RNS Number : 1888P
Diaceutics PLC
21 May 2024
 

Diaceutics grows revenues by 22% in FY 2023 and delivers order book growth of 57%

 

52% of revenues are now recurring 

 

Six customer engagements now at enterprise-wide level

 

AI upgrades to the DXRX platform driving improved data insights

 

Diaceutics becoming the primary commercialisation partner for pharma and biotech launching precision medicines - 17 of the top 20 global pharma companies are Diaceutics' customers

 

Strong balance sheet with cash of £16.7 million

 

Strong momentum enjoyed in 2023 has continued into 2024

 

Belfast and London, 21 May 2024 - Diaceutics PLC (AIM: DXRX), a leading technology and solutions provider to pharma and biotech companies, today announces the continued strong performance and growth across its business for the full year ended 31 December 2023.

 

Ryan Keeling, Diaceutics' Chief Executive Officer, commented: "2023 was another year of strong performance and growth for Diaceutics despite it being a challenging year for the wider pharma industry. This growth demonstrates the significant value our customers place on our differentiated offering, as reflected by the increasing number of precision medicines we are working with. The good momentum we enjoyed in 2023 has continued into 2024 to date and we see many opportunities for growth both with existing and potential new customers."

 

Financial Highlights:


FY 2023 

FY 2022 

Change  

Revenue 

£23.7m 

£19.5m 

+22

Recurring revenue percentage of overall revenue 

52%

35%

+17 ppts

Annual Recurring Revenue (ARR)

£13.7m

Not reported

-

Order book

£26.5m

£16.9m

+57%

Gross Profit 

£19.7m 

£16.7m 

+18% 

Gross Profit Margin 

83% 

86% 

-3 ppts 

Adjusted EBITDA*

£2.4m 

£3.6m 

-33%

Profit /(loss) before tax 

(£2.4m) 

£0.6m 

-£3.0m

Net cash 

£16.7m 

£19.8m 

-£3.1m 

   *Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and exceptional items.

 

·   

22% revenue growth in FY 2023 - 19% on a constant currency basis

·     

52% of revenues in the period were recurring (FY 2022: 35%)

·     

Good visibility on future revenues - order book value at 31 December of £26.5 million (2022: £16.9 million), of which £12.3 million will be realised in FY 2024

·     

Adjusted EBITDA of £2.4 million (2022: £3.6 million)

·     

Diaceutics remains debt free with cash of £16.7 million at 31 December (2022: £19.8 million)

·     

Continuing to scale and invest in line with accelerated growth strategy

 

 

Strategic & Commercial Highlights: Continued progress across our key value drivers and expansion of our team, further enhancing our competitive advantage as we scale the business for future growth

 

Enhancing our lab network, data capabilities and DXRX platform

·   

Further expansion of lab network, data assets and capabilities in Europe

·   

Accelerated roll out of DXRX Signal across US markets, which identified over 500,000 patients in 2023

·   

Enhanced platform scale and capabilities improving customer experience and service

·   

Significant technical upgrade to DXRX platform involving best in class AI

 

Investing in our team

·   

Leadership team further developed and strengthened - Ryan Keeling appointed Chief Executive Officer, Graham Paterson appointed as a Non-Executive Director and Jillian Beggs appointed Chief Commercial Officer. Co-founder and former CEO Peter Keeling now focussed on business development & partnership opportunities.

·   

Q1 2024 - appointment of Ken Ruppel as VP Scientific & Medical Services and Amie McNiece as VP Marketing

 

Strong commercial progress

·   

Four customers at enterprise level during 2023 (2022: Nil)

·   

Two new enterprise-wide engagements in 2024 - bringing total enterprise ARR to £9.0 million

·   

Worked with 69 individual therapeutic brands, an increase of 23% YoY

·   

Q1 2024 - Signed KPMG strategic alliance facilitating joint marketing

·   

May 2024 - hosted Practice Gaps & Economic Forum in Belfast

 

Current Trading & Outlook:

