out to
November 2037.
Fruitflow to confer health benefits in modulating the gut microbiome of humans
The Company announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits, to include a
reduction in TMAO (trimethylamine-n-oxide). This patent filing extends
potential patent protection for Fruitflow out to June 2042.
Capital structure and funding
The Company is seeking to maximise the commercial returns that can be achieved
from its Fruitflow technology, and the Company's cost base and its resources
continue to be very tightly managed. The Company remains keen to minimise
dilution to shareholders and it is focussed on moving into profitability as
Fruitflow revenues increase, but while the Company remains in a loss-making
position it may need to raise funds in the future to meets its working capital
requirements.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a DSM Premix or DSM Market-Ready solution) will
transfer to become direct customers of Provexis WEF 1 January 2023.
The Company will need to hold Fruitflow in stock from 1 January 2023 onwards,
to sell to new and existing customers, and the Company has therefore agreed to
purchase from DSM the remaining stocks of Fruitflow which DSM holds on 31
December 2022. It is intended that the Company will pay DSM for this inventory
over the course of a three month sale back period, commencing on 1 January
2023, with payments due equally (amounting to one third of DSM's 31 December
2022 inventory) on 31 January 2023, 28 February 2023 and 31 March 2023. The
amount of inventory which DSM will hold at 31 December 2022 will depend
primarily on DSM's sales of Fruitflow in 2022, which will be notified to the
Company in late January 2023, hence it is not currently possible to state with
any certainty how much inventory will remain at 31 December 2022, or therefore
the amount which the Company would need to pay DSM for this inventory on 31
January 2023, 28 February 2023 and 31 March 2023.
Under the terms of the DSM Transfer of Business agreement, the Company can
elect in the first quarter of 2023 to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022, being a decision which the
Company will seek to make in the first quarter of 2023 once the Company has a
clearer understanding of (i) the amount of stock remaining at 31 December
2022, (ii) the best before dates of this inventory, which are currently
estimated to be favourable / long dated in light of recent production runs of
new Fruitflow material in 2022, (iii) likely customer demand in 2023 and
beyond and (iv) the Company's financial resources at that time.
The amount of stock which will remain at 31 December 2022 clearly remains
uncertain as set out above, although it is currently expected to be in excess
of €1m (one million Euros), an amount which - if the Company elected in the
first quarter of 2023 to purchase this inventory in its entirety, which is
likely to be in the Company's best interests - would require further equity or
loan finance. Subject to the outcome of ongoing negotiations with a third
party, the Company might also be able to hold some of this stock on a
consignment basis, only paying for the stock when it was required for sale.
Based on its current level of cash it is expected that the Group will
therefore need to raise further equity finance, or potentially new loan
finance, in the coming months, a situation which is deemed to represent a
material uncertainty related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's financial
statements.
Outlook
The Company is pleased to report on another strong period of progress.
The Company was delighted to announce the completion of two significant
agreements with DSM in June 2022, which will position the Company extremely
well for the next stage of its development.
The Company was also pleased to announce the filing of a new patent
application for Fruitflow in June 2022, relating to the use of Fruitflow to
confer health benefits in modulating the gut microbiome of humans. The patent
application follows the completion of a successful human study, the results of
which strongly support the use of Fruitflow for modulating gut microbiota to
confer a number of health benefits, to include a reduction in TMAO. It is
particularly encouraging to note that some potential new uses for Fruitflow
were identified in the study, and have been highlighted in the patent
application, looking to treat some major health conditions which are beyond
Fruitflow's long established and proven use in heart-health.
The Company and DSM have had a strong long-term relationship over the past
twelve years, with the shared interest of both companies always having been to
maximise the commercial returns that can be achieved from Fruitflow. The
Company remains appreciative of DSM's past help and support, and it looks
forward to building on this relationship in the coming years through the new
gut microbiome partnership, and through ongoing sales of Fruitflow to DSM's
Premix and Market-Ready Solutions businesses.
The Company looks forward to welcoming and serving the majority of DSM's
existing customers for Fruitflow from January next year, and is pleased to be
taking over control of the supply chain / production process for Fruitflow at
the same time. There will be some clear synergies from January 2023 as the
Company will be looking to sell Fruitflow to: (i) former DSM customers for
Fruitflow; (ii) DSM and its Premix and Market-Ready Solutions businesses;
(iii) new customers for Fruitflow as a straight ingredient; and (iv) By-Health
and its customers, through the Company's long term supply and distribution
agreement for Fruitflow with By-Health. Provexis will continue to sell its
Fruitflow+ Omega-3 dietary supplement product direct to consumers, and serve
its Chinese Cross-Border e-commerce distributor for this product in China.
