5 December 2023

IXICO plc

("IXICO" or the "Group")

Financial Results for year ended 30 September 2023, Board chair retirement & Notice of AGM

IXICO plc (AIM: IXI), the medical imaging advanced analytics company delivering insights in neuroscience, announces its results for the year ended 30 September 2023 ("FY23").

The Group has continued to develop its capabilities in 2023.  The validation of its next generation TrialTracker imaging platform, as well as the launch of new MRI and PET imaging analysis solutions exemplify investments that further strengthen the Group's offering to the neurological clinical trials market.  This infrastructure also enables the integration of new, partner technologies that will complement and augment the Group's internal capabilities to address new markets and so expand the Group's addressable market.

Financial:

The Group has delivered financial earnings in line with market expectations and retains a strong, debt free, cash balance in an especially challenging year for the biopharmaceutical industry. Financial performance marginally outperformed the trading update provided in September following a strong final month of the year.

·      £6.7 million revenues (2022: £8.6 million).  The reduction on the prior period principally reflects the final year of impact of the previously announced early cessation of large client trials coupled with a slower pace of new client contract wins reflecting a challenging market backdrop;

·      Gross margin of 49% (2022: 61%) reflects the lower revenues and an increased proportion of early phase trials requiring lower volumes of automated, AI-assisted, image analysis;

·      EBITDA¹ loss of £0.8 million (2022: £1.5 million profit);

·      Closing, debt-free, cash of £4.0 million (2022: £5.8 million), after investments in long-term technology and data of £1.9 million (2022: £2.2 million); and

·      Closing balance sheet value of £11.4 million (2022: £12.5 million).

Operational & Commercial:

·      Completed the PET analysis of the landmark 1,000 participant BioHermes study for the Global Alzheimer's Platform (GAP);

·      Completed the first phase of an unprecedented harmonization analysis of the c.6,000 HD-IH consortium MRI datasets and onboarding of a third biopharma partner, Asklepios BioPharmaceutical, Inc.

·      £8.0 million in new contracts won across 6 therapeutic areas, a combination of new contracts across 7 clients and 13 client contract extensions; 

·      Closing order book of £14.8 million (2022: £16.0 million), providing good visibility to future years' contracted revenues; and

·      Funding secured to further progress the Group's "Precision in Neuroscience" strategy, supporting diagnostic decision-support and safety monitoring of ARIA³, the core side effect of recently approved anti-amyloid therapies.

¹Earnings before interest, tax, depreciation, and amortisation

²Operating cash and R&D tax credit inflows

³Amyloid related imaging abnormality

Giulio Cerroni, CEO of IXICO, said: "I am proud of IXICO's achievements in 2023, reflected most clearly by several important successes in our scientific and technological capabilities. We have purposefully and deliberately focussed investment over recent years to ensure we develop and own our technology. In leveraging our neurological expertise, together with cutting edge technologies, we have built a truly unique, end-to-end, regulatory compliant, medical imaging technology platform.  Whilst IXICO was not immune to the more challenging market conditions of 2023, we remain confident that our "Precision in Neuroscience" strategy will gain market traction as the importance and use of imaging biomarkers in a broad range of CNS therapeutic areas continues to grow.

Board Chair Succession

Charles Spicer, having served for ten years as a Non-Executive Director and seven as the Board Chair, will retire from the Board at the AGM on 25 January 2024. As previously disclosed, Mark Warne, a current Non-Executive Director, will subsequently assume the role of Chair.

Giulio Cerroni, CEO of IXICO, said: "I and the rest of the Board are tremendously grateful for all that Charles has given to IXICO.  His leadership of the Board has been balanced and considered and he has been a wonderful adviser to me and to my leadership team.  I also want to thank Charles for continuing to work hard for IXICO over the last few months whilst we have been undertaking a managed transition of roles within the Board."

Notice of AGM

IXICO also announces that its 2024 Annual General Meeting ("AGM") will be held at CCT Venues Smithfield, Two East Poultry Avenue, Smithfield, London EC1A 9PT on 25 January 2024 at 10.30am.

The full Annual Report and Accounts, along with Notice of AGM, will be posted to shareholders on 15 December 2023 and at the same time will be made available on the Company's website in accordance with AIM Rule 20.

This announcement contains inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR.

For further information please contact:

About IXICO

IXICO is dedicated to delivering insights in neuroscience to help transform the advancement of investigational therapies for neurological diseases, such as Huntington's disease, Parkinson's disease and Alzheimer's disease. The Company's purpose is to advance medicine and human health by turning data into clinically meaningful information, providing valuable new insights in neuroscience by supporting pharmaceutical companies across all phases of CNS clinical research. IXICO's goal is to be a leading advocate of artificial intelligence in medical image analysis.