·     

Continued strong growth in Q1 2024 - Total Contract Value up 82% and revenues up 25% vs Q1 2023

·     

Q1 2024 Adjusted EBITDA and cash in line with expectations and accelerated investment strategy to scale for growth continuing to plan

·     

Deployment of enhanced technologies across the DXRX platform delivering operational leverage

·     

Market opportunity significant and growing, including expansion beyond pharma

·     

Continuing to win new business and expand enterprise-wide engagements with existing large pharma customers

·     

Strong demand for DXRX insight and engagement solution products driven by customer success

 

Analyst Presentation:

A webinar presentation for investors and analysts will be held at 1330 BST (0830 ET) on Tuesday, 21 May 2024. Those wishing to attend can register using the following link:

 

https://stifel.zoom.us/webinar/register/WN_avvLvNSEQ-GNugz8dbboZg

 

Investor Meet Presentation:

A webinar presentation for investors will be held via the Investor Meet platform at 1630 BST (1130 ET) on Tuesday, 21 May 2024. The presentation is open to all existing and potential shareholders and registration can be completed via the following link:

 

https://www.investormeetcompany.com/diaceutics-plc/register-investor

 

Questions can be submitted pre-event via your Investor Meet Company dashboard up until 0900 (BST) the day before the meeting or at any time during the live presentation. Investors who already follow Diaceutics on the Investor Meet Company platform will automatically be invited.

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for making this announcement on behalf of the Company is Nick Roberts, Chief Financial Officer.

 

Enquiries: 

Diaceutics PLC  


Ryan Keeling, Chief Executive Officer 

Tel: +44 (0)28 9040 6500 

Nick Roberts, Chief Financial Officer  

investorrelations@diaceutics.com 





Stifel Nicolaus Europe Limited (Nomad & Broker) 

Tel: +44 (0)20 7710 7600 

Ben Maddison 


Nick Harland 


Kate Hanshaw




Alma Strategic Communications

Tel: +44(0)20 3405 0205 

Caroline Forde 

diaceutics@almastrategic.com

Kinvara Verdon

Kieran Breheny


 

About Diaceutics

At Diaceutics we believe that every patient should get the opportunity to receive the right test and the right therapy to positively impact their disease outcome.

 

We provide the world's leading pharma and biotech companies with an end-to-end commercialisation solution for precision medicines through data analytics, scientific and advisory services enabled by our platform DXRX - The Diagnostics Network ®.

 

 

Statement from the Chair

Diaceutics recognises the importance of maintaining high standards of corporate governance. We adhere to the principles of the QCA Corporate Governance Code (the "QCA Code") and will be reporting against the new 2023 QCA Code next year, in respect of the Group's financial year ending 31 December 2024. To ensure that the Group is operating to its highest level, we have rigorous processes in place to assess the effectiveness of the Board and its committees and assess how our standards can be improved.

Deborah Davis 

Chair

 

 

CEO transition

On the same day, Ryan Keeling, then Chief Innovation Officer, was appointed CEO Designate and officially assumed the role of CEO on 1 January 2024. Ryan, who joined Diaceutics in 2006 and became a member of the Board upon its IPO in 2019, brings over 17 years of expertise in diagnostic commercialisation. He is the architect of the Company's data capabilities and DXRX platform, driving its technology advancements and product innovation.

 

 

Chief Executive review

Business and strategic overview

Transformational year

I am delighted to present my first set of results as CEO of Diaceutics. These results are validation of the market opportunity that Diaceutics is pursuing, and I am excited to continue to build upon this success, further establishing Diaceutics as the primary commercialisation partner for all life science companies launching precision medicines.

The past year has marked significant progress and strong financial performance for Diaceutics. Our accelerated investment strategy is yielding results, evidenced by our revenue growth and increasing proportion of recurring revenues, which enhance revenue quality and visibility.