The Alliance Agreement business for Fruitflow is effectively now in a period
of transition and handover; the customer transfer process from DSM to
Provexis, for sales of Fruitflow from 1 January 2023 onwards, is currently
ongoing and thus far it has seen a number of very positive interactions with
existing and prospective new customers for direct sales of Fruitflow by
Provexis in 2023 and beyond.
The Company's supply and distribution agreement for Fruitflow with By-Health,
which was announced in November 2021, will take full effect from 1 January
2023. By-Health will file its regulatory submission to the SAMR for Fruitflow
at the appropriate time, seeking to obtain a new permitted health function
claim for foods such as Fruitflow that can demonstrate an anti-platelet
effect. If By-Health is successful in obtaining a new permitted health
function claim, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
Fruitflow is well placed to play an important role in the Chinese
cardiovascular health market under the permitted health function claim
legislation, and we look forward to working closely with By-Health seeking to
maximise the commercial success of this agreement for the benefit of both
companies.
The Company has developed a strong, long lasting and wide-ranging patent
portfolio for Fruitflow, and it owns outright four existing patent families
for Fruitflow. The new microbiome patent application takes this to a potential
total of five patent families, with potential patent protection now running
out to 2042. The four existing patent families have a truly global footprint,
and the Company also holds other valuable intellectual property and trade
secrets for Fruitflow. The intellectual property for Fruitflow is of
fundamental importance to the Company and its current and future commercial
partners, to include DSM and By-Health, and it underpins the numerous
commercial opportunities which the Company and its partners are pursuing for
Fruitflow.
The Company expects that the new gut microbiome patent application, and the
other significant changes announced in June 2022 to the sales and supply chain
structure for Fruitflow, will have a strongly beneficial effect on the current
and future commercial prospects for Fruitflow and the business worldwide.
The Company would like to thank its customers and shareholders for their
continued support, and the Board remains positive about the outlook for
Fruitflow and the Provexis business for the second half of the financial year
and beyond.
Dawson
Buck Ian
Ford
Chairman CEO
Consolidated statement of comprehensive income Unaudited Unaudited Audited
Six months ended 30 September 2022 six months six months year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£ £ £
Notes
Revenue 179,369 211,195 426,168
Cost of goods (26,730) (24,287) (46,119)
Gross profit 152,639 186,908 380,049
Selling and distribution costs (23,974) (24,170) (45,268)
Research and development costs (107,398) (140,866) (249,694)
Administrative costs - share based payment charges (11,318) (28,039) (67,119)
Administrative costs - other (183,955) (139,062) (317,173)
Loss from operations (174,006) (145,229) (299,205)
Finance income 264 40 73
Loss before taxation (173,742) (145,189) (299,132)
Taxation - R&D tax relief: receivable tax credit 16,108 650 58,905
Loss and total comprehensive loss for the period (157,634) (144,539) (240,227)
Attributable to:
Owners of the parent (155,759) (130,164) (224,250)
Non-controlling interest (1,875) (14,375) (15,977)
Loss and total comprehensive loss for the period (157,634) (144,539) (240,227)
Loss per share to owners of the parent
Basic and diluted - pence 3 (0.01) (0.01) (0.01)
Consolidated statement of financial position Unaudited Unaudited Audited
30 September 2022 30 September 30 September 31 March
2022 2021 2022
Notes £ £ £
Assets
Current assets
Inventories 63,964 107,640 85,808
Trade and other receivables 140,809 94,349 104,443
Corporation tax asset 61,268 14,610 72,865
Cash and cash equivalents 744,551 981,657 863,873
Total current assets 1,010,592 1,198,256 1,126,989
Total assets 1,010,592 1,198,256 1,126,989
Liabilities
Current liabilities
Trade and other payables (152,728) (172,568) (157,909)
Total current liabilities (152,728) (172,568) (157,909)
Total liabilities (152,728) (172,568) (157,909)
Total net assets 857,864 1,025,688 969,080
Capital and reserves attributable to
owners of the parent company
Share capital 2,217,822 2,210,822 2,210,822
Share premium reserve 18,703,321 18,675,221 18,675,221
Merger reserve 6,599,174 6,599,174 6,599,174
Retained earnings (26,130,579) (25,931,132) (25,986,138)
1,389,738 1,554,085 1,499,079
Non-controlling interest (531,874) (528,397) (529,999)
Total equity 857,864 1,025,688 969,080
Consolidated statement of cash flows Unaudited Unaudited Audited
30 September 2022 six months six months year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£ £ £
Cash flows from operating activities
Loss after tax (157,634) (144,539) (240,227)
Adjustments for:
Finance income (264) (40) (73)
Tax credit receivable (16,108) (650) (58,905)
Share-based payment charge - share options 11,318 28,039 67,119
Changes in inventories 21,844 (47,064) (25,232)
Changes in trade and other receivables (36,292) 46,614 36,475
Changes in trade and other payables (5,181) 21,887 7,228
Net cash flow from operations (182,317) (95,753) (213,615)
Tax credits received 27,705 - -
Total cash flow from operating activities (154,612) (95,753) (213,615)
Cash flow from investing activities
Interest received 190 - 78
Total cash flow from investing activities 190 - 78
Cash flow from financing activities
Proceeds from issue of share capital - share options 35,100 - -
Total cash flow from financing activities 35,100 - -
Net change in cash and cash equivalents (119,322) (95,753) (213,537)
Opening cash and cash equivalents 863,873 1,077,410 1,077,410
Closing cash and cash equivalents 744,551 981,657 863,873
Consolidated statement of changes in equity Share Share Merger Retained Total equity Non- Total
30 September 2022 capital premium reserve earnings attributable to owners of controlling interests equity
the parent
£ £ £ £ £ £ £
At 31 March 2021 2,210,822 18,675,221 6,599,174 (25,829,007) 1,656,210 (514,022) 1,142,188
Share-based charges - share options - - - 28,039 28,039 - 28,039
Total comprehensive expense for the period - - - (130,164) (130,164) (14,375) (144,539)
At 30 September 2021 2,210,822 18,675,221 6,599,174 (25,931,132) 1,554,085 (528,397) 1,025,688
Share-based charges - share options - - - 39,080 39,080 - 39,080
Total comprehensive expense for the period - - - (94,086) (94,086) (1,602) (95,688)
At 31 March 2022 2,210,822 18,675,221 6,599,174 (25,986,138) 1,499,079 (529,999) 969,080
Share-based charges - share options - - - 11,318 11,318 - 11,318
Issue of shares - share options exercised 23-May-22 7,000 28,100 - - 35,100 - 35,100
Total comprehensive expense for the period - - - (155,759) (155,759) (1,875) (157,634)
At 30 September 2022 2,217,822 18,703,321 6,599,174 (26,130,579) 1,389,738 (531,874) 857,864
1. General information, basis of preparation and accounting policies
General information
Provexis plc is a public limited company incorporated and domiciled in the
United Kingdom (registration number 05102907). The address of the registered
office is 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK.
The main activities of the Group are those of developing, licensing and
selling the proprietary, scientifically-proven Fruitflow® heart-health
functional food ingredient.
Basis of preparation
This condensed financial information has been prepared using accounting
policies consistent with International Financial Reporting Standards in the
European Union (IFRS).
The same accounting policies, presentation and methods of computation are
followed in this condensed financial information as are applied in the Group's
latest annual audited financial statements, except as set out below. While the
financial figures included in this half-yearly report have been computed in
accordance with IFRS applicable to interim periods, this half-yearly report
does not contain sufficient information to constitute an interim financial
report as that term is defined in IAS 34.
Use of non-GAAP profit measure - underlying operating profit
The directors believe that the operating loss before share based payments
measure provides additional useful information for shareholders on underlying
trends and performance. This measure is used for internal performance
analysis. Underlying operating loss is not defined by IFRS and therefore may
not be directly comparable with other companies' adjusted profit measures. It
is not intended to be a substitute for, or superior to IFRS measurements of
profit.
The interim financial information does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006 and has been neither audited
nor reviewed by the Company's auditors James Cowper Kreston pursuant to
guidance issued by the Auditing Practices Board.
The results for the year ended 31 March 2022 are not statutory accounts. The
statutory accounts for the last year ended 31 March 2022 were approved by the
Board on 29 September 2022 and are filed at Companies House. The report of the
auditors on those accounts was unqualified, contained an emphasis of matter
with respect to going concern, and did not contain a statement under section
498 of the Companies Act 2006.
The interim report for the six months ended 30 September 2022 can be
downloaded from the Company's website www.provexis.com. Further copies of the
interim report and copies of the 2022 annual report and accounts can be
obtained by writing to the Company Secretary, Provexis plc, 2 Blagrave Street,
Reading, Berkshire RG1 1AZ, UK.
This announcement was approved by the Board of Provexis plc for release on 30
December 2022.
Going concern
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a DSM Premix or DSM Market-Ready solution) will
transfer to become direct customers of Provexis WEF 1 January 2023.
The Company will need to hold Fruitflow in stock from 1 January 2023 onwards,
to sell to new and existing customers, and the Company has therefore agreed to
purchase from DSM the remaining stocks of Fruitflow which DSM holds on 31
December 2022. It is intended that the Company will pay DSM for this inventory
over the course of a three month sale back period, commencing on 1 January
2023, with payments due equally (amounting to one third of DSM's 31 December
2022 inventory) on 31 January 2023, 28 February 2023 and 31 March 2023. The
amount of inventory which DSM will hold at 31 December 2022 will depend
primarily on DSM's sales of Fruitflow in 2022, which will be notified to the
Company in late January 2023, hence it is not currently possible to state with
any certainty how much inventory will remain at 31 December 2022, or therefore
the amount which the Company would need to pay DSM for this inventory on 31
January 2023, 28 February 2023 and 31 March 2023.
Under the terms of the DSM Transfer of Business agreement, the Company can
elect in the first quarter of 2023 to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022, being a decision which the
Company will seek to make in the first quarter of 2023 once the Company has a
clearer understanding of (i) the amount of stock remaining at 31 December
2022, (ii) the best before dates of this inventory, which are currently
estimated to be favourable / long dated in light of recent production runs of
new Fruitflow material in 2022, (iii) likely customer demand in 2023 and
beyond and (iv) the Company's financial resources at that time.
The amount of stock which will remain at 31 December 2022 clearly remains
uncertain as set out above, although it is currently expected to be in excess
of €1m (one million Euros), an amount which - if the Company elected in the
first quarter of 2023 to purchase this inventory in its entirety, which is
likely to be in the Company's best interests - would require further equity or
loan finance. Subject to the outcome of ongoing negotiations with a third
party, the Company might also be able to hold some of this stock on a
consignment basis, only paying for the stock when it was required for sale.
Based on its current level of cash it is expected that the Group will
therefore need to raise further equity finance, or potentially new loan
finance, in the coming months, a situation which is deemed to represent a
material uncertainty related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale.
For these reasons the Directors are of the opinion that at 30 December 2022,
the Group and Company's liquidity and capital resources are adequate to
deliver the current strategic objectives and 2023 business plan and that the
Group and Company remain a going concern.
Accounting policies
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 March 2022, as described in those
annual financial statements.
2. Segmental reporting
The Group's operating segments are determined based on the Group's internal
reporting to the Chief Operating Decision Maker (CODM). The CODM has been
determined to be the Board of Directors as it is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments. The performance of operating segments is assessed on revenue.
The CODM uses revenue as the key measure of the segments' results as it
reflects the segments' underlying trading performance for the financial period
under evaluation. Revenue is reported separately to the CODM and all other
reports are prepared as a single business unit.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
DSM Alliance Agreement 97,194 135,188 281,899
Fruitflow+ Omega-3 82,175 76,007 144,269
179,369 211,195 426,168
3. Earnings per share
Basic earnings per share amounts are calculated by dividing the profit
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the period.
The loss attributable to equity holders of the Company for the purpose of
calculating the fully diluted loss per share is identical to that used for
calculating the basic loss per share. The exercise of share options would have
the effect of reducing the loss per share and is therefore anti-dilutive under
the terms of IAS 33 'Earnings per Share'.
Basic and diluted loss per share amounts are in respect of all activities.
There were 171,500,000 share options in issue at 30 September 2022 (2021:
168,500,000) that are currently anti-dilutive and have therefore been excluded
from the calculations of the diluted loss per share.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
Loss for the period attributable 155,759 130,164 224,250
to owners of the parent - £
Weighted average number of shares 2,215,794,201 2,210,821,523 2,210,821,523
Basic and diluted loss per share - pence 0.01 0.01 0.01
4. Share capital and Total Voting Rights
At 30 December 2022, the date of this announcement, the Company's issued share
capital comprises 2,217,821,523 ordinary shares of 0.1 pence each, each with
equal voting rights. The Company does not hold any shares in treasury and
therefore the total number of ordinary shares and voting rights in the Company
is 2,217,821,523.
The above figure may be used by shareholders in the Company as the denominator
for the calculations by which they will determine if they are required to
notify their interest in, or change to their interest in, the share capital of
the Company under the FCA's Disclosure Guidance and Transparency Rules.
5. Cautionary statement
This document contains certain forward-looking statements with respect to the
financial condition, results and operations of the business. These statements
involve risk and uncertainty as they relate to events and depend on
circumstances that will incur in the future. Nothing in this interim report
should be construed as a profit forecast.
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