IXICO has developed and deployed breakthrough data analytics, at scale, through its remote access technology platform, to improve the return on investment in drug development and reduce risk and uncertainty in clinical trials for the Company's pharmaceutical clients.

More information is available on www.IXICO.com and follow us on Twitter @IXICOnews

Chair's statement

This is my last statement as Chair as, after ten years on the Board and seven as Chair, I will step down at the AGM in January 2024 and be succeeded by my fellow non-executive director, Mark Warne.

I am proud of all that the Group has achieved over the last decade.  IXICO now leads the market in neurological image analysis capabilities. We support academic and industry partnerships investigating and illuminating disease progression in the challenging conditions of Huntingdon's disease (HD) and Alzheimer's disease (AD) and have seamlessly delivered image analysis services to the world's largest HD clinical trial.

This year, Eisai announced FDA approval for a drug to treat AD and Eli Lilly reported positive late stage trial results that together, by showing disease modification benefits, herald a new era for neurological drug development.  Such positive progress towards mechanisms that slow, halt and potentially even reverse the progression of AD, coupled with the global epidemic of dementia and the rapid growth in associated international healthcare costs, creates a compelling investment case for the biopharma industry generally and IXICO in particular.

Despite the currently challenging neurological disease clinical trials market, typified by high profile drug failures and decades of research to achieve even minor progress, IXICO has progressed in its technical, scientific and operational capabilities and is strongly positioned to scale. In the last few months, we have streamlined our cost base whilst sharpening our focus on the growth opportunity ahead.  The next generation TrialTracker platform is now production ready and our recent investments in IT infrastructure provide the Group with the highest levels of data security and resilience. 

Overview

Our purpose is to advance medicine and human health in neuroscience by converting raw imaging data, captured as part of the clinical trial process, into clinically meaningful information.  We accurately measure changes (which can be very small) in biomarkers relevant to diseases of the brain. By doing so, our data analytics services provide objective insights into the efficacy and safety of the drugs being trialled and so deliver greater efficiency and accuracy to the clinical development process.  These services are underpinned by our TrialTracker end-to-end technology platform which supports the capture, management, analysis and reporting of data on behalf of each clinical trial in a seamless, centralised, regulatory compliant system that removes the need for travel to global imaging sites.

A step backwards to move forwards.

It has been an especially challenging year for the biopharmaceutical industry and the clinical trials service providers that support it.  Across the Contract Research Organization (CRO) market we have seen fewer clinical trial initiations as large pharma companies scrutinise their existing trial pipelines.  Meanwhile, biotech companies, facing tight capital market conditions, are making cash conservation their primary priority. Consequently, cost restructuring and market consolidation have been widely reported.

In this context, IXICO has performed satisfactorily.  Despite reduced revenues (which we communicated this time last year) the Group has delivered an earnings performance in line with market expectations and retains a strong, debt-free, cash balance.

As the Group looks to return to growth, we have carefully adjusted expectations based on the wider market challenges and the Board took the important, but uncomfortable, decision to right-size our cost base.  I thank the IXICO team for the professional, sensitive and respectful way in which this was managed by all involved.

Governance and people

IXICO's future depends on our people and the Board thanks all our employees for their hard work, dedication, and flexibility in this particularly challenging year. We continue to promote our values - Aspiration, Ability, Agility and Accountability - to augment our culture and align our team with our purpose. The Group uses the ten principles outlined in the Quoted Companies Alliance ('QCA') Corporate Governance Code to ensure it maintains appropriate governance arrangements and the Board conducts itself in a manner that places IXICO's values and the QCA principles at the core of our culture. The Board met formally thirteen times during the year with several additional ad-hoc meetings or calls to discuss specific topics.

I am delighted that Dr Dipti Amin has joined us as a Non-Executive Director.  An experienced NED with an executive career that includes more than twenty years with IQVIA, where she occupied senior positions in compliance, drug safety and medical affairs. Dipti brings significant additional pharmaceutical and CRO experience to the Board.

At the 2024 Annual General Meeting ('AGM'), in accordance with the Company's Articles of Association, Dipti Amin and Mark Warne will stand for election, supported by the Board of Directors' recommendation.  I will retire from the Board on the same date and Mark Warne will step up to the Board Chair position. I am delighted that Mark has agreed to do so, thereby creating a smooth succession, and wish him, our fellow directors and the wider IXICO team the best of luck for the future.

Shareholders

The Group has an impressive list of leading institutional investors, and we would like to thank all our shareholders for their continued support and enthusiasm for IXICO's important work.

Outlook

While we expect 2024 to be largely flat on 2023, we anticipate growth in our orderbook of client contracts should position the Group for a return to double digit revenue growth in 2025.