Simplified model

At the start of the year, we outlined our accelerated investment strategy bringing focus to the business across our four value drivers:

·    Data

·    Lab Network

·    DXRX Platform

·    Our Team

 

We remain resolutely driven by our purpose; ensuring every patient should get the right test and the right therapy to positively impact their disease outcome. This shapes the strategic decisions we make. 

Data

Our competitive advantage continues to be reinforced through our unrivalled depth of data. The expansion of our data supply network has significantly augmented our data coverage, particularly in the US market, and the launch of daily alerts via DXRX signal in August 2023 is a ground-breaking innovation which provides Diaceutics' customers with close to real time data that can be used to identify patients eligible for therapy prescription or clinical trial.

Lab network

Expanding our lab partner network has empowered labs to improve the patient diagnostic and treatment journeys. We have augmented our lab networks and data sets, with 941 labs now across 55 countries. Over the last year, Diaceutics has produced and promoted a range of exciting content to engage these labs and encourage a beneficial two-way relationship.

DXRX platform

To solidify our market leading position, we continually enhance our capabilities. Development of new functionality for the DXRX platform, including patient level linkable data, generative AI (Diaceutics Large Language Model, DLLM), and comprehensive US data sets that include data on social determinants of health, underscores our commitment to innovation.

The deployment of generative AI in the form of Diaceutics' Large "Lab" Model has enabled the platform to ingest large unstructured data sources from multiple sources on a daily basis, where it is sorted, labelled and communicated on to customers as insights within 24 hours.

This technology advancement enabled the launch of daily signal in 2023 and empowers Diaceutics' customers with even timelier insights, allowing healthcare professionals to be engaged precisely during the treatment decision window and ensuring the most effective drugs or therapies are offered promptly to patients.

The successful launch of new subscription offerings and the securing of six enterprise-wide engagements to date align with our objective to transition larger customers onto the DXRX platform, driving platform-based subscription contracts. 52% of our revenue is now subscription based, with ultimately, 70% of our business expected to be subscription only and platform enabled by the end of 2025, with peak adoption expected to reach 80% two years later. Crucially, we are seeing increasing traction for our enterprise-wide engagements, which offers Diaceutics a significant opportunity to scale.

Our team

At Diaceutics, our purpose - to ensure each patient receives the right treatment - guides every endeavour. Our team's dedication has been instrumental in driving significant progress, and it has been a privilege to work alongside them in various capacities within the organisation.

Investing in our people remains a priority. We have strengthened the team significantly through recruitment and investment in training and development. At a senior leadership level, we have recruited a number of Vice Presidents across the business, enhancing our industry expertise and supporting our strategic growth.

Financial performance

 

Strategy validated by strong financial performance

Business momentum has continued throughout the year, driven by further DXRX platform adoption by large pharma customers. Increasing both the number of therapeutic brands we work with and the average revenue per brand has allowed us to capture a greater share of customer budget. We worked with 44 customers during the year, adding 13 new therapeutic brands in 2023, and we have increased our average revenue per brand to £0.38 million up from £0.35 million in 2022.

Revenue grew 22% to £23.7 million in 2023 (2022: £19.5 million), 19% on a constant currency basis, with 52% of revenues in the year being recurring (2022: 35%). 72% of revenues were DXRX platform enabled, and our continued progress towards becoming a recurring revenue business is supported by our newly introduced metric of Annual Recurring Revenue (ARR) of £13.7 million as at 31 December 2023.

Our robust order book, totalling £26.5 million at December 31, 2023, represents 57% growth in the year (FY 2022: £16.9 million). £12.3 million of the order book will be realised as revenue in FY 2024.

The six enterprise-wide engagements secured across 2023 and Q1 2024 have an Annual Recurring Revenue (ARR) of £9.0 million. An enterprise-wide engagement is characterised by a customer deploying the DXRX solutions across three or more of the precision medicines in their portfolio, or a customer engaging Diaceutics as the primary commercialisation partner for their precision medicine. All six current enterprise-wide engagements are with top 20 global pharma companies, and are on autorenewal contract terms with contact lengths between 12 and 36 months.

