RUA Rua Life Sciences Plc

RUA Life Sciences plc

("RUA Life Sciences", the "Company" or the "Group")

Final results for the year ended 31 March 2024

RUA Life Sciences, the holding company of a group of medical device businesses focused on the exploitation of the world's leading long-term implantable biostable polymer (Elast-Eon^TM), announces its audited final results for the year ended 31 March 2024.

 Highlights:

·      Revenue growth of 1% to £2,191,000 (2022: £2,179,000)

·      Strong second half to year with 64% of Revenues and Gross Profit

·      Loss before tax reduced 13% to £2,019,000 (2023: £2,322,000)

o  RUA Biomaterials was impacted by a strong Sterling against the Dollar with 10% revenue reduction to £496,000 (2023: £554,000). RUA Biomaterials maintains a high operating profit margin (85%) (2023: 89%);

o  RUA Contract Manufacture enjoyed strong operating profit growth of 19% to £944,000 (2023: £794,000) on modest revenue growth of 1%. It maintained good operating profit margins of 55% (2023: 49%);

o  RUA Vascular and RUA Structural Heart now pivoted strategy to commercialise IP created and reduce R&D spend;

·      Reduced R&D spend £873,000 (2023: £1,072,000)

·      Strategy to commercialise IP created in RUA Vascular and RUA Structural Heart being pursued

·      Year-end cash £3,931,000 (2023: £1,484,000)

·      John McKenna to retire from executive duties and become non-executive director.

Current trading and outlook

Current trading is in line with Board expectations and significant opportunities are being pursued to grow revenues. 

Geoff Berg, Chairman of RUA Life Sciences, commented: "The past year has seen a switch for RUA from being a business with future funding requirements to finance R&D projects to a fully funded business with a focus on cash generation and return to profitability. The balance sheet was strong at the year end with some £4 million in cash and prospects for growth remain exciting."

For further information contact:

RUA Life Sciences                                                                                Tel: +44 (0)1294 317073  

G Berg, Non-Executive Chairman                                                          

W Brown, Chief Executive                                                                     

L Smith, Group Chief Financial Officer

Cavendish Capital Markets ltd

(Nominated Advisor and Stockbroker)                                      Tel: +44 (0)20 7397 8900

Giles Balleny/Dan Hodkinson (Corporate Finance)                                  

Charlie Combe (Broking)

Michael Johnson (Sales)

About RUA Life Sciences

RUA Life Sciences plc is the ultimate parent company of the Group, whose principal activities comprise exploiting the value of its IP & know-how, medical device contract manufacturing and development of cardiovascular devices.

Our vision is to improve the lives of millions of patients by enabling medical devices with Elast-Eon^TM, the world's leading long-term implantable polyurethane.

Whether it is licensing Elast-Eon^TM, manufacturing a device or component, or developing next generation medical devices, a RUA Life Sciences business unit is pursuing our vision.

Elast-Eon™'s biostability is comparable to silicone while exhibiting excellent mechanical, blood contacting and flex-fatigue properties. These polymers can be processed using conventional thermoplastic extrusion and moulding techniques. With over 8 million implants and 15 years of successful clinical use, RUA's polymers are proven in long-term life enabling applications.

The Group's four business units are:

A copy of this announcement will be available shortly at www.rualifesciences.com/investor-relations/regulatory-news-alerts.

CHAIRMAN'S STATEMENT

I am pleased to present my first Chairman's Statement since being appointed Non-Executive Chairman in June. The financial results for the year to 31 March 2024 are presented below together with the strategic and organisational progress achieved by the Company.

Trading for Year

The headline trading results are very encouraging with the loss for the year reducing by 28.1% to £1,440k from £2,003k. Revenues at £2,191k were marginally higher than last year (£2,179k) demonstrating a strong recovery during the second half of the year. At the interim stage, trading was below the corresponding period of the prior year but the second half benefited from a 75% increase in revenues and a 55% reduction in pretax losses.

Cash burn during the year (before new funds raised) was £1,499k, similar to the £1,491k seen during 2023. The cash consumption of the business reduced from £976k in the first half to £526k demonstrating the focus of management on driving towards cash neutrality in a shorter time frame

Cash balances at the year end of £3,931k (2023:£1,484k) resulted from the successful equity issue during December 2023.