IXICO is well positioned in its wider market which we expect to grow and therefore attract new investment in the global pursuit of medical solutions to those neurological diseases so that impact the lives of millions of patients and impose wider significant social and economic burdens.  We are a small but important part of the solution to this high unmet medical need and the Board is proud of the way that the Group approaches its business activities with this significant responsibility held firmly at the front of mind.

Charles Spicer

Non-Executive Chair

Chief Executive's statement

Executive Summary

As I look back and reflect on 2023, it is with mixed feelings.  On the one hand, the Alzheimer's Disease (AD) research landscape continues to experience a significant resurgence, with regulatory approvals for new therapies with blockbuster potential imminent. After nearly two decades of high-profile disappointing results in Phase 3 trials, Biogen's Aducanumab approval in 2021 was followed in 2023 by the accelerated and then full FDA approval granted for Eisai's Lecanemab and positive Phase 3 readouts for Eli Lilly's Donanemab. Our view is that these major milestones will be a trigger for more investment in neurological disease areas by the biopharmaceutical industry. With this favourable backdrop, we took significant strides in 2023 in the delivery of our purpose of harnessing medical imaging data to advance human health, investing to strengthen our position as a specialist provider of neuroscience imaging data analytics solutions to the clinical trials industry.

Conversely, macro-economic impacts of a challenging political landscape, high global inflation, and continuing regional conflicts resulted in the biopharmaceutical industry cutting back on development pipelines and/or delaying new clinical trial start-ups.  Like many other CRO companies supporting the clinical trials market, IXICO was not immune to the financial impacts of these conditions, resulting in a weaker year of new contract bookings than had been anticipated.   Despite lower than planned revenues, I am pleased to report earnings that align with market expectations. However, given that we expect the challenging business environment to continue across 2024, we recently took the difficult decision to reduce headcount to right size our cost base as we reset the business for growth. 

During the year we supported two important enhancements to neurological disease knowledge in AD and Huntington's disease (HD).  We supported the Global Alzheimer's Platform (GAP) by providing PET Amyloid visual reads for their 1,000 participant BioHermes trial, completing data transfers ahead of the requested timelines. The study was notable for achieving a secondary recruitment target requiring a minimum of 20% of the study participants to be from traditionally underrepresented populations, enabling IXICO to report on initial findings on differences between racial and ethnic groups at the CTAD opening symposium (Boston, October 2023).  We also led, alongside the CHDI Foundation, the Huntington's Disease Imaging Harmonization Consortium (HD-IH) in securing funding to ensure the full analysis of more than 6,000 HD datasets using IXICO's leading IXIQ.Ai analytics platform. We anticipate that the insights derived from the work of the HD-IH consortium will create long term value to the biopharmaceutical partners to support them in their clinical development programmes and to the broader HD research community.

We delivered seamlessly for our clients, providing image analysis services to more than 30 studies, broadening our offering across therapeutic indications whilst improving our service level metrics to exceed our clients' expectations.  In tandem, we further developed our PET imaging capabilities, including an enhanced service offering for PET tracer management, deepening our reach into the AD market.  Our next generation TrialTracker platform is production ready, and we are looking forward to deploying this Microsoft Azure enabled technology in support of our client trials during 2024 and in the years ahead.

We have made strides in executing our 2022 to 2027 "Precision in Neuroscience" strategy.  We enter our new financial year with an order book of signed contracts valued at £14.8m and a stronger pipeline of client opportunities, with visibility of new contracts to provide a platform for double digit growth in 2025 and beyond. Considering the longer term, I am also excited by the progress made with the "Bridge Pillar" of our strategy, with a recent funding award to develop our plans for post-market decision support; this development will  provide the bridge between clinical trials and diagnostic tools to enable the right patients to safely access novel therapies in AD.  There remains significant opportunity in this space, and our intention is to accelerate further development in this area during 2024.

I would like to thank my team at IXICO for their incredible hard work over the last twelve months, and for the approach and professionalism that they have brought to both meeting the opportunities and supporting the challenges that we and our current and prospective clients face in developing new therapies across many neurological diseases.  As I look forward to 2024, it is with cautious optimism underpinned by a deep-rooted confidence that IXICO is better placed than it has ever been to deliver seamlessly for our clients on our purpose of harnessing medical imaging data to advance human health within neuroscience.

Market overview

The burden of degenerative neurological disease continues to increase, driven by an aging population. Research in this area continues to advance; greater understanding of neurological disease has been recently driven by insights derived from multi-modal approaches combing genomics, biomarkers, diagnostics, and imaging techniques, and this, along with emerging new drug mechanisms, is changing the fundamentals of innovation in the sector.