We are committed to continuing to invest in the expansion of our key value drivers, and our strong balance sheet means we are fully funded to deliver significant growth in line with our strategic roadmap. Our cash at 31 December 2023 was £16.7 million (FY 2022: £19.8 million) and we continue to have no debt.

Market opportunity

Growing market opportunity and reach

The rapid expansion of the precision medicine market offers significant opportunities for Diaceutics. As global pharma intensifies their focus and dedicates more resources to this field, aiming to improve patient access, capture lost revenue and increase profitability, Diaceutics is well-positioned to capitalise on these trends. Despite their best efforts, we estimate that pharma is still losing up to US$3 billion¹ of lifetime precision medicine revenues due to inadequate testing. This underlying market strength, combined with pharma's potential diagnostic commercialisation budget of US$10-15 million per brand, reinforces Diaceutics' growth ambitions. We are committed to scaling by expanding the number of brands we work with and increasing the average revenue per brand.

Capturing the opportunity

The Board is confident that Diaceutics has the right offering and competitive advantage to capitalise upon the growing market opportunity. Peter Keeling's increasing involvement in a corporate development role underscores our commitment to accelerating growth through wider industry partnerships.

With our infrastructure investments (our platform, people and lab network) largely complete, we are poised for the next phase of growth, extending our market reach through partnerships and sales and marketing initiatives. Our recent strategic alliance with KPMG, exemplifies our commitment to expanding our commercialisation solutions to life science customers launching precision medicine. The strategic alliance will combine Diaceutics' and KPMG's extensive knowledge, expertise and industry reputation, and enable Diaceutics and KPMG to engage their life science customers, through a new sales channel, and with a broader and more comprehensive range of precision medicine services.

1 The US$3 billion of lifetime precision medicine revenues lost and US$10-15 million commercialisation budget for pharma are estimates based on Diaceutics market data. 

 

Quarter 1 2024 trading

We are pleased to have seen positive progress in Q1. Notwithstanding the cautious spending of the pharma industry due to macroeconomic concerns observed during 2023, recurring revenues are growing, fuelled by strong demand for our insight and engagement solutions. The Total Contract Value ('TCV') of contracts signed grew 82% to £7.3 million and revenues grew 25% to £5.0 million (vs. Q1 2023). The Adjusted EBITDA and cash in Q1 2024 are both performing in line with Diaceutics' accelerated investment strategy and management expectations. The net headcount increase was 9 between 31 December 2023 and 31 March 2024.

The growing demand shows the underlying strength of the market and validates our accelerated investment strategy, and we are confident in sustaining this momentum as we turn our focus to extending our reach through increased sales and marketing activities.

 

We have further strengthened our senior leadership team. In February, Ken Ruppel was appointed Vice President of Scientific and Medical Services, to lead the expansion of our current offering and the development of innovative solution in precision medicine. Most recently, Amie Mc Neice has been appointed Vice President of Marketing, to oversee our three-year marketing vision, brand position, messaging and integration of marketing automation, as part of Diaceutics' drive to scale its marketing capabilities in the US and Europe.

 

We have also further solidified our central position within the precision medicine industry, announcing in April the formation of our landmark Economic Forum, composed of leading experts in the industry, aiming to urgently address the specific economic gaps limiting the advancement of precision medicine, which is synonymous with our purpose.

Outlook

Diaceutics continues to grow the number of precision medicines it is working on and is seeing continued strong demand for its insight and engagement solution products from customers, which is in turn, driving order book growth and increased recurring revenues. The importance and positioning of precision medicines in global pharma and biotech drug asset portfolios is maturing as they seek to improve patient access to therapies, capture lost revenue opportunities and increase profitability. As a result, the market opportunity available to Diaceutics is significant and continues to grow. Furthermore, recent collaboration with strategic partners has deepened our understanding of the competitive landscape and has served to validate our unique value proposition and superior market offering. Our success in 2023 and the sustained positive momentum in 2024 to date gives the Board confidence in current market estimates.

