Oxford BioDynamics Plc (LON:OBD), a biotechnology company focused on the discovery and development of epigenetic biomarkers, based on regulatory 3D genome architecture, using its liquid biopsy platform EpiSwitch™, has announced its interim results for the six month period to 31 March 2020.
CORPORATE AND OPERATIONAL HIGHLIGHTS
· Board restructuring to support future growth worldwide, with a special focus on the US, with the appointment of Dr Jon Burrows as Global Chief Executive Officer (March 2020)
· Presentation of significant results of the utility of OBD’s EpiSwitch™ in predicting response to immuno-oncology (IO) treatments, co-authored with Pfizer, EMD Serono and Mayo Clinic, offering significant commercial potential (November 2019)
· Signature of master services agreement with top US pharmaceutical company (December 2019)
· Publication in peer-reviewed Translational Medicine (Communications) of the development of the first successful blood-based assay for prognostic stratification and disease subtyping in diffuse large B-cell lymphoma (DLBCL), in collaboration with Roche and Genentech (March 2020)
· Recruitment of first patient to the Mitsubishi Tanabe Pharma America (MTPA)-sponsored REFINE-ALS clinical study, in which EpiSwitch™ biomarkers are used to assess the rate of amyotrophic lateral sclerosis (ALS) disease progression (October 2019)
· Appointment of Professor Iain McInnes to the Company’s Scientific Advisory Board (October 2019)
FINANCIAL HIGHLIGHTS
· Revenue of £0.2m (H1 2019: £0.6m)
· Operating loss of £2.4m (H1 2019: £1.7m)
· Cash and term deposits of £13.9m as at 31 March 2020 (31 March 2019: £16.9m, 30 September 2019: £15.5m)
POST-PERIOD END
· Inclusion of the Group’s EpiSwitch™ technology in the GETAFIX clinical study, in collaboration with University of Glasgow, to perform prognostic and predictive profiling of COVID-19 patients (April 2020)
· Receipt of first 500 samples under master services agreement with top US pharmaceutical company announced in December 2019 (April 2020)
· Appointment of the Group’s Chief Scientific Officer, Dr Alexandre Akoulitchev, to represent OBD on the Foundation for the National Institutes of Health (FNIH) Biomarkers Consortium Steering Committees in Oncology, Inflammation & Immunity, and Neuroscience in Bethesda, MD, USA (April 2020)
· Appointment of industry expert Dr Peter Pack as Independent Non-Executive Chairman, succeeding Stephen Diggle (June 2020)
Commenting on the results, Jon Burrows, Chief Executive Officer of Oxford BioDynamics, said:
“By reducing to practice and presenting the utility of our IO non-response EpiSwitch™ classifier at SITC in November 2019 followed by the commercially validating execution of an MSA with one of the industry’s leading pharma companies in December 2019 to use the EpiSwitch™ platform for biomarker development, it is clear that OBD is beginning to put itself firmly on the map as an innovative value adding technology company to partner with for pharma drug development and precision medicine.
The completion and publication of our work in DLBCL with Roche and Genentech and our participation in the REFINE-ALS clinical trial with Mitsubishi Tanabe Pharma America are further evidence of our early reach into the commercial space.
Finally, the turn in a commercially dedicated direction has been completed by the appointments of a commercially seasoned Global CEO and Chairman to lead the Company through the effects of COVID-19 and into the commercial opportunities of 2021. We look forward to updating the market on our future progress.”
CHIEF EXECUTIVE OFFICER’S REVIEW
Introduction
During the six-month period to 31 March 2020, OBD continued to make significant commercial, organizational and scientific progress. The period also saw the introduction of COVID-19-related restrictions in the Group’s key locations and markets: as well as contributing to the research-driven fight against coronavirus, OBD’s strengthened leadership team is focused on planning to emerge from current restrictions with renewed commercial focus.