Strategy Review

On 20 November 2023, prior to the equity issue, the Company updated shareholders on the new strategy of the Company. The Strategy Update highlighted that the key objective of RUA was to reduce the timeframe and the funding necessary for the business to become cash generative.

One of the priorities of the business is to expand the Contract Manufacturing business through conversion of customer enquiries and projects into long term manufacturing contracts. Good progress is being made in this objective as described within the Business Review below.

Within the Heart Valve business, the new heart valve leaflet material - AurTex, has demonstrated the ideal mechanical properties to compete as a replacement for the animal tissue used to manufacture the current generation of heart valves. The business model is not to seek to develop a new heart valve to compete with the large heart valve companies but to become a supplier of material and technology to those same businesses. This strategy allows the commercialisation of our new leaflet material earlier than planned with potential future revenues generated from licence fees and material supply contracts rather than the sale of devices after incurring large R&D and regulatory costs. The AurTex leaflet material is currently undergoing initial testing by a potential partner.

The Company no longer plans to take the Vascular Graft products through regulatory approval in house, and third party finance or license agreements being pursued to commercialise the IP created to date.

Management and Board Structure

Subsequent to the Strategy Update and the successful equity issue, the Company announced the departure of the Group Managing Director. This change enabled the Board to consider the most appropriate structure going forward. It was clear that a smaller, more agile and fully aligned Executive team was allowing the key objectives to be pursued and as such rather than recruit, the role of Executive Chairman was split with Bill Brown taking on the new role of Chief Executive and myself taking on the more traditional role of Non-Executive Chairman. Lachlan Smith continues as Chief Financial Officer but has assumed a wider role covering a number of operational matters out with the finance department. John McKenna, Director of Clinical Marketing has notified the Company that he will retire from executive duties at the time of the AGM in August.  John has a wealth of experience in medical devices and a substantial network of key contacts. In order not to lose this expertise, John has agreed to remain as a non-executive.

Conclusion

The past year has seen a switch for RUA from being a business with future funding requirements to finance R&D projects to a fully funded business with a focus on cash generation and return to profitability. The balance sheet was strong at the year end with some £4 million in cash and prospects for growth remain exciting.

BUSINESS REVIEW

Group Performance

Group trading has been encouraging during the year with the reduction in reported losses and the strong performance in the second half of the year. A detailed analysis of trading and finances is provided below in the Financial Review.

The change in strategy announced in November 23  has brought a focus to the business with a greater emphasis on short term commercial activities rather than longer term ambitions to grow a larger infrastructure. A laser focus on commercial activities has unified the executive team and allowed a number of roles within the business to be eliminated with total annual payroll savings of over £600,000.

A review of each business is set out below, together with the outlook and plans for future growth and development.

RUA Biomaterials

The Group's platform technology is based upon Elast-Eon, and RUA Biomaterials owns all the Elast-Eon IP, and licenses use of Elast-Eon to medical device companies. Elast-Eon has been proven to have all of the characteristics necessary for a long-term implantable biomaterial, and has been the enabling technology behind over 8 million life-sustaining devices over the last 15 years.  Elast-Eon polymer licence and royalty income fell during the period from £554,000 in 2023 to £496,000. All of the revenues in Biomaterials are billed in US$ and the strengthening of Sterling had an adverse impact of around £35,000. In addition, polymer shipments from our partner Biomerics to one particular customer were lower due to the timing of the shipments. Indications from licensees are positive regarding the prospects for steady growth with new purchasers of polymer appearing in recent months and an enquiry from one customer regarding a long term license for exclusivity in a currently un-licensed field of use. RUA Biomaterials maintains a high operating profit margin (85%) (2023: 89%), with its only outlay being patent costs. The Group continues to use the Elast-Eon polymer within its vascular and heart valve product pipelines.

RUA Contract Manufacture

Revenue for our contract manufacturing division increased by 3% in the period to £1,679,000 (2023: £1,625,000) and generated an operating profit of £931,000 (2023: £794,000). Our Contract manufacturing division enjoys long term manufacturing contracts with its major customer. This partnership, which has been in place since 2012, was extended during the year for a further three years.

At the interim stage, this business unit was adversely impacted by a technical problem resulting in delays in shipping products to the major customer. The problems were quickly identified in conjunction with our customer, and record shipments over the second half of the year allowed the annual forecast to be achieved. Despite this technical issue, RUA remains a trusted supplier to the customer and ranks amongst its best suppliers with a number of new business opportunities being explored. Despite the hiatus in production and deliveries good operating profit margins of 55% were enjoyed (2023: 49%). A recent customer satisfaction survey scored 100%, which reflects the organisation's commitment to quality and service.