 

Ryan Keeling

Chief Executive Officer

 

 

Chief Financial Officer review

·     

Continued growth in the number of enterprise-wide engagements - six announced to date

·     

Improved data coverage and AI automation of data feeds in the US, EU and UK

·     

Enhanced Real World Data (RWD) products - daily, linkable, patient level insights

·     

The KPMG strategic alliance


2023

£000's

2022

£000's

Change

Revenue

23,699

19,504

22%

Revenue growth constant currency basis*

19%

26%

-

Proportion of revenue which is recurring*

52%

35%

+17 ppts

Annual Recurring Revenue*

13,662

not reported

-

Order book

26,517

16,928

57%

Order book visibility for next 12 months

12,334

10,898

13%

Gross profit

19,706

16,741

18%

Gross profit margin (%)

83%

86%

-3 ppts

Adjusted EBITDA*

2,357

3,583

(1,226)

EBITDA*

1,754

3,583

(1,829)

EBITDA margin*

7%

18%

-11 ppts

(Loss)/Profit before tax

(2,438)

564

3,002

Cash and cash equivalents

16,667

19,841

(3,174)


2023

£000's

2022

£000's

Change

Insight and Engagement solutions

17,150

12,653

36%

Scientific and Advisory services

6,549

6,851

(4%)

Total revenue

23,699

19,504

22%

Investment focus

Delivered in 2023 and 2024 to date

Enrich data and platform products

Enhanced Real World Data (RWD) products: Improved data geographical and therapeutic area coverage, Daily Signal launched, linkable datasets and European Signal development progressing.

Accelerate growth and engagement of the laboratory network and platform-based community

Broadening the laboratory network and relationships and launched first US virtual lab conference

Invest in platform scale and capability

Strengthened data supply chain.

Enhancing platform functionality and AI capabilities.

Launched My DXRX platform iteration for network stakeholders.

Transform our customer experience and service through customer account teams

Seven account teams with a project manager, data analyst, precision medicine expert and key account manager in each team.

13 brands added during the year.

Six enterprise-wide engagements with top 20 pharma.

Work with 17 of the top 20 pharma.


2023

£000's

2022

£000's




Operating profit

(3,018)

575

Depreciation & Amortisation

4,772

3,008

EBITDA

1,754

3,583

EBITDA margin

7%

18%




Adjustments for:



-       US sales tax provision

603

-

Adjusted EBITDA

2,357

3,583

Adjusted EBITDA margin

10%

18%

Nick Roberts

Chief Financial Officer

 

 

Group Profit and Loss Account

 


 

 

Note

2023

£000's

2022

£000's

 

 

 

Revenue

4

23,699

19,504

5

(3,993)

(2,763)


19,706

16,741

5

(22,784)

(16,280)


60

114

5

(3,018)

575


646

111


(66)

(122)


(2,438)

564


692

160

(1,746)

724

 

All results relate to continuing operations.



Group Statement of Comprehensive Income

for the year-ended 31 December 2023

 

2023

£000's

2022

£000's

 

 

 


(1,746)

724





(378)

440


(2,124)

1,164

 

All results relate to continuing operations.

 

Group Statement of Financial Position

as at 31 December 2023

 

Note

2023

2022

ASSETS

 

£000's

£000's

Non-current assets




Intangible assets

7

                       15,262

15,222

Right of use assets


                          1,180

1,333

Property, plant and equipment


                               719

759

Deferred tax asset


                          1,143

46



                       18,304

17,360

Current assets




Trade and other receivables

8

11,367

9,209

Income tax receivable


6

1,846

Cash and cash equivalents


16,667

19,841

 


28,040

30,896





TOTAL ASSETS


46,344

48,256





EQUITY AND LIABILITIES




Equity




Equity share capital

10

169

169

Share premium

10

37,126

37,126

Treasury shares

10

(312)

(263)

Translation reserve

10

(240)

138

Profit and loss account


4,043

5,344

TOTAL EQUITY

 