New leadership with extensive industry experience and US commercial focus
I joined the Group as Chief Executive Officer at the end of the period, on 23 March 2020 and nearly three months of my tenure have been spent in the COVID-19 lockdown. This extraordinary situation has severely curtailed the Company’s business development continuity, but it has afforded me a valuable opportunity to spend time getting to know the rest of the OBD executive team, reviewing the Group’s current position and reshaping the commercial mindset of the team. I am pleased to report my overwhelmingly positive experience of the OBD team that I am leading, of the Group’s EpiSwitch™ technology and the remarkable depth of R&D, data and know-how possessed by the Company. In my deep dive into OBD’s niche platform technology and capabilities I see significant commercial potential, particularly in the EpiSwitch™ classifiers that have been developed to predict likely response to IO therapies, our prognostic and disease subtyping assay for DLBCL, which outperformed a number of industry standard tests, our rapidly developing work on disease severity in COVID-19 and in the bioinformatics foundation that supports the contextual interpretation of OBD’s data.
As we plan for the gradual ending of lockdown in the US and UK, I am very positive about the Group’s prospects. I intend to bring a refreshed mindset and unrelentingly commercial focus to all of our activities. To that end, we are planning for a number of appointments to critical positions, predominantly in the US (in human resources, customer service, product development, marketing and bioinformatics) as soon as we are able.
Post-period end on 3 June 2020, the Board elected industry expert Dr Peter Pack to the position of Independent Non-Executive Chairman. Peter joined the OBD Board in April 2019 and in his first year as a Non-Executive Director has provided excellent support and challenge to the Executive Directors, as well as developing a deep understanding of OBD’s technology and business. Peter’s extensive industry experience, much of it gained in the fields of diagnostics and biomarkers, make him particularly well-suited to helping guide the OBD Board through the next stages of the Group’s journey.
Peter and I are already working well together, and I look forward to him leading the Board as we move toward fuller realization of the commercial potential of the EpiSwitch™ technology platform. The Board also thanks Stephen Diggle for his commitment and leadership in the role of Interim Chairman since April 2019. Steve has returned to his role as Non-Executive Director.
Earlier, in October 2019, the Company was pleased to appoint Professor Iain McInnes CBE to its Scientific Advisory Board. Iain is currently the Director of the Institute of Infection, Immunity, and Inflammation, Muirhead Professor of Medicine and Professor of Rheumatology at the University of Glasgow. OBD has collaborated with Professor McInnes and his teams on several successful research projects since 2014, and immediately following my appointment we jumped right into the Group’s recently announced participation in the GETAFIX COVID-19-related clinical study, with the University of Glasgow which is outlined below.
Response to COVID-19 pandemic
Shortly after the period end, in April 2020, the Company announced the selection of its EpiSwitch™ platform for prognostic and predictive profiling of COVID-19 patients in the GETAFIX clinical study, in collaboration with the University of Glasgow. As well as seeking a biomarker profile to predict likely response to the anti-viral treatment Favipiravir, OBD plans to develop a predictive disease severity classifier, to help identify patients who may be at increased risk of serious illness or death as a result of overreaction of their immune systems in so-called “cytokine storms”. These occur when the response of the body goes into overdrive triggering excessive release of key regulators of inflammation – cytokines, leading to tissue damage by the patient’s own immune system. Cytokine storms are well-known complications in a number of diseases such as flu, SARS, or sepsis and similar reactions are observed in patients with multiple sclerosis, pancreatitis, or as a common side effect of IO treatments such as CAR-Ts and TCRs. We believe such a classifier could therefore have broad clinical utility and significant commercial potential.
In addition to its involvement in the research-driven fight against COVID-19, the Group set out its operational response to the current pandemic in our business update on 21 May 2020. We restate here that the COVID-19 pandemic has already had an impact, which is expected to continue, on the timing of certain existing projects, directly as a result of delays in receipt of blood samples, especially from cohorts of patients who are considered particularly vulnerable to serious illness from a COVID-19 infection. In addition, travel restrictions worldwide have impacted business development activity. The likely severity and duration of the pandemic and its impact on OBD’s customers’ activities remains uncertain.
Notwithstanding these issues, the Group is in a strong position to navigate the current crisis, with cash and fixed-term deposits at 31 March 2020 of £13.9m, sufficient to fund planned activity for several years. To date, none of the Company’s UK employees has been put on furlough. Activity has continued on several projects including the receipt, in April 2020, of the first 500 patient samples to be analysed under the master services agreement announced on 20 December 2019 (referred to below). The Company continues to do everything possible to keep its employees safe. Our most recent risk assessments have allowed us cautiously to increase the number of laboratory personnel permitted to work at our facilities, while still following strict social distancing rules.
Commercial and scientific progress
In October 2019 the first patient was enrolled in the Mitsubishi Tanabe Pharma America-sponsored REFINE-ALS clinical study, in which the Group’s EpiSwitch™ technology platform is to be used to assess the rate of ALS disease progression using highly novel epigenetic biomarkers. Recruitment to this study has been affected by the COVID-19 pandemic and we have not yet received patient samples for laboratory analysis.
In November 2019, the Company’s EpiSwitch™ technology featured in two poster presentations at The Society for Immunotherapy of Cancer’s 34th Annual Meeting. The presentations, co-authored with collaborating scientists from EMD Serono, Pfizer, Oxford BioDynamics and the Mayo Clinic, showed that biomarkers identified by EpiSwitch™ using blood samples from patients treated with immune checkpoint inhibitors enabled robust exclusion of non-responders across cancer indications and therapeutic combinations, provided asset-specific classifiers with high positive predictive value, and had the potential to enable IO drug development programmes to advance with smaller patient cohorts. As we noted at the time, the ability to stratify patients based on their genomic architecture to reduce the risk, cost and time-to-market for therapeutic development programmes would be a game changer in IO.
In December 2019, the Group entered into a master service agreement for the development of predictive EpiSwitch™ biomarkers with a top US pharmaceutical company. This agreement built on OBD’s proven ability to develop predictive biomarkers for response in IO, granting the customer access to OBD’s unique EpiSwitch™ technology for use in the development of predictive biomarkers. The first 500 patient samples to be analysed under the agreement were received shortly after the period end in April 2020 and laboratory work has been progressing as planned.
In January 2020, further evidence of the applicability of EpiSwitch™-derived biomarkers across species was presented at American Association for Cancer Research (AACR) Conference on Advances in Liquid Biopsies, in Miami, Florida. In work conducted in collaboration with the University of Minnesota Department of Veterinary Clinical Sciences, Animal Cancer Care and Research Program, College of Veterinary Medicine and Masonic Cancer Center, OBD utilised its proprietary datasets of markers specific for regulatory 3D genome architecture associated with lymphoma in humans, as determined by EpiSwitch™. The Company’s scientists were able to translate the markers from humans into dogs, to generate a new biomarker signature using whole blood from a cohort of dogs with lymphoma and validate it on a second cohort. The results of this study indicate that EpiSwitch™ biomarkers can be successfully translated across species for related pathologies and conditions and highlight the potential application of non-invasive EpiSwitch™ biomarkers in new therapeutic developments, including in the veterinary industry.
In March 2020, the results of OBD’s work in collaboration with Roche and Genentech to develop a blood-based EpiSwitchTM signature for non-invasive prognostic stratification of Diffuse large B-cell lymphoma (DLBCL) patients were published in the peer-reviewed journal Translational Medicine (Communications). DLBCL is the second most common type of blood cancer after Hodgkin’s Lymphoma. Within this disease there are two distinct subtypes associated with cell of origin: germinal centre B-cell-like (GCB) and activated B-cell-like (ABC). Conventional methods for identifying disease subtypes use complex and time-consuming gene expression-based platforms that require an invasive biopsy to obtain a diagnosis and often fail to assign the correct subtype. The two subtypes follow different disease courses and respond differently to therapeutic intervention, with the ABC subtype having a far worse survival prognosis; it is therefore important to determine a patient’s subtype as early as possible. Importantly, a significant group of patients do not manifest clear ABC or GCB transcriptional profiles and are classified as Type III (Unclassified), despite showing underlying differences in prognostic outcomes. OBD’s EpiSwitch™ platform was used in a full programme of biomarker development, beginning with screening and biomarker evaluation in 60 patients with a known subtype, followed by validation of that EpiSwitchTM prognostic classifier on an independent cohort of 58 Type III patients, comparing the prognostic call made with EpiSwitch™ with the clinical outcome of patient survival. The results of the study were striking, showing that the EpiSwitch™ DLBCL biomarker signature was accurate in classifying confirmed ABC and GCB subtypes in patient samples of known status, providing an identical call in all 60 samples. Furthermore, the EpiSwitch™ biomarker signature was able to classify all 58 Type III samples into subtypes, correctly predicting clinical outcome with a high level of statistical significance and outperforming a number of current industry standard gene expression-based assays. The prognostic calls on patients prior to their treatment made using the EpiSwitch™ classifier had significant correlation with actual survival rates, demonstrating the potentially transformative utility of an EpiSwitch™ assay in the clinical management of DLBCL.