Our stated ambition for Contract Manufacture is to double the scale of the business over the medium term. Business development activities are focused on long term high value strategic opportunities, and significant headway has been made with plans to increase Original Equipment Manufacturer (OEM) customer demand to meet our objectives. We are confident of achieving our ambitions either through the c£2m in annualised revenue from current enquiries or from a corporate opportunity presented through our strong client relationships.

RUA Vascular

Following a successful pre-submission process with the FDA, which allows the Group's vascular graft to go through the less onerous 510k market clearance route. The graft is now fully prepared to undergo the regulatory testing regime agreed upon once funding is in place. Regulatory approval is anticipated to be achievable within 30 to 36 months of starting recruitment for the remaining clinical studies. The budget required would be approximately £6 million

The Board believes that the Vascular project has very attractive risk-adjusted returns on the additional investment required but will not seek to fund these trials in house. The investment in RUA Vascular will be exploited by seeking third party funding for the project whilst retaining an interest which could involve an equity interest, a contract development and manufacture agreement or a form of licensing of technology developed.

By not pursuing the Vascular regulatory pathway in house has dramatically reduced the cash drag on the business.

RUA Structural Heart

The heart valve industry's reliance on animal tissue remains a significant risk to the industry and the continuity of the supply of valves to patients. An outbreak of BSE or similar in Australia or New Zealand would be almost catastrophic. RUA  developed a novel composite material , now referred to as AurTex, from which a preliminary valve design was created and tested. The results of this initial testing were so positive that we identified the opportunity to license and supply AurTex to the heart valve industry rather than seek to compete with it in valve design and delivery systems.

Building upon the biological properties of Elast-Eon in long term implants and coupled with RUA's textile expertise and novel process of creating a unified composite material, AurTex has continued to demonstrate very encouraging data.

Ongoing in-house trials continue to provide further encouraging data, demonstrating that AurTex has the opportunity to replace current leaflet material.

A heart valve leaflet needs to be durable and AurTex has undergone both flex fatigue and accelerated wear testing as a valve. In both cases, our expectations were exceeded. In hydrodynamic testing, the AurTex leaflet valve has performed in line with current technology.  The novel material itself also has additional beneficial properties. At only 150 microns thick, it is much thinner than animal tissue material, therefore potentially delivering benefits to transcatheter valve delivery and performance.

AurTex material is currently undergoing testing with a potential partner and the full data pack of internal testing results will shortly be available to the wider industry.

The target for the heart valve business is now to pursue material supply and license agreements with other heart valve businesses, thus bringing time to commercialisation closer and future development budget requirements reduced dramatically. This strategy of seeking to "own" the leaflet material of choice may allow faster commercialisation with revenues generated during the customer development phase.

Outlook

Expectations for the coming year are to engage with licencees to grow Biomaterials licensing revenues and enter into development contracts with customers in Contract Manufacture to lead to a doubling of its annual revenues in the medium term. I am very encouraged by the pace of change within the business and the focus of the team in engaging with current and prospective customers and licensees. Substantial opportunities are being pursued within Contract Manufacture and, with a following wind, could provide visibility to the ambitious growth plans. These opportunities alone would transform the Group without the potential for added value from the partnering to fund the regulatory pathway for Vascular and licensing of AurTex for heart valve leaflets.

FINANCIAL REVIEW

RUA has a portfolio of four businesses, all of which are designed to add value to the Group. The established businesses of Biomaterials and Contract Manufacture have strong contractual revenue streams generating attractive net margins yet have the potential to grow profitability and add significant value. A revised strategy for Vascular has significantly reduced future Group cash burn. Contract manufacturing and polymer licensing business units have performed in line with expectations.

Revenue

Reported Group revenues for the year ended 31 March 2024 rose slightly to £2,191,000 from £2,179,000 in the previous year. This modest increase reflects stable performance across our business segments, coupled with H2 recovery. Notably, our Contract Manufacturing business experienced a small positive growth trend, with revenues rising 3% to £1,679,000, up from 1,625,000 in 2023. This growth underlines the effectiveness of our strategic initiatives and our ability to meet customer demand.