Recent regulatory progress in AD for Biogen, Eisai and Eli Lilly has given pharma companies greater certainty of commercial returns in what has been historically a very challenging indication. This has encouraged further investment in neuroscience portfolios and, consequently, the market for clinical trials in neuroscience is expected to continue to grow at pace.

Central Nervous System disorders account for the second largest segment of pharmaceutical R&D investment, behind only that of oncology. The CNS disorders segment accounted for 10.6% of the clinical trial imaging market in 2020. This segment has been valued at $108 million in 2021 and it is expected to grow to $157 million in 2026 with a CAGR of 7.7%

Neuroimaging is widely deployed in CNS trials at all phases, firstly to screen patients for safety and eligibility and then at regular intervals to detect and measure changes in brain structure caused by disease progression and interventions.  Although many imaging biomarkers are exploratory, objectively detecting and measuring even small changes can deliver significant insights to the sponsor on treatment mode of action and efficacy.

The core of IXICO's imaging offer is in its proprietary, validated artificial intelligence technology which is deployed to deliver standardised and repeatable analysis generating reliable insights; IXIQ.Ai can more than double the amount of usable data compared to widely used tools delivering greater value to clients in extracting insights from its trial investments.  In addition, IXICO offers its clients deep expertise, in imaging techniques and endpoints with specialist Biomarker Scientists dedicated to each study to help clients plan the imaging approach and protocol, and to provide quality assurance for the study output. IXICO's TrialTracker platform ensures robust data management and security which is of the highest importance to clients operating in the highly regulated field of clinical trials, particularly when deploying studies in multiple jurisdictions. 

Outlook of the neurological drug development segment by indication

Alzheimer's Disease (AD)

Historically, over 99% of novel treatments in development for AD have failed to achieve regulatory approval, with many of these failures occurring in the late stage of trial, representing a loss of many billions of dollars of investment.  More recently, Biogen and Eisai have achieved approval by the FDA and, with a further asset now in regulatory review (Eli Lilly), there is renewed confidence in the validity of the research approach.  This has paved the way for even greater focus in this area of research and development. The IXIQ.Ai brain segmentation platform can improve success rates by providing more usable data, enabling more targeted patient selection to lower the biggest driver of costs and inefficiencies while increasing the chance of success. Currently there are over 140 drugs in the global AD development pipeline; many of these drugs are exploring new modes of action, increasing the value of imaging biomarkers to closely monitor patients for safety, as well as to study disease progression and drug efficacy.

Parkinson's Disease (PD)

Until recently, treatments for PD have focused on reducing the severity and impact of the physical symptoms of this debilitating disorder. However, decades of research into the underlying causes of PD are now bearing fruit with the development of newer drugs that focus on slowing, halting, or even reversing disease progression, particularly in the early stages. To date, IXICO has provided neuroimaging services to 14 trials in parkinsonian syndromes and more recently has introduced algorithms for DAT SPECT imaging modalities, specifically to support the growing portfolio of PD trials.

Multiple Sclerosis (MS)

MS tends to affect a younger patient population compared to AD and PD, and a wide portfolio of therapies has been available for treatment for many years.  However, the disease is increasingly now well-understood, and research has identified new clinical subtypes, ushering in new approaches to treatment and management, and fuelling an increasing development pipeline. IXICO is partnering with leading clinical centres on the development of new algorithms to support subtype detection and monitoring, providing leading-edge services to MS studies. The Group also recently introduced an early engagement programme to enable sponsors to fully take advantage of novel imaging approaches on their studies to unlock new insights.

Huntington's Disease (HD)

HD is a relatively rare neurodegenerative disease caused by a faulty gene. Although there have been recent setbacks in the progress of drug development for this indication, the genetic nature of HD means that patients can be reliably identified earlier in the disease pathway, long before symptoms are apparent. This may enable earlier intervention and raises the possibility of gene therapies, supporting the continued growth of the HD development pipeline.  IXICO is a leader in neuroimaging in HD, having supported many HD studies in the past decade and has strengthened its leadership position through its close collaboration with the CHDI Foundation and the HD-IH consortium (see the Science review).

Orphan and Rare Diseases

Initiatives by the EU EMA and US FDA such as orphan drug designation, and the increasing use of genomic sequencing technology to screen newborns and to investigate early childhood development disorders, have encouraged significant investment into a wide range of rare diseases.  In the past five years a new wave of rare disease neurological treatments, including dozens with orphan designation, have been approved. With its expertise in imaging and biomarker development, IXICO has successfully adapted many biomarkers for rare neurodegenerative diseases to support a wide range of studies in rare indications such as Friedreich's Ataxia, Multiple System Atrophy and Progressive Supranuclear Palsy.

Operational review

During 2023, the Group worked on more than 30 studies across a broadening range of neurodegenerative indications, supporting all phases of clinical research from small early phase studies to larger Phase 3 trials.

Delivering operational excellence

As a highly specialised provider of tailored solutions, we strive to deliver an excellent service to our biopharmaceutical clients and to the imaging sites we work with. We achieve our high standards by being agile in decision-making and through our ability to customise the solutions we offer.  Examples of 2023 performance metrics include:

?     Project performance: we monitor our performance through customer satisfaction, quality, resources and deliverables. Our metrics have exceeded both those agreed with our sponsors and our own internal targets.

?     Geographies: We supported more than 30 studies across 25 countries. During 2023 we added more than 10 SPECT sites to our network of qualified sites, bringing our total qualified site number for MRI, PET and SPECT to over 1,000 sites across the globe.

?     Analysis units: we analysed over 30,000 image endpoints this year for over 4,000 patient visits. The number of endpoints analysed increased by 37% compared to FY22.

?     Turnaround timelines: fast turnarounds of radiology reports are key to ensure patient eligibility and treatment decisions are not delayed. During 2023, IXICO consistently delivered radiology reports in an average of 3 working days or less, meeting or exceeding the high standards of expectation by clients for brain scans.

We strive to stay at the forefront when developing best practice and have reduced the timelines for transferring data and images to our clients. We know how critical it is for biopharmaceutical companies to have quick access to the full set of high-quality data collected in their study to allow regulatory filing, early publication and conference presentations. We continue to streamline our processes to ensure that client requirements are fulfilled or exceeded to achieve these important milestones.

We are proud of our easy-to-work with operations processes, exemplified by a webinar (December 2022) in collaboration with Re:Cognition Health showcasing our best-in-class approach in setting up imaging studies quickly and efficiently.

 Enhancing operational capabilities

1.   PET Tracer management

During 2023, IXICO enhanced its service offering to our sponsors to provide PET Tracer management solution for AD and PD studies. PET imaging uses a radioactive tracer during the scan. The tracer's uptake provides information to help determine patient eligibility and treatment efficacy. Due to their radioactive nature, these tracers have a short half-life (e.g., 110 minutes for the most widely used), and require special transportation, licencing and storage conditions. They are complex to produce and therefore their availability may be limited. Due to all these characteristics, tracer management is increasingly of interest to biopharmaceutical companies.  IXICO is able to support these activities by facilitating the coordination of the Tracer manufacturing company, the logistics companies and the imaging sites.

2.   Next generation of TrialTracker

Over the past three years, IXICO has utilised its in-house development resources, augmented by contracted expertise, to bring to market a next generation of its TrialTracker platform.

As with the Group's existing TrialTracker, this is an end-to-end data management platform enabling imaging sites, wherever they are in the world, to upload brain scans whilst automatically checking scan quality and pseudonymising the scan.  The platform seamlessly transfers the scan to IXICO's radiological team, to provide image reads and safety checks, and hosts its AI enabled, automated proprietary analysis pipelines.

The next generation TrialTracker platform has been developed using Microsoft's Azure cloud technologies, providing the Group and its clients with state-of-the-art, secure, resilient, regulatory compliant infrastructure benefitting from highly flexible microservice capabilities.  This enables the Group to adapt the platform to suit the specific (and often bespoke) clinical trial needs of its clients and partners.

The platform is ready to be deployed on client trials having completed extensive testing and validation activities in 2023.

Science review

Significant progress was made across 2023 in further developing, validating and positioning IXICO's clinical trial product portfolio across therapeutic indications. In addition, the Group made further progress in developing core technology to 'bridge' into potential new markets in clinical applications as the field is experiencing significant momentum in the approval of new therapies, specifically in AD. Throughout 2023, IXICO has actively participated in the scientific discussion across core therapeutic areas as demonstrated by the attendance at eight conference and the (co-) presentation of more than 20 posters and (invited) talks. IXICO has furthermore, hosted three scientific webinars with key opinion leaders in AD, gene therapies, and HD.

