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hVIVO plc - Preliminary results for the year ended 31 December 2016.

20 Apr 2017

hVIVO plc (AIM: HVO), the pioneer of human disease models, is pleased to announce its audited preliminary results for the year ended 31 December 2016.

Financial Highlights
·      Revenue of £19.9 million (2015: £7.7 million), includes £7.3 million from third-party client engagements and £12.5 million from equity investments (£9.7 million from the three PrEP-001 Phase IIa clinical studies and £2.8 million from the FLU-v Phase IIb clinical study)
·      Gross profit of £4.2 million and gross profit margin of 21.3% (2015: gross profit £2.5 million and gross profit margin 31.8%), with margin dampened by clinical studies with equity investments
·      Research and development (R&D) expense was £6.3 million (2015: £10.2 million) and is lower, as expected, compared to previous years, due to the timing of phases and weighting of costs of our discovery research programmes, with greater R&D expense in previous years from undertaking the sample clinical studies and subsequent third party transcriptomic analysis
·      Administrative expenses were £13.8 million (2015: £13.7 million) with costs maintained primarily due to non-capitalisable costs of investment in a medical management technology platform, leveraging technology to improve efficiency, partially offset by ongoing cost savings and other efficiency initiatives
·      Short-term deposits, cash and cash equivalents of £25.7 million at 31 December 2016 (2015: £51.2 million), extending cash runway into H2  2018

Operational Highlights
·      Filed hVIVO's first patent application in severe flu as a result of our our pathomics-informed drug target discovery, and in parallel, progressed the selection of a severe flu compound against this target, positioning hVIVO to lead the way in developing the first treatments for this area of high unmet need
·      Advanced a potentially ground-breaking biological algorithm for predicting who will experience asthma worsening before symptoms emerge
·      Conducted three Phase IIa clinical studies for PrEP-001 designed to address key clinical development questions, regarding target indications (both flu and cold), dosing regimens (daily dosing), and  optimal field study population (healthy adults)
·      Contracted our second equity investment in April 2016, acquiring a 49.0% interest in Imutex Limited for £7.0 million, which holds two clinical stage vaccine platforms in universal flu (FLU-v) and mosquito-borne disease (AGS-v)
·      Advanced three clinical studies with FLU-v and AGS-v, with initial data read-outs expected in 2017

Commenting on today's results, Kym Denny, Chief Executive Officer, said: "In 2016 we leveraged the hVIVO platform to advance our equity investment-based clinical assets, while simultaneously converting our growing insight in flu and asthma into new inventions. Securing PrEP-001's clinical proof-of-concept in flu was a key achievement. Whilst PrEP-001's asthma trial results were not what we hoped for, our ongoing analysis of the data, in combination with hVIVO's proprietary common cold datasets, will inform future hypothesis for testing regarding specific asthma subtypes. In the meantime PrEP Biopharm will progress the product's development in the healthy adult population. Our Imutex investment brought us a universal flu vaccine and a mosquito-borne illness vaccine, both of which we were able to accelerate into the clinic, with initial data read outs expected in 2017. Further to the platform's product testing activities, the hVIVO R&D team took the insight generated from previous years' samples and arrived at a qualified drug target and corresponding candidate compound list for severe flu, as well as produced our first biological algorithm for predicting patients at risk of asthma worsening before symptoms arise. We look forward to advancing our inventions and clinical stage assets in 2017, as we seek to utilise our revolutionary platform and precision development approach to deliver respiratory precision medicine-based therapies."

For further information please contact:

hVIVO plc

+44 207 756 1300

Kym Denny (Chief Executive Officer)

 

Graham Yeatman (Chief Financial & Business Officer)

 

Media Enquiries

+44 203 021 3933 /

+44 7854 979 420

Colin Paterson (Director of Marketing, Communication and Public Relations)

 

Numis Securities Limited

+44 207 260 1000

Michael Meade / Freddie Barnfield (Nominated Adviser)

 

James Black / Michael Burke (Corporate Broking)

 

FTI Consulting

 

Simon Conway / Victoria Foster Mitchell (UK)

+44 203 727 1000

John Capodanno / Evan Smith (US)

+1 212 850 5705

Notes to Editors:

hVIVO plc ("hVIVO"), a specialty biopharma company with discovery and clinical testing capabilities, is pioneering a human-based analytical platform to accelerate drug discovery and development in respiratory and infectious diseases.  Leveraging human disease models in flu, RSV and asthma exacerbation, the hVIVO platform captures disease in motion, illuminating the entire disease life cycle from healthy to sick and back to health.  Based in the UK, market leader hVIVO has conducted more than 45 clinical studies, inoculated over 2000 volunteers and has three first-in-class therapies currently in development with a growing pre-clinical pipeline.

CHIEF EXECUTIVE OFFICER'S STATEMENT

In 2016, the insights enabled by our "disease in motion" human disease models allowed us to achieve significant steps in our quest for precision medicines in respiratory and infectious diseases. After three years of collecting and qualifying influenza (flu) disease in motion samples, we were able to demonstrate 'severe flu' as having a different pathophysiology to 'normal flu', opening up the ability to predict, diagnose and treat severe flu for the very first time. Additionally, from our new asthma exacerbation disease model, we were able to advance a potentially ground-breaking biological algorithm that can predict, up to two days before symptoms emerge, who will experience asthma worsening due to the common cold. Leveraging our platform for its product testing capabilities, we advanced PrEP-001 through three clinical studies aimed at widening its application, selecting the optimal dosing regimen, and investigating the best patient population in which to advance  development. Lastly, we formed a joint venture with SEEK Group (SEEK) to develop two clinical stage vaccine assets in universal flu and mosquito-borne diseases, which we advanced into Phase IIb and first-in-man studies, respectively.

Severe flu - first pathomics patent application filed

Over hVIVO's 25 years of experience researching flu it has become clear that there are significant gaps in existing treatments and vaccines.  We believe we can overcome these gaps by better understanding the immune response to flu infection. In particular, hVIVO noted that there were no treatments for severe flu. This translates into a worrying economic reality: in the US alone, there are 200,000 cases of severe flu annually, 20% of which develop acute respiratory distress syndrome (ARDS) and cause $13.8 billion in hospital costs.  These figures can be expected to increase exponentially in pandemic outbreaks.

As such, hVIVO turned the power of our platform on severe flu in order to illuminate the correct drug targets to produce a positive therapeutic effect.  Through our pathomics process, we arrived at a qualified pathway component for our severe flu drug target in under 18 months and filed our first patent application around this discovery in early July 2016.  The invention in this initial patent application aims to protect our pathomics-informed drug target (HVO-001), with additional patent applications to follow that address novel and inventive use of the associated pathway and disease activity biomarkers.

Based on both in vitro and human ex vivo disease relevant assays, we are currently in the compound selection stage for our severe flu drug candidate.  We believe our pathomics insights and our efforts over the past three years to distinguish those pathways involved in severe flu positions hVIVO to lead the charge in defining and treating this area of high unmet medical need.

Data mining - translating insights to products

Once we had identified a biological distinction between severe and normal flu, we turned to data mining of our time-course, disease in motion samples to reveal patterns and meaningful correlations between clinical, cellular and molecular data. Our goal is subsequently to identify molecular signatures and biological algorithms that can serve as predictor tools and patient stratification guides. For flu, we have identified a candidate invention to distinguish who is contagious well in advance of showing symptoms (patent application filed in February 2017) and we are currently working to identify a molecular signature for predicting who will develop severe flu. Qualification of these discoveries is ongoing in 2017, and we continue to mine our existing discovery data sets with the goal of deriving additional commercially viable inventions.

In addition to flu, 2016 saw hVIVO progress data mining of samples from our newest human model in asthma exacerbation. We identified a time-course signature in our disease in motion data that pointed to an ability to predict who would suffer asthma worsening when infected with the common cold.  By the end of 2016, we had completed a third party analysis of that discovery, which we strengthened via correlation analysis and grouping, in addition to predictive modelling. The result was a refined algorithm that can potentially predict up to two days in advance of any symptoms, who will experience a worsening of their asthma (patent application filed in April 2017). We see this invention being further refined as we zero in on asthma subtypes. The discovery holds promise for both precision drug development as well as precision diagnostics. As a development tool, the asthma worsening predictor can help select patients for enrolment into clinical trials; as a diagnostic or digital health tool, it could help patients at risk proactively and appropriately seek or avoid therapeutic interventions, thereby preventing serious exacerbations and morbidity for patients and substantially reducing healthcare costs.

Advancing PrEP-001 - a novel pan-viral prophylactic

Less than 18 months after our investment in PrEP Biopharm Limited (PrEP Biopharm) and its lead product PrEP-001, hVIVO has completed three Phase IIa studies for PrEP-001: a proof-of-concept (POC) in flu, a dose ranging (durability) study, both using healthy volunteers, and a study exploring an additional patient population (asthmatics).  These studies were designed to answer early in development crucial questions regarding breadth of viral coverage, dosing regimens and optimal field study patient populations. They provide the ability to sufficiently explore study variables before committing to Phase III - a step that is imperative in diseases such as asthma, where taking a "one-size-fits-all" approach is not viable for bringing more targeted and effective new medicines to market, highlighting how little is known regarding asthma's subtype populations.

PrEP-001 is a nasally administered, broad-spectrum agent that leverages the innate immune system to prevent upper respiratory tract viral infections.  The PrEP-001 Phase IIa flu POC study, which achieved positive results and was announced in June 2016, was a key highlight of the first half of 2016.  Severity and duration of flu symptoms were reduced two-fold in healthy volunteers. Following the previous successful results in the common cold POC study in 2014, this study demonstrated PrEP-001's potential as a pan-viral prophylactic for flu and cold infections that cause more than 500 million infections per annum.

The PrEP-001 Phase IIa durability and asthma exploratory studies were designed to provide valuable insights for PrEP-001 on dosing regimens and future study patient populations, respectively, and build on the profile of the drug following the positive flu and cold POC challenge studies in healthy volunteers.  Both of these trials were initiated in 2016 and reported post-period in February 2017. Both studies demonstrated that PrEP-001 was safe and well tolerated, with the adverse event profile being similar in active and placebo arms and consistent with previous studies with the drug.

The durability study was conducted in healthy subjects challenged with human rhinovirus 16 (HRV-16) to explore the impact of two potential dosing schedules for PrEP-001 beyond the once daily dosing already established in prior studies. Together, with the previous study in common cold, the results showed that weekly and twice weekly dosing were not sufficient to sustain a meaningful prophylactic effect and once daily dosing may be the more effective dosing regimen.

The next Phase IIa trial investigated the effect of PrEP-001 in a different patient population, namely people with asthma. The trial involved a non-stratified approach in patients with mild to moderate controlled asthma, challenging them with HRV-16. The primary endpoint was patient assessed TSS, expressed as an average (Area Under the Curve (AUC)). The trial failed to meet its primary endpoint, with lower than expected symptoms reported in both the placebo and treatment groups, hinting that a broad, controlled asthma patient population responds differently to cold infections than a more homogeneous healthy population.

We subsequently took a deeper look into the data to see if we could detect any trends that would help pinpoint the key differences in the clinical characteristics and biology of the patient population and therefore identify key features of responders and non-responders. We identified that there was a significantly higher number of patients post common cold infection with no symptoms in the active group compared to placebo. This suggests that there was potentially a strong responder subtype. In addition, when exploring individual symptoms (as opposed to an average), we found in a modified intent-to-treat (ITT) analysis that the TSS peak was significantly lower in the active compared to the placebo.

Work is now ongoing to fully characterise the responder subgroup discussed above at the clinical, cellular and molecular level. Whilst PrEP-001's asthma trial results were not what we hoped for, hVIVO is in a privileged position of being in possession of full time-course data for healthy, mild uncontrolled, and controlled mild to moderate asthma patients challenged with the common cold virus and we will be leveraging this dataset to tease out the granular differences (i.e. phenotypes and endotypes) between asthma patients and how they respond to viral infection. In the meantime, PrEP Biopharm will advance the development of PrEP-001 in the healthy adult population, with Phase IIb planned for H1 2018.

Expanding our pipeline - Imutex Limited

In April 2016, hVIVO completed its second equity investment, forming  a joint venture in a new company, Imutex Limited (Imutex),  with fellow investor PepTcell Limited, also known as the SEEK Group (SEEK). The partnership was formed to develop two clinical stage vaccine platforms in universal flu (FLU-v) and mosquito-borne diseases (AGS-v).

Such vaccines are key public health priorities identified by the Centers for Disease Control and Prevention (CDC), the US National Institute of Health (NIH), and other international health authorities.  Since the announcement, hVIVO and SEEK have been collaborating to accelerate development of both vaccines. Both products have the potential to qualify for US Food and Drug Administration (FDA) Fast Track designation, depending on the outcome of the trials being conducted in 2016/2017.  

Outlook

In 2016, we made significant strides in leveraging our platform to test new products and harvest our biological insights.  We advanced the development of our three clinical stage assets.  Separately and concurrently, we pivoted from building our collection of disease in motion samples to mining and converting the biological insights they reveal into precision medicine-based therapies and tools.

To date, our equity investment assets, namely PrEP-001 and FLU-v, have benefited from our platform, primarily as a rapid, sophisticated testing tool. As we now move forward with converting our insight into precision development tools and diagnostics, we will add much deeper value to these products and to future products we collaborate on and test in our platform. To that end, in 2017 we will be focusing on mining our time-course samples across common cold challenged data sets to search for an asthmatic subgroup of PrEP-001 responders, as well as a phenotype associated with susceptibility to viral infection.  In the meantime, PrEP Biopharm will press ahead with a PrEP-001 Phase IIb study in healthy adults.

We also expect the development of the assets from our most recent investment in Imutex to continue at its rapid pace, with data from the two FLU-v Phase IIb studies, and the AGS-v Phase I study, expected later this year. With flu remaining a key priority for many public health authorities, we will look to advance to lead candidate selection  and capitalise on the opportunity to fast track development of a potential severe flu drug treatment, as well as further progressing Imutex's FLU-v.

We plan to continue to progress the application of our asthma worsening predictor tool as we deepen our understanding of asthma subtypes, and qualify our severe flu predictor tool. Along with the flu contagiousness patent application filed in February 2017, we expect the development of additional tools for flu and asthma to continue in 2017.

In the second half of 2016, our testing facilities were leveraged to their highest capacity of the year, with the completion of PrEP-001 durability and asthma exploratory studies, the start of the FLU-v study, and the restarting of a client study that was delayed from H1 2016.  We successfully managed the workload of the PrEP-001 and FLU-v studies to accommodate the client study, such that the PrEP-001 and client studies completed their quarantines in Q4 2016, with the expanded FLU-v study achieving its last quarantine cohort in March 2017. Demand continues to rebuild for flu, with strong funding opportunities coming particularly from US government agencies. Our flexible operating model allows us dynamically to balance competing demands for our capacity and workload, to meet our own and our clients' development expectations. Our commercial operating model is now such that we seek to balance and flex our platform's capacity and workload between engagements with our equity investments, our strategically important clients and our own discovery work (together with the associated funding streams from client revenue and government grants), such that we achieve the optimum mixture of work type to advance our products and progress adoption of our models depending on priority and best value.  We also continue to make significant strides in achieving a more agile, flexible and efficient operating model, together with implementing other cost savings initiatives and leveraging technology in our process, which seek to extend our cash runway and prioritise our investment spend to achieving near term value inflection points and commercialisation opportunities.

As we move into 2017, we stand at the forefront of the development of precision medicine for respiratory and infectious diseases, and model platform, converting biological insights from our disease in motion samples into proprietary inventions that will, over time, help to revolutionise how we treat respiratory and infectious diseases such as asthma and flu.  I look forward to updating you further as we achieve key milestones and I would like to thank our staff, patients, customers, partners and investors for their invaluable support in making all of our 2016 achievements possible.

Kym Denny
Chief Executive Officer
19 April 2017

Sources:

·      CDC.gov, Influenza Activity - United States, 2013-2014 Season and Composition of the 2014-15 Influenza Vaccine, Accessed 10/15
·      Woods et al (2015), Am J Physiol Lung Cell Mol Physiol 38(9): L912-L921
·      Howard WA et al (2011), influenzajournal.com,
·      Wisen, J., et al (2012), Annals of Intensive Care, 2:41
·      Molinari (2007), Vaccine 25(27) :5086-5096
·      Fendrick et. al. (2003), Arch Intern Med.  163(4):487-494

FINANCIAL REVIEW

During 2016, hVIVO completed three PrEP-001 Phase IIa clinical studies, contracted its equity investment in Imutex Limited (April 2016) and made significant progress in conducting the FLU-v Phase IIb clinical study for PepTcell Limited.  A third party client study postponed from H1 2016 was restarted and completed in H2 2016, which added to improved utilisation and gross profit margin in the second half of the year.  hVIVO continued to invest in its research and development programme to leverage its collection of disease in motion samples to provide biological insights and further develop its clinical assets. 

Financial KPIs

2016

2015

Shortterm deposits, cash and cash equivalents

£25.7m

£51.2m

Revenue

£19.9m

£7.7m

Gross profit

£4.2m

£2.5m

Gross profit margin

21.3%

31.8%

Research and development expense

£(6.3)m

£(10.2)m

Administrative expense

£(13.8)m

£(13.7)m

Share of loss of associates and joint ventures

£(7.4)m

£(0.1)m

Loss for the year

£(17.9)m

£(17.9)m

Revenue

Revenue for the year ended 31 December 2016 was £19.9 million (2015: £7.7 million). Revenue includes £7.3 million from third party client engagements and £12.5 million from equity investments (£9.7 million from the three PrEP-001 Phase IIa clinical studies and £2.8 million from the PepTcell Limited FLU-v Phase IIb clinical study).  The PepTcell Limited FLU-v study is included in revenue following the reversal in accounting treatment of the Imutex Limited transaction, announced on 13 April 2017.

During 2016, the Group delivered final study data for the PrEP Biopharm Limited flu and asthma licence arrangements, leading to recognition of revenue and related costs against the delivery of these two licences on a "completed" basis.  Revenue from the PrEP-001 durability study, FLU-v study and other third party client studies was recognised on a percentage of completion basis.

Research and development ("R&D") expense

R&D expense was £6.3 million (2015: £10.2 million) and is lower, as expected, compared to previous years,  due to the timing of phases and weightings of cost of our various discovery research programmes, with greater R&D expense in previous years from undertaking the sample clinical studies and subsequent third party transcriptomic analysis.

Share of loss of associates and joint ventures

Share of loss of associates and joint ventures was £7.4 million (2015: £0.1 million), which reflects the share of results of hVIVO's investments in PrEP Biopharm Limited (£7.4 million loss) and Imutex Limited (£nil).

Administrative expense

Administrative expenses were £13.8 million (2015: £13.7 million). The increase is primarily due to non-capitalisable costs of investment in a medical management technology platform of £0.4 million, as well as increased spend on legal and professional fees, partially offset by savings achieved through the continuation of cost saving initiatives during the period. Administrative expense in 2016 included £1.1 million of leasehold provisions (2015: £1.0 million).

Taxation

The Group makes claims each year for research and development tax credits and, since it is loss-making, elects to surrender these tax credits for a cash rebate. The amount credited to the consolidated statement of comprehensive income with respect to amounts received and receivable for the surrender of research and development expenditure was £4.8 million for the year ended 31 December 2016 (2015: £3.7 million).

Consolidated statement of financial position

As of 31 December 2016 total assets less liabilities amounted to £46.1 million (2015: £63.6 million) including shortterm deposits of £nil (2015: £37.0 million) and cash and cash equivalents of £25.7 million (2015: £14.2 million).

The principal movements in the consolidated statement of financial position during the year are summarised below:

·      acquisition of equity in Imutex Limited of £7.1 million, inclusive of £0.1 million of transaction costs;
·      recognition of losses (£7.4 million) and other comprehensive income (£0.2 million) relating to the Group's investment in PrEP Biopharm Limited;
·      delivery of the licence of previously completed flu and asthma study data to PrEP Biopharm, resulting in a reduction of current intangible asset of £2.9 million;
·      decrease in short-term deposits of £37.0 million;
·      increase in cash and cash equivalents of £11.5 million; and
·      decrease in current trade and other payables of £10.4 million, which includes the payment in January 2016 of £5.0 million deferred consideration in respect of the equity investment in PrEP Biopharm Limited on 1 November 2015.

Cash flow

The principal cash flows in the year were as follows:

Inflows

·      finance income of £0.3 million (2015: £0.4 million).

Outflows

·      cash outflow from operating activities of £17.8 million (2015: £9.8 million);
·      equity investment in Imutex Limited of £7.1 million, inclusive of £0.1 million of transaction costs; and
·      purchase of intangible assets (data management software platform) of £0.7m (2015: £nil).

Key performance indicators

The Directors consider the principal financial performance indicators of the Group to be:

·      shortterm deposits, cash and cash equivalents;
·      revenue;
·      gross profit;
·      gross profit margin;
·      research and development expense;
·      administrative expense;
·      share of loss of associates and joint ventures; and
·      net profit or loss.

The Directors consider the principal nonfinancial performance indicators of the Group to be:

·      performance of hVIVO's equity investments;
·      collaboration opportunities with global pharmaceutical companies;
·      development of intellectual property from our discovery research and product validation capabilities and, in particular, disease research (pathomics), data mining and analysis, sample collection and product testing processes;
·      the expansion of the hVIVO platform and its increasing acceptance by global pharmaceutical companies and government bodies, including regulatory agencies;
·      development of new human disease models; and
·      research and development in other disease areas including asthma.

These elements are discussed within the Chief Executive Officer's statement.

Graham Yeatman
Chief Financial & Business Officer
19 April 2017

For the full RNS announcement, please click here.