Revenues for our Biomaterials division were impacted by a strengthened Sterling against the Dollar coupled with a slight reduction in royalty income for the year. However royalty income remained substantial at £496,000 compared to £554,000 in the prior year.

General and administrative expenses

Cost control continues to be a priority objective. This is supported by a rigorous budgeting process coupled with the implementation of enhanced controls. These measures have provided the group with clearer sight of and ultimately better control of business running costs resulting in a reduction in administrative expenses for the year to £3,792,000 (2023: £4,169,000); these figures include amortisation & depreciation charges of £364,000 (2023: £358,000), the research and development costs noted above and the share-based payment charges noted below.

Research and development costs

As announced in November 2023, the group is beginning the process of scaling back its overall investment in Research and Development to focus on delivering profitability. The effects of this shift in focus saw a reduction in R&D spend of £200,000 for the year compared to the prior year.   During the year, the Group expensed through the income statement £873,000 (2023: £1,072,000) of research costs relating to the Vascular Graft and Heart Valve programmes.

Share-based payment charges

The business operates share option plans for key personnel, incurring an annual charge for share-based payment expenses. During the year, there was a non-cash credit of £35,000 (compared to a charge of £102,000 in 2023). The non-cash credit is attributed to a writeback related to the withdrawal of share option awards from two executives who left the Group.

Net finance costs

In the past two years, the business has opted for non-dilutive financing solutions to preserve cash. Finance expenses for the year rose to £83,000 compared to £16,000 in 2023. This figure includes unrealised foreign exchange losses amounting to £28,000 (2023: 12,000 gain).

Losses before taxation

The business continues to incur losses with losses before taxation from business operations for the year amounting to £2,020,000 (2023: £2,322,000).

Loss per share

Basic and diluted loss per share for the year was 4.29 pence (2023: 9.03 pence).

Taxation

The Group claims research and development tax credits each year and, since it is currently loss making, elects to surrender these tax credits for a cash rebate. The amount is included within the taxation line of the consolidated income statement in respect of amounts receivable for the surrender of research and development expenditure amounting to £580,000 (2023: £319,000). The Group has not recognised any tax assets in respect of trading losses arising in the current financial year or accumulated losses in previous financial years.

Cashflow

In December 2023, the business successfully raised £4 million via an equity placing. By year-end, the business held cash and short-term deposit balances totalling £3,931,000 (2023: £1,484,000).

Cash preservation remains a strategic objective. Throughout the year, operating cash outflows from operations amounted to £1,328,000 (2023: £1,146,000), reflecting the financial activities and commitments involved in sustaining business operations and growth initiatives.

The business invested £55,000 in capital expenditure during the year, down significantly from the £449,000 spent in 2023. This reduction in capital expenditure indicates a strategic adjustment in spending priorities, aligning with the focus on cash preservation and efficiency.

Financial position

Following our successful fundraise, our financial position has significantly strengthened, providing a robust platform to capitalise on new opportunities and initiate discussions with partners aimed at enhancing shareholder value. Our net assets as at 31 March 2024 were £7,182,000 (2023: £4,683,000) of which cash and cash equivalents amounted to £3,931,000 (2023: £1,484,000).

Intangible assets (not including Goodwill) reduced to £419,000 (2023: £470,000) due to the amortisation charge of £51,000.

Dividends

No dividends have been proposed for the year ended 31 March 2024 (2023: £nil).

STRATEGY

The mission of the Group is to enhance patients' lives through the development of pioneering innovative cardiovascular medical devices using Elast-Eon, the world leading long-term implantable biostable polyurethane This is being undertaken through:

·      International growth via licensing Elast-Eon to third parties through RUA Biomaterials;

·      International growth through RUA Contract Manufacture; becoming a centre of excellence for designing, developing and manufacturing Elast-Eon based medical devices, whilst continuing to serve and expand its current OEM customer base;

·      Partnering with third parties to exploit the development work completed for a range of Elast-Eon sealed vascular grafts through RUA Vascular; and

·      Licensing and supply of our novel heart valve leaflet material AurTex through RUA Structural Heart.

RUA Life Sciences will seek to maximise shareholder value by growing each business to achieve attractive levels of profitability or disposing of business areas if the valuations are attractive.