A key R&D focus was on the extension of IXICO's PET analysis capabilities to extend the service offerings across both relevant (MRI and PET) imaging modalities within a broadening range of neuroscience clinical trials. Specifically, IXICO has now deployed PET visual read and quantitative analysis solutions across core PET tracers in AD and PD. During 2023, we have completed PET analysis of the Bio-Hermes trial for the Global Alzheimer's Platform (GAP). Co-sponsored by pharma companies with an interest in AD clinical development, the landmark 1,000-participant Bio-Hermes study was designed to evaluate the ability of blood-based and digital biomarkers to reflect the presence of brain amyloid in participants enrolled in AD clinical trials. A secondary objective of Bio-Hermes was to include a significant representation of ethnic and racial minority participants, building a highly valuable database as regulatory requirements in AD clinical trials increasingly require improved representation of traditionally underrepresented populations. IXICO provided all PET data collection services as well as the visual radiology read to determine gold-standard amyloid pathology. Following study completion, IXICO's scientific team led an initial analysis of the collected PET biomarkers, specifically focusing on the analysis across ethnic and racial groups. The work was selected for presentation and discussion in the opening symposium at the high-impact CTAD (Clinical Trials in Alzheimer's Disease) conference, held in Boston, Massachusetts, between 24^th and 27^th October 2023. Selection by the organising committee for this prestigious presentation slot highlights the importance of the work performed for the AD community and provided a significant opportunity for IXICO to demonstrate cutting edge scientific and technical capabilities in AD PET imaging to participating pharma sponsors and academic researchers. As a Bio-Hermes partner with an R&D license on the data collected, IXICO is well-positioned to further investigate the unique dataset and thereby advance scientific knowledge in this critical field of AD development.

Huntington's disease continues to be a key market for IXICO, and good progress was made during 2023 to further underline the Group's leading position by progressing the IXICO-initiated HD Imaging Harmonization (HD-IH) consortium. HD-IH was founded in 2022 by IXICO, the CHDI Foundation Inc. (CHDI) and pharma partners uniQure and PTC Therapeutics to conduct an unprecedented harmonization analysis of more than 6,000 participant-visit magnetic resonance images (MRIs) acquired from over 2,000 research participants. During 2023, the project has completed the initial phase and, through the onboarding of a third pharma partner, Asklepios BioPharmaceutical, Inc. (AskBio) and additional funding commitments by both CHDI and IXICO, secured the necessary financing to complete the project. These analyses are expected to support the development of therapeutic strategies targeting specific HD sub-populations ("precision-medicine"), inform eligibility and dosing decisions for clinical trials, and aid in associated trial design decisions and biomarker development to enable interventional studies earlier in the disease course. IXICO presented an update on progress of HD-IH at the 18^th Huntington's Disease Therapeutics Conference (HDTC) held in Dubrovnik, Croatia, from 24-27 April 2023.

Further steps were taken in the development of an extended offering for demyelinating disorders.  The Group has previously announced the award of two phase-III trials in MOG antibody-associated disease (MOG-AD) and during 2023 we have extended our service offering to provide automated lesion quantification into one of those trials. With these extended capabilities, the Group can now serve core imaging requirements across demyelinating disorders, including Multiple Sclerosis (MS) as the most prevalent and widely researched disease area. IXICO presented a poster on its quantitative MS analysis at the 9^th conference by the European Committee for Treatment and Research in MS, ECTRIMS, held in Milan, Italy, from 11-13 October 2023.

The Group continues an active R&D program exploring opportunities to develop its core clinical trial analytics technology for applications that support treatment-related decision-making in new post-market applications. During 2023, we have actively progressed several partnership opportunities on the development of solutions to provide diagnostic decision-support in clinical practice and safety monitoring of ARIA (amyloid related imaging abnormality), the core side effect of recently approved anti-amyloid therapy. To further support development of a post-market decision support tool, the Group has secured funding that will support and complement IXICO's internal R&D program during 2024.

Growth strategy & Corporate outlook

Our focus remains on neuroscience with neurology global medicine spending expected to grow at 3-6% to more than $140 billion by 2025. This includes much higher growth subsegments, as a range of rare neurological diseases have had new treatments approved or showing positive progression as well as the potential that large population diseases like AD or PD will see further investment consequent to the approval of new treatments.

During 2023, IXICO was impacted by a slow-down in trial start-ups and near-term cutbacks in pharma R&D pipelines resulting from a tighter funding environment affecting the biopharmaceutical industry. Whilst we anticipate these conditions continuing in 2024, we view them as near-term headwinds. We remain resolute in our conviction that the unmet clinical need in neurodegenerative diseases provides significant runway for growth for IXICO, reflected in our "Precision in Neuroscience" strategy.

Our 5-point Precision in Neuroscience strategy

IXICO continued to make good progress in several strategic areas:

Build Pillar:  Robust operational performance and cost control measures for the period enabled financial earnings in line with market expectations, despite lower year over year revenues. Investments made during 2023 to build our commercial infrastructure have led to notable increase in the client contract opportunities pipeline providing management visibility to significantly larger numbers of Requests for Proposal (RFP) over the next 24 months, each valued at between £0.25m to £2.5m, across a broadening range of therapeutic areas. This, combined with an order book at the end of 2023 of £14.8m, provides good future revenue visibility and a basis for targeting our commercial efforts to return to double digit revenue growth in 2025 and beyond.

Innovate Pillar: We believe that IXICO will lead in our addressable markets by developing proprietary algorithms that the biopharmaceutical industry rely on to establish both the safety and efficacy of new treatments. Data analysis undertaken by IXICO as part of the GAP Bio-Hermes study (see Science review) completed in 2023 were presented in the opening symposium at the prestigious CTAD (Boston, October 24th), AD clinical trials scientific conference. Presenting important data at large disease specific conferences is expected to increase awareness of IXICO's capabilities to the global pharma industry and provide significant potential future business development opportunities.

In 2023, the HD-IH consortium was expanded (see Science review). The HD-IH consortium deploys IXICO's proprietary IXIQ.Ai brain segmentation platform to conduct a harmonized analysis of more than 6,000 participant-visit magnetic resonance images (MRIs) acquired from over 2,000 research participants. These analyses will support the development of therapeutic strategies targeting more specific sub-populations, inform eligibility and dosing decisions for HD clinical trials, and aid in associated trial design decisions and biomarker development to enable interventional studies earlier in the disease course.

Penetrate Pillar: Despite delays in clinical trial start-ups, we continue to make good progress in pursuing our strategy of penetrating early stage (phase 1 and 2) programmes, accessing the potential to stay with the client for several years as the asset, if successful, moves along the development continuum.  Broadening the client base with more early phase studies reduces the risk associated with any single large, late phase project, while providing multiple opportunities to move into larger, later stage (phases 3 and 4) clinical trials in the future.

Developing drugs takes a long time and is expensive. The overall likelihood of approval (LOA) from Phase 1 for all developmental candidates over 2011-2020 was 7.9%.  However, rare disease therapies (of which many are in neurology) are notably more successful with an overall LOA of 17.0% and development programs with trials employing patient preselection biomarkers have two-fold higher LOAs (15.9%), driven by a Phase 2 success rate of nearly one-in-two. This insight supports our strategy of becoming the partner of choice across a broader range of rare diseases, as we have done in HD. In addition, we will be looking to leverage our next generation TrialTracker platform to increase commercial success in new trials of large population diseases like AD, MS, or PD, in particular those employing imaging biomarkers combined with potential analysis of non-imaging biomarkers, such as blood-based and digital biomarkers.

Bridge Pillar: There is incredible potential for real world evidence (RWE) to play a much broader role in the advancement of drug development, delivering insights that ensure efficacy and safety, while increasing patient-centricity and trial feasibility. With our recent and ongoing investments in artificial intelligence (AI) and cloud analytics together with our next generation TrialTracker data sharing and AI analysis platform, IXICO's ambition is to address many of the challenges to analysing and interpreting RWE Imaging data. We expect this to expand IXICO's addressable clinical trials market whilst creating a bridge into post marketing and clinical practice markets.

Enhance Pillar:  With long lead times, significant regulatory and procurement barriers to entry into the clinical trials market, IXICO is uniquely positioned to partner with innovative analytics organisations to provide a market channel to the global biopharmaceutical industry. This partnering strategy supplements our own innovation roadmap with additional enhancements to our offering to provide cutting edge innovations across a broad range of CNS disease areas. Progress made during 2023 means that we are hopeful to be able to announce our first significant partnership agreement early in 2024.

Giulio Cerroni

Chief Executive Officer

Financial review

Right sizing the Group for future growth.

In 2023, the Group has navigated a challenging trading environment.  This was anticipated, and the Group has delivered financial earnings for 2023 in line with market expectations.

Looking to 2024, ongoing macro-economic and political challenges continue to weigh down on the clinical trials market, and, in particular, the availability of capital.  This has led to cost restructuring and consolidation across the pharma, biotech and CRO space, and has softened the Group's revenue outlook for 2024, as announced in September 2023.  To anticipate this, the Group has undertaken cost reduction measures, including a 'right sizing' of the employee base seeking to balance the weaker short-term outlook and the medium-long term market opportunity (which, if anything, has strengthened in the year).

The Group expects to deliver flat revenue across 2024, before returning to revenue growth in 2025.

This review includes a comparison of the financial KPIs used to measure progress over the prior year, a summary of which is shown below:

Revenue

Revenue for the year of £6.7 million (2022: £8.6 million) represents a year-on-year contraction of 23%. This contraction was expected, and was caused by the final year impact of large client trial cessations arising across 2021 and early 2022, each materially impacting future revenues.  Replacing the revenues lost from these trials takes time, both in contracting and initiating new trials and those new trials will tend to be lower value, earlier phase trials compared to the large, failed trials (which were predominantly late stage).

Across 2023, the Group has seen lower levels of new contract bookings than it anticipated, a trend seen across the clinical trials market. The Group will deliver approximately flat revenues in 2024 before an expected return to revenue growth in 2025.

Gross profit

The Group reports gross profit of £3.3 million for the year (2022: £5.2 million). This equates to a gross margin of 49% (2022: 61%).  Whilst this remains a strong gross margin, the reduction on the prior year reflects both the reduction in revenues and a revenue mix increasingly reflective of earlier phase trials, which tend to be lower margin.  Whilst in the short term, a portfolio of early phase trials results in lower gross margins, this portfolio also provides a strong base for future growth, as those trials that successfully move from early to late phase provide the Group with the opportunity to continue providing services as these trials transition to larger, later phase trials.

Earnings before interest, tax, depreciation, and amortisation ('EBITDA')

The Group delivered an EBITDA loss of £0.8 million in the year (2022: £1.5 million profit). This reflects the reduction in revenues, tighter margins, a lower level of grant income, several non-recurring benefits that supported profitability in 2022 and a reduced level of cost capitalisation.  These negative impacts have then been partially offset by careful cost management including the completion of a headcount reduction exercise immediately post the financial year end.

Operating profit

Operating expenditure in the year reflected careful cost management alongside targeted investment, specifically:

·      research and development expenses of £0.9 million (2022: £1.2 million) included the development of new algorithms to support image analysis in new and existing therapeutic indications. In addition, the Group capitalised £1.2 million of internal development expenditure primarily in respect of its next generation TrialTracker platform (2022: £0.9 million);

·      sales and marketing expenses of £1.3 million (2022: £1.2 million) reflecting increased investment in this team in particular, sales executives and marketing and product capabilities; and

·      general and administrative expenses of £2.9 million (2022: £2.6 million) reflecting several non-recurring positive impacts on profit in the prior year that included positive foreign exchange movements and the write back of long term incentive charges on share options that did not, or were not expected to, meet their performance conditions.

Operating losses totalled £1.4 million (2022: £0.9 million profit) equated to an operating loss margin of 22% (2022: 11% profit margin).

Order book

The Group continues to benefit from a healthy contracted order book. On 30 September 2023 this totalled
£14.8 million (2022: £16.0 million), which takes account of £6.7 million of revenues delivered during the financial year,
£8.0 million of new and expanded multi-year contracts secured during the year and £2.6 million of trial descopes due to client trial failures and minor foreign exchange movement in the year. This net contraction in the order book reflects the notable slowdown in new trial initiations during 2023.  This is a short-term challenge reflective of the tight capital markets and is counter to the medium and longer term trends for increased investment in this market driven by aging populations, increased global healthcare costs and scientific breakthroughs in the area of neurological disease.

New contracts won were across 7 clients with contract extensions across 13 clients.

Cash

The Group reported operating cash inflows after tax receipts of £0.3 million in the year (2022: £1.4 million).  This reflects the timing of operational cash inflows and outflows with strong client payment volumes early in the year supporting an overall positive operational cash position.

The Group had a closing cash balance at 30 September 2023 of £4.0 million (2022: £5.8 million) with the reduction in cash reflecting £1.9 million (2022: £2.2 million) of investment in data and technology assets designed to support future scalability and £0.2m of lease payments on the Group offices (2022: £0.1m). These investments were partially offset by the £0.3m of operating cash and taxation inflows (2022: £1.4 million).

Non-current asset investments

The Group capitalised £1.9 million of non-current assets in the year to 30 September 2023 (2022: £2.3 million). This decrease in non-current assets reflects the 2023 investment in bringing to operational readiness of the Group's next generation TrialTracker platform totalling £1.6 million (2022: £2.0 million). 2024 capitalised investment in this platform to deliver additional functionality is expected to be less than £1.0 million.

The next generation TrialTracker platform further enhances the Group's capabilities to remotely collect, and centrally analyse, brain images in support of clinical trials. The platform has been developed on Microsoft Azure's cloud infrastructure supporting further improvements in system resilience, security, scalability, and efficiency.

Net assets

The Group's net asset position decreased by £1.1 million to £11.4 million across the year (2022: £12.5 million). This reflects the losses reported partially offset by the investments made in technology assets to underpin long-term future growth aspirations and market demands.

Loss per share

The Group reports a loss per share of 2.44p (2022: 2.14p profit per share).

Grant Nash

Chief Financial Officer

Financial Statements

Consolidated Statement of Comprehensive Income

for the years ended 30 September 2023 and for 30 September 2022

Consolidated Statement of Financial Position

as at 30 September 2023 and 30 September 2022

Company Statement of Financial Position

as at 30 September 2023 and 30 September 2022

Parent Company Income Statement

As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial statements. The Company's loss for the financial year was £707,000 (2022: £741,000).