Bioventix plc (LON:BVXP), a UK company specialising in the development and commercial supply of high-affinity monoclonal antibodies for applications in clinical diagnostics, has announced its audited results for the year ended 30 June 2024.
Highlights:
· Revenue up 6% to £13.6 million (2023: £12.82 million)
· Profit before tax up 5% to £10.6 million (2023: £10.13 million)
· Cash at year end of £6.0 million (30 June 2023: £5.7 million)
· Second interim dividend of 87p per share (2023: 90p)
· Total dividends 155p per share (2023: 152p)
Introduction and Technology
Bioventix creates, manufactures and supplies high affinity sheep monoclonal antibodies (SMAs) for use in diagnostic applications. Bioventix antibodies are preferred for use when they confer an improved test performance compared to other available antibodies.
Most of our antibodies are used on blood-testing machines installed in hospitals and other laboratories around the world. Bioventix makes antibodies using our SMA technology for supply to diagnostic companies for subsequent manufacture into reagent packs used on blood-testing machines. These blood-testing machines are supplied by large multinational in vitro diagnostics (IVD) companies such as Roche Diagnostics, Siemens Healthineers, Abbott Diagnostics & Beckman Coulter. Antibody-based blood tests are used to help diagnose many different conditions including, amongst others, heart disease, thyroid function, fertility, infectious disease and cancer.
Testosterone is an example of a blood test where a Bioventix SMA has facilitated an improved test. In 2003, it became clear that testosterone tests performed on automated IVD platforms were deficient. Whilst the higher levels of testosterone in healthy adult males were accurately reported, the lower levels of testosterone in pre-pubescent boys and women were inaccurately reported. In 2005, Bioventix created an antibody called testo3.6A3 which was evaluated by customers during 2006. Evaluations were successful and following the necessary regulatory approvals, the first testosterone assays based on testo3.6A3 were launched in 2009. A number of IVD companies still use this antibody for revised tests that more accurately measure lower levels of testosterone.
Over the past 20 years, we have created and supplied approximately 25 different SMAs that are used by IVD companies around the world. We currently sell a total of 15-20 grams of purified physical antibody per year which accounts for 25-30% of our annual revenue. In addition to revenues from these physical antibody supplies, the sale by our customers of diagnostic products (based on our antibodies) to their downstream end-users attracts a modest percentage royalty payable to Bioventix. These downstream royalties currently account for the remaining 70-75% of our annual revenue.
Bioventix adopts one of two commercial approaches when creating new antibodies. The first is own-risk antibody creation projects which gives Bioventix the complete freedom to commercialise the antibodies produced. The second is contract antibody creation projects in partnership with customers who supply materials, know-how and funding and to create antibodies that can only be commercialised with the partner company. In both cases, after initiation of a new project, it takes around a year for our scientists to create a panel of purified antibodies for evaluation by our customers. The evaluation process at customers’ laboratories generally requires the fabrication of prototype tests which can be compared to other tests, for example the customer’s existing commercial test or perhaps another “gold standard” method, on the assay machine platform being considered. The process of subsequent development thereafter by our customers can take many years before registration or approval from the relevant authority, for example the US Food and Drug Administration (FDA), the Medicines and Healthcare products Regulatory Agency (MHRA), or EU authorities, is obtained and products can be sold to the benefit of the customers, and of course Bioventix, through the agreed sales royalty. This does mean that there is a lead time of 4-10 years between our own research work and the receipt by Bioventix of royalty revenue from product sales. However, because of the resource required to gain such approvals, after having achieved approval for an accurate diagnostic test using a Bioventix antibody, there is a natural incentive for continued antibody use. This results in a barrier to entry for potential replacement antibodies which would require at least partial repetition of the approval process arising on a change from one antibody to another. This barrier to antibody replacement arises from a combination of factors driven by the clinical criticality of the test and the potential consequences of making such a change which include the time and cost to register any changes required to validate the performance of the replacement antibody.
Another consequence of the lengthy approval process is that the revenue for the current accounting period is derived largely from antibodies created many years ago.
2023/2024 Financial Results
We are pleased to report our results for the financial year ended 30 June 2024. Revenues for the year increased by 6% to £13.6 million (2022/23: £12.8 million). Profits before tax for the year increased by 5% to £10.6 million (2022/23: £10.1million). Cash balances at the year-end were £6.0 million (30 June 2023 £5.7 million).
Our most significant revenue stream continues to come from the vitamin D antibody called vitD3.5H10. This antibody is used by a significant number of diagnostic companies around the world for use in vitamin D deficiency testing. Sales of vitD3.5H10 increased by 1% to £5.9 million which reflects analysts’ expectation for a relatively mature global IVD market.
Sales of our other core historic antibodies are featured below with the respective percentage increase/decrease (+/-) in sales compared to the previous year 2022/23:
– T3 (tri-iodothyronine): £.1.38 million (+21%)
– biotins and biotin blockers: £1.14 million (+35%)
– progesterone: £0.63 million (-15%)
– estradiol: £0.52 million (-7%)
– testosterone: £0.33 million (-29%)
– drug-testing antibodies: £0.32 million (-21%)
During the year the Company became aware that, due to a customer error in the incorrect application of an historic royalty percentage, they had overreported and overpaid troponin royalty revenues since July 2021. Royalty revenues for the financial years 2021/22 and 2022/23 were overstated by £132k and £195k respectively. These amounts are immaterial in respect of each of the affected periods and therefore the Company is not required to restate the audited financial statements for those years, however the cumulative effect of a reduction of £327k in respect of such royalty revenue has been included in the financial statements for the current year to 30 June 2024.
After correctly allocating the revenue to each of the years 2023/24 and 2022/23 our total troponin antibody royalty revenue from Siemens Healthineers and another separate technology sub-license increased by 3% during the year from £1.41 million to £1.45 million. The level of these royalties and their growth are below our previous expectations based on downstream assumptions.
In contrast to the disappointment of troponin sales in the current application of acute chest pain (ie suspected heart attack in A&E centres), we are pleased to note that Siemens have received FDA approval for a revised label claim for their troponin assay that covers a new prognostic application. This enables troponin levels to be measured in “at risk” patients and/or patients who have already been diagnosed with a cardiac condition, whose troponin levels may now be measured to assess their impending risk of a future adverse cardiac event. This risk information can then be used to help clinicians consider additional diagnostic procedures or to review therapeutic alternatives. We expect that this new application will stimulate additional troponin assay use and our associated royalties, thus increasing the market opportunity. As previously disclosed, Siemens troponin revenues will terminate for contractual reasons in June 2032.
Our shipments of physical antibody to China continued to increase. Some sales are made directly and some are made through five appointed distributors. More regulatory approvals for domestic Chinese customers using our antibodies have been registered leading to more significant flows of royalty payments flowing from these customers.
Chinese customers declare and pay royalties in arrears on a calendar year basis and we therefore have to accrue for such revenue, in both full year and interim results, basing our revenue expectation on previous experience. As a result of internal and external audit processes it was only in May 2024 that we received payment from a Chinese customer for the royalties earned in 2023 and therefore our revenue for 2023/24 has benefited by £239k from our prudent assessment of accrued royalty revenue in respect of previous periods.
The prospects for further short term growth in China are good. Longer term, price pressures and continued antibody technology development in China constitute an anticipated threat. In addition to this, the current global geopolitical climate has stimulated the desire for “on-shoring” supply chains and our Chinese customers are likely to be influenced by this trend.
Our research into Tau antibodies and Alzheimer’s diagnostics continues to progress and we are delighted that our early work has now translated into a modest revenue stream from antibodies now entering commercial manufacture. Our commercial policy is to supply initial evaluation samples of antibodies free of charge. If antibodies perform well on prototype assay systems at our IVD customers and additional supplies are ordered, these are charged at regular prices and such repeat sales have generated revenues during the year. These revenues are not only additive but also indicate that our antibodies could feature in future commercial assays. In addition to our conventional IVD customers, we have also supplied antibodies to specialist platform customers, for example Quanterix Corporation who specialise in assays for the research market. The research market is established earlier than more regulated tests for routine clinical use
and it is pleasing that royalty revenues from such activities have already been established. Total Tau revenues for the year were above our expectation at £155k.
We estimate that 50-60% of our total sales are directly linked to US Dollars via physical product pricing in US Dollars or indirectly linked to US Dollars via royalties based on downstream US Dollar sales. The remainder of the currency split is dominated by Euros and important Asian currencies. Our view continues to be that hedging mechanisms would not, in the longer term, add value and may have the potential to add risk to our business. Consequently, future movements in exchange rates may therefore affect our Sterling revenues.
Cash Flows and Dividends
As reported above, the performance of the business during the year generated cash balances at the year-end of £6.0 million and royalties received during quarter 3 of 2024 have added to this balance.
Increases in the rate of Corporation Tax from 19% to 25%, effective from 1 April 2023, have had a full year impact on profit after tax, EPS, cashflow and dividends for the year to 30 June 2024.
In consideration of our established dividend policy and the available cashflows, the Board is pleased to announce a second interim dividend of 87 pence per share which, when added to the first interim dividend of 68 pence per share makes a total of 155 pence per share for the current year.
Accordingly, a dividend of 87 pence per share will be paid in November 2024. The shares will be marked ex-dividend on 7 November 2024 and the dividend will be paid on 21 November 2024 to shareholders on the register at close of business on 8 November 2024.
Research and Future Developments
Over the last few years, a considerable amount of our laboratory resource has been allocated to the Tau project and Alzheimer’s disease (AD) diagnostics. AD is a complex disease that manifests itself differently across the patient population. At a cellular level, nerve cells (neurons) become associated with amyloid (A) plaques that build up outside the neurons. This is followed by the build-up of Tau (T) tangles inside the neurons. These pathological processes then result in neuronal cell death and the symptoms of neurodegeneration (N) that accompany this. This “ATN” framework is used by neurologists to define the AD pathway that progresses many years before patient symptoms become more obvious.
Recently, the approval of first generation AD therapeutics (Lecanemab™ jointly developed by EISAI and Biogen and Donanemab™ from Eli Lilly) have changed the perception of AD therapy, and it is likely that second generation therapeutics, or combination therapies will further help to slow the disease process. Patients presenting early in the ATN pathway appear to benefit most from therapy. Therefore, ATN assessments can be used not only to screen for patients suitable for therapy but also for monitoring patients whilst on therapy.
The ATN status of patients can be defined with the use of PET scans using appropriate amyloid and/or Tau contrast agents together with other assays for biomarkers in cerebral spinal fluid. It would be highly desirable if such diagnostic procedures could be replaced or augmented with cheaper and more convenient blood tests.
Bioventix has been working with the University of Gothenburg since early 2020 to create new antibodies to Tau and to develop prototype assays for use in AD. The view of many neurological opinion leaders – and shared by our IVD customers – is that blood-testing machines will soon offer a panel of new neurological tests that will reveal information about patient brain health which will be useful for screening and therapy monitoring purposes.
We have supplied a number of major IVD companies with antibodies from our growing Tau antibody portfolio. It is encouraging that a small number of these companies have requested additional quantities of the antibodies supplied. Not only does this add modestly to our overall revenues but it also offers some encouragement that our antibodies will play some part in the future neurological panel offerings of our customers.
Whilst our major IVD customers’ primary interest is in developing regulated tests for routine clinical use, expert neurology centres are already adopting “research use only” tests in advance of the availability of other tests through hospital-orientated IVD companies. Some of these R&D tests are run on Quanterix Corporation (Billerica, MA) machines and our partnership with Quanterix has resulted in one commercial R&D test for neurodegeneration (N) that uses an SMA and which has generated on-going royalty revenues.
Pre-Diagnostics (in Oslo) and their clinical collaborators have two amyloid beta assays based on Bioventix antibodies available for research use. A current focus for Pre-Diagnostics is ARIA (amyloid related imaging abnormality) which is an important side-effect of new anti-amyloid drugs for Alzheimer’s. Pre-Diagnostics’ assays relate to amyloid metabolism and could help screen for ARIA vulnerable patients, before or during treatment.
Our partners at CardiNor (also in Oslo) have continued with their work to try and identify the possible utility of secretoneurin in heart failure patients. This has not progressed successfully and CardiNor are currently restructuring both their operations and their financial position. We have accordingly taken the decision to write off the entire cost of our investment in CardiNor of £183k made between July 2016 and June 2020.
Our pyrene lateral flow system for industrial pollution biomonitoring is proceeding steadily as planned. We have now completed a second manufacturing batch of lateral flow cassettes and intend to conduct a field trial with firefighters during 2025. The follow-on project for benzene exposure has also progressed and lateral flow assay development has recently commenced. Benzene exposure is known to be carcinogenic and is of relevance to the petroleum industry. An additional industrial pollution biomonitoring project featuring isocyanates (hazardous chemicals used in the manufacture of polyurethane paints and plastics) has also progressed well and lateral flow assay development is due to start early in 2025.
We have recently embarked on a new project focussing on sewage contamination of rivers and lakes. Drugs contained in sewage such as paracetamol and caffeine have each previously been used in research labs as a convenient surrogate marker of sewage in waterways. The project concept is to harness our experience with sandwich antibodies, lateral flow systems, together with phone app technology, to facilitate rapid riverside tests, the results of which can be uploaded, pooled and shared. This will allow for much greater intensity and geographical coverage of analysis that will be available to all the many interested parties. Antibodies have already been made for this application and lateral flow assay development is due to commence soon.
The industrial biomonitoring and water pollution projects have required significant external expenditure during the year of approximately £200k. As we develop the projects, we expect this expenditure to continue and grow modestly into the future. Using our cash resources to support the steady internal organic growth of our business has been a consistent feature of our strategy.
Future Strategy
We have previously identified diagnostic biomarkers that we believe suit our antibody technology and have found academic collaborators who have seen merit in working with Bioventix. The Tau project and our collaboration with the University of Gothenburg is an excellent example of this strategy and we will seek additional such opportunities in the future.
We will continue to rely on our core SMA antibody creation technology which consistently helps us to create superior antibodies for our research projects. We are also incorporating additional newer technologies where such technologies are helpful to us. We have successfully created novel “sandwich” assay formats for small molecules using a combination of primary SMA technology and a secondary synthetic “anti-complex” antibody created using the “antibody library” technology of a third party. We have recently created new sandwich systems for benzene and isocyanates (to be more precise, the urine metabolites of these chemicals) in addition to caffeine and paracetamol to add to previous successes with pyrene and THC/cannabis.
The Bioventix Team and Facility
The composition of the Bioventix team of 12 full-time equivalents (14 staff in total) has remained stable over the year facilitating excellent performance and know-how retention. This level of stability has formed an excellent base upon which we have been able to build our new products moving into the exciting new areas described above. We are very fortunate to have such a dedicated and loyal team and we are grateful to them for their continued enthusiastic input and support.
Nick McCooke has recently informed the Board that he wishes to step down as a Director of Bioventix plc and accordingly Nick will not be seeking re-appointment as a Director at the Company’s forthcoming Annual General Meeting. The Board would like to acknowledge Nick’s exceptional contribution to Bioventix plc since his appointment to the Board in January 2014. Nick’s acumen, experience, independence of thought and wisdom are all highly valued by his fellow Directors and the business and have played a full part in the Company’s progress and success over the last 10 years. We are very grateful to him and wish him a very happy retirement. As is described in the Nomination Committee report the Board will seek to appoint a further independent non-Executive Director in due course.
Conclusion and Outlook
We are pleased with our financial results for the year which we believe reflect steady growth in the use of our established products in more mature diagnostic markets. We remain very encouraged by the very early signs of success for our Tau/Alzheimer’s antibodies and we look forward to more progress into the future.