There was no other comprehensive income for 2024 (2023: £Nil)

NOTES TO THE EXTRACTS FROM THE CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of preparation

The extracts from the Consolidated financial statements are for the year ended 31 March 2024. The Consolidated financial statements have been prepared in compliance with UK-adopted International Accounting Standards.

The Consolidated financial statements have been prepared under the historical cost convention, with the exception of fair value adjustments made in connection with the acquisition of RUA Medical.

The accounting policies remain unchanged from the previous year.

2. Going concern

These financial statements have been prepared on the going concern basis, notwithstanding a loss before tax of £2.0 million and operating cash outflows of £1.3 million for the year ended 31 March 2024. The Directors consider this to be appropriate for the following reasons.

RUA Life Sciences has two cash-generative units (RUA Biomaterials and RUA Contract Manufacture). These cash-generating units provide a healthy Gross Margin (90% & 76%), and contributions to Group operating loss were (£421,000 & £931,000).The group has two cash-consuming units (RUA Vascular and RUA Structural Heart), and both these units require further investment before commercialisation and cash generation can be achieved. RUA Life Sciences is seeking off-balance sheet financing for RUA Vascular while costs relating to RUA Structural Heart will predominantly be to enhance the profile of the asset and help bring it to commercialisation.

The Board has considered the current cash position, reviewed budgets and profit and cash flow forecasts to October 2025 along with sensitivity analyses and made appropriate enquiries. The Board has formed a judgement at the time of approving the financial statements that the Group will have access to adequate resources to continue in operational existence for the period of the going concern assessment. For this reason, the Board considers that the adoption of the going concern basis in preparing the consolidated financial statements is appropriate.

Whilst there are inherent uncertainties regarding the cash flows associated with the development of the vascular graft range, together with the timing and commercialisation of our heart valve composite leaflet material, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Company and Group are able to meet their liabilities as they fall due for at least twelve months from the date of approval of the financial statements.

The Directors continue to explore additional third-party sources of income and finance available to the Group to continue the development of the vascular graft range beyond 2024.

Based on these indications, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least twelve months from the date of approval of the financial statements and, therefore, have prepared the financial statements on the going concern basis.

3. Preliminary announcement

The summary accounts set out above do not constitute statutory accounts as defined by section 434 of the UK Companies Act 2006. The summarised consolidated statement of financial position at 31 March 2024, the summarised consolidated income statement, the summarised consolidated cash flow statement and the summarised consolidated statement of changes in equity for the year then ended have been extracted from the Group's statutory financial statements for the year ended 31 March 2024 upon which the auditor's opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 31 March 2024 did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2023 have been delivered to the Registrar of Companies. The 31 March 2024 accounts were approved by the Directors on 23 July 2024, but have not yet been delivered to the Registrar of Companies.

4. Earnings per share

The basic loss per ordinary share of 4.29 pence (2023: loss of 9.03 pence) is calculated on the loss of the Group of £1,440,000 (2023: loss of £2,003,000) and on 62,060,272 (2023: 22,184,798) ordinary

shares, being the weighted average number of shares in issue during the year.  Diluted earnings per share have not been calculated as the Group is loss making.

Posting and availability of accounts

The annual report and accounts for the year ended 31 March 2024 will be sent by post or electronically to all registered shareholders on 26 July 2024.  Additional copies will be available for a month thereafter from the Company's office 2 Drummond Crescent, Riverside Business Park, Irvine, Ayrshire KA11 5AN. Alternatively, the document may be viewed on, or downloaded from, the Company's website: www.rualifesciences.com.

Notice of Annual General Meeting

Notice of the twenty-sixth Annual General Meeting of RUA Life Sciences plc will be posted with the Annual Report and Accounts and will be held at Gailes Hotel, Marine Drive, Irvine, Ayrshire KA11 5AE on Tuesday, 27 August 2024 at 11:00am.

FORMAT OF THE AGM

The AGM will be a physical meeting. The Board encourages all shareholders who are unable to, or do not wish to, attend the AGM in person to vote by proxy.

If you wish to attend the AGM in person, it would assist the Company's planning if you could please notify the Company in advance by email to lachlan.smith@rualifesciences.com, including your name as shown on the Company's Register of Members.

Any changes to these arrangements will be published on the Company's website as soon as possible before the date of the meeting and will also be circulated via a Regulatory Information Service.

Further details of the AGM will be included in the Annual Report and will published on the Company's website at www.rualifesciences.com.