40,786

42,514





Non-current liabilities




Lease liability


1,059

1,205

Provision for dilapidation


88

79

Deferred tax liability


28

706

 


1,175

1,990

 




Current liabilities




Trade and other payables

9

4,237

3,628

Lease liability


146

124





 


4,383

3,752

 




TOTAL LIABILITIES


5,558

5,742





TOTAL EQUITY AND LIABILITIES


46,344

48,256

 

Group Statement of Changes in Equity

for the year-ended 31 December 2023

 

Equity share capital

Share premium

Treasury shares

Translation reserve

Profit and loss account

Total
  equity

£000's

£000's

£000's

£000's

£000's

£000's

At 1 January 2022

168

36,864

(165)

(302)

4,084

40,649

Profit for the year

-

-

-

-

724

724

Other comprehensive income

-

-

-

440

-

440

Total comprehensive income for the year

-

-

-

440

724

1,164

 







Transactions with owners, recorded directly in equity







Conversion of loan notes

1

133

-

-

-

134

Exercise of warrants

-

129

-

-

-

129

Share-based payment

-

-

-

-

536

536

Treasury shares

-

-

(98)

-

 -

(98)

Total transactions with owners

1

262

(98)

-

536

701

 

 

 

 

 

 

 

 At 31 December 2022

169

37,126

(263)

138

5,344

42,514

 

 

 

 

 

 

 

Equity share capital

 

Share premium

 

Treasury shares

 

Translation reserve

Profit and loss account

Total
  equity

£000's

£000's

£000's

£000's

£000's

£000's

169

37,126

(263)

138

5,344

42,514







-

-

-

-

(1,746)

(1,746)

-

-

-

(378)

-

(378)

Total comprehensive income for the year

-

-

-

(378)

(1,746)

(2,124)








Transactions with owners, recorded directly in equity







Share based payment

-

-

-

-

445

445

Treasury shares

-

-

(49)

-

-

(49)

Total transactions with owners

-

-

(49)

-

445

396








169

37,126

(312)

(240)

4,043

40,786

 

Group Statement of Cash Flows

for the year-ended 31 December 2023

 

 

Note

2023

2022

 

 

£000's

£000's

Operating activities


 


(Loss) / profit before tax


(2,438)

564

Adjustments to reconcile (loss) / profit before tax to net cash flows from operating activities




Net finance costs


(580)

11

Amortisation of intangible assets

5

4,459

2,704

Depreciation of right to use asset

5

153

157

Depreciation of property, plant and equipment

5

161

147

Research and development tax credits


(42)

(86)

Share-based payments

5

445

536

Loss on disposal of fixed asset


3

-

Increase in trade and other receivables


(2,158)

(1,594)

Increase in trade and other payables


618

1,266



 

 

Cash received from operations


621

3,705

Tax received


690

1,391

Net cash inflow from operating activities

 

 

1,311

5,096

 


 

 

Investing activities


 

 

Purchase of intangible assets

7

(4,730)

(4,684)

Purchase of property, plant and equipment


(125)

(186)

Finance income interest received


646

111

Net cash outflow from investing activities


(4,209)

(4,759)

 


 

 

Financing activities


 

 

Interest paid


(11)

(59)

Leasehold repayments


(179)

(163)

Purchase of treasury shares

 10

(49)

(98)

Issue of shares on exercise of a warrant


-

129

Net cash outflow from financing activities


(239)

(191)

 


 

 

Net increase/(decrease) in cash and cash equivalents


(3,137)

146

Net foreign exchange (loss)/ gain


(37)

20

Cash and cash equivalents at 1 January


19,841

19,675

Cash and cash equivalents at 31 December


16,667

19,841





 

 

Notes to the Group Financial Statements

for the year-ended 31 December 2023

1.         General information

 

Diaceutics PLC (the "Company") is a public company limited by shares, incorporated, domiciled and registered in Northern Ireland. The Company's registration number is NI055207, and the registered office is First Floor, Building Two, Dataworks at King's Hall Health & Wellbeing Park, Belfast, County Antrim, Northern Ireland, BT9 6GW.