Shortly after the period end, in April 2020, the Group’s Chief Scientific Officer, Dr Alexandre (Sasha) Akoulitchev, was appointed to represent OBD on three Steering Committees of the FNIH Biomarkers Consortium, in Oncology, Inflammation & Immunity, and Neuroscience, in Bethesda, MD, USA. The Biomarkers Consortium is a public-private biomedical research partnership managed by the FNIH that endeavours to discover, develop, and seek regulatory approval for biomarkers, to support new drug development, preventive medicine, and medical diagnostics. The members of the Steering Committees represent a variety of sectors, including academia, government, industry and not-for-profit/advocacy organisations and are responsible for identifying and moving forward promising biomarker projects for implementation by the Consortium. Sasha’s appointment to the Steering Committees represents both a major recognition of his expertise in the field and an opportunity to share the application of OBD’s EpiSwitch™ platform in a highly respected scientific forum.
IP portfolio development
OBD’s IP portfolio now includes fourteen patent families, with the latest application having been filed after the period end in early June 2020. During the period, the Group continued its strategy of seeking to obtain claims which provide the best possible protection for its EpiSwitch™ platform and the biomarkers that are derived from it; two patents were granted, a further one entered the national phase and supplementary information was submitted to patent offices in connection with one other. The Group also benefits from significant technological and scientific know-how within its team and valuable proprietary experimental data.
Looking forward
The period to 31 March 2020 saw the Group continue to make commercial and scientific progress on several fronts whilst initiating a transition to newly appointed, commercially focused executive leadership. The period saw the beginning of COVID-19-related restrictions, with the Group in a strong position not only to survive the period without external financial assistance, but also to apply its EpiSwitch™ technology to research into the effects of the virus.
In the remainder of the year, we expect to emerge from the immediate effects of the pandemic with renewed organizational focus, building on the Group’s progress to date for significant growth in 2021 and beyond. We look forward to providing shareholders with news of further positive developments in due course.
Dr Jon Burrows
Chief Executive Officer
FINANCIAL REVIEW
Overview
The six-month period ended 31 March 2020 included modest project revenue alongside slightly increased operating costs. The Group ended the period in a strong financial position, with sufficient resources to continue to operate through and beyond restrictions arising from the COVID-19 pandemic.
Financial performance
Revenue for the six-month period to 31 March 2020 was £0.2m (H1 2019: £0.6m), entirely derived from research projects (H1 2019 also included some licence fee income). Revenue on research projects is recognised as the Group meets its performance obligations under the relevant contracts, and the timing of this work is in turn largely dependent on the receipt of blood samples from customers.
Operating expenses before share option charges were £2.45m, (H1 2019: £2.11m), reflecting a 27% increase, compared to H1 2019, in direct (non-staff) research and development costs and more modest increases in staff costs and general and administration costs. Research and development costs are principally laboratory consumables and reagents, with cost broadly reflecting the level of activity on both internal and revenue-generating research projects.
Staff costs of £1.24m (H1 2019: £1.06m) increased because of expansion of the staff team, including as a result of a number of senior appointments since March 2019, as well as salary increases for existing staff.
Increases in general and administration costs (£0.69m, H1 2019: £0.66m), in addition to general inflationary rises, included costs incurred following the Group’s establishment of its US subsidiary and for recruitment of senior staff. These increases are offset by a reduction in the level of rent charges included under general and administration costs following the adoption of IFRS 16 ‘Leases’ with effect from 1 October 2019. The adoption of IFRS 16 was also the principal cause of the increase in depreciation to £0.24m (H1 2019: £0.19m).
The Group’s operating loss for the period was £2.4m (H1 2019: £1.7m), reflecting the lower revenue and increased costs noted above.
Finance income for the period of £80k related to interest receivable and realised and unrealised exchange gains (H1 2019: £98k of interest receivable) and reflected both lower balances and lower deposit interest rates. Finance costs of £10k are lease interest charges calculated under IFRS 16 ‘Leases’ (H1 2019: £14k related to realised and unrealised exchange losses). In both periods, exchange movements were driven almost entirely by the effect on US dollar-denominated cash and debtor balances of movements in the sterling-to-US dollar exchange rate.
The taxation credit for the six months to 31 March 2020 of £0.26m represents tax relief on applicable research and development expenditure incurred by the Company during the period and was broadly similar to the prior period (H1 2019: £0.32m). The Group has so far not recognised any deferred tax assets in respect of trading losses arising in the current or prior financial periods.
Net loss for the half year was £2.03m (H1 2019: £1.28m). Loss per share for the six months ended 31 March 2020 was 2.2 pence (H1 2019: 1.4 pence).
Financial position
Additions to intangible and tangible fixed assets during the period were primarily related to patents and computer equipment. Right-of-use assets of £0.54m (31 March 2019 and 30 September 2019: £nil) are recognised for the first time in the current period on the adoption of IFRS 16 ‘Leases’ and relate to the Group’s leased laboratory and office space.
Inventory balances have remained broadly level at £0.25m (31 March 2019: £0.24m, 30 September 2019: £0.24m). Prior to March 2019, the Group had engaged in planned stockpiling of certain laboratory supplies in advanced of the then-anticipated departure of the UK from the EU. Subsequently new lines of consumables have been added to inventory and there was some limited re-ordering in advance of the implementation of the COVID-19-related lockdown.
Trade and other debtors were £1.10m (31 March 2019: £0.73m, 30 September 2019: £1.18m). The increase in this balance
relative to 31 March 2019 is primarily due to amounts receivable from customers, all of which were received on time shortly after the period end. Compared to 30 September 2019, customer receivables were slightly increased, offset by a reduction in the debtor associated with the Company’s R&D Tax Credit claim in respect of the year ended 30 September 2019, which was received during the six months ended 31 March 2020.
Cash and cash equivalents and fixed-term deposits at 31 March 2020 were £13.9m (31 March 2019: £16.9m, 30 September 2019: £15.5m).
Trade and other payables at 31 March 2020 were £1.29m (31 March 2019: £0.69m, 30 September 2019: £1.11); reflecting increases in trade creditors and contract liabilities (amounts received from customers in advance of the recognition of revenue for the projects concerned).
Non-current liabilities have increased significantly with the recognition of a lease liability on the adoption of IFRS 16 ‘Leases’ from 1 October 2019.
Cash flow
Net cash used in operating activities was increased at £1.39m (H1 2019: £0.80m), reflecting the increased operating loss, offset by an increase of £0.12m in receipts of R&D Tax Credits. Net cash generated by investing activities was £2.88m, including £2.97m of cash inflows on the maturity of various fixed-term deposits (H1 2019: net cash used of £9.75m, including the placement of £9m of funds into fixed-term deposits). Net cash used in financing activities reflects lease payments. In the prior period the cash generated from financing activities arose from the settlement of share option exercises during the period, of which there were none in the six months to 31 March 2020.
The overall reduction in cash and term deposits for the six-month period ended 31 March 2020 was £1.6m, representing a slightly increased burn rate compared to the prior year (H1 2019: £1.3m).
Summary
The Group’s results for the six-month period to 31 March 2020 reflect genuine commercial progress, albeit tempered by the effect of delays to certain projects that were outside the Group’s control. The OBD Board has also concentrated significant efforts on strengthening its commercial leadership, culminating in the appointment of Jon Burrows as CEO and, post-period end, Peter Pack as Non-Executive Chairman. The Group has continued research and development activity, growing its UK team and investing in its intellectual property portfolio. Whilst the COVID-19 crisis and its associated impact on the Company’s operations remains open-ended and uncertain, the Board looks forward to emerging from the current restrictions more ready to benefit from the adoption of its unique and valuable technology platform, EpiSwitch™, by a growing customer base. The Board is satisfied that the Group’s significant cash and term deposits mean it remains well funded both to withstand the likely effects of the pandemic and to fund its near-term plans.
Paul Stockdale
Chief Financial Officer