The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Company financial statements present information about the Company as a separate entity and not about the Group.

The principal activity of Diaceutics PLC ("the Company") and its subsidiaries (together "the Group") is data, data analytics and implementation services.

The Group has established a core suite of products and outsourced advisory services which help its Pharma customers to optimise and deliver their marketing and implementation strategies for companion diagnostics. Their mission is to design, create and implement innovative solutions that enhance speed to market and increase the effectiveness of all the stakeholders in the personalised medicine industry.

The financial statements are presented in pounds sterling.

Basis of accounting

These consolidated financial statements have been prepared on a going concern basis and in accordance with international accounting standards in conformity with the Companies Act 2006 applicable to companies reporting under UK adopted international accounting standards. These financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies.

The preparation of financial statements in conformity with UK adopted international accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Judgements in applying accounting policies and key sources of estimates and uncertainty are disclosed in the notes.

The material accounting policies adopted in the preparation of these consolidated financial statements are set out below.

The material accounting policies have been consistently applied to all the years presented, unless otherwise stated.

Going concern

The financial performance and balance sheet position at 31 December 2023 along with a range of scenario plans to 31 December 2026 has been considered, applying different sensitives to revenue. Across these scenarios, including at the lower end of the range, there remains significant headroom in the minimum cash balance over the period to 31 December 2026 and the Directors have satisfied themselves that the Group has adequate funds in place to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Company has power over the subsidiary, is exposed, or has rights, to returns from its involvement with the subsidiary; and has the ability to use its power to affect its returns.

The Company considers all relevant facts and circumstances in assessing whether it has control over a subsidiary, including the ability to direct the relevant activities at the time that decisions need to be made.

Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Employee Benefit Trusts ('EBTs'), including the UK and Global SIPs, are accounted for under IFRS 10 and are consolidated on the basis that the parent has control, thus the assets and liabilities of the EBT are included on the company balance sheet and shares held by the EBT in the Company are presented as a deduction from equity.

2.         Accounting policies

 

New and amended IFRS standards that are effective for the current year

The Group has applied the following standards and amendments for the first time for their annual reporting year commencing 1 January 2023:

·     

IFRS 17 Insurance Contracts including Amendments to IFRS 17

·     

Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

·     

Amendments to IAS 12 Income Taxes: International Tax Reform - Pillar Two Model Rules

·     

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 - Disclosure of Accounting Policies

·     

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates

 

There has been no material impact on our financial statements as a result of any of these changes.

New accounting standards and interpretations not yet adopted by the Group

The following new accounting standards, amendments and/or interpretations have been published but not yet endorsed by the UK and are not mandatory for 31 December 2023 reporting year. They have not been early adopted by the Group and these standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions:

·   

Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Classification of Liabilities as Current or Non-current - Deferral of Effective Date and Noncurrent Liabilities with Covenants

·   

Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback

·   

Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements

·   

Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability

 

We are still assessing the implications of the new standards and interpretations however it is not expected to have a material impact on the Group.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group's activities. Revenue is shown net of value-added tax and after eliminating sales within the Group.

The Group has two separate products and service lines: Insight & Engagement Solutions (Data and related information services); Scientific & Advisory Services (Professional services).

The Group's performance obligations for these revenue streams are deemed to either be the provision of specific deliverables to the customer, at or over a period of time, or subscription-based deliverables.

Revenue billed to the customer is allocated to the various performance obligations, based on the relative fair value of those obligations, and is then recognised when it transfers control of a deliverable to a customer as follows:

Insight & Engagement Solutions (Data & related information services)

Insight & Engagement Solutions (formerly referred to as Data) comprise access to the DXRX platform diagnostic testing data repository to utilise licensed data insight products, typically: Lab Segmentation, Physician Segmentation, Testing Rates Tracker and Physician Signal.

The contract with the customer defines the nature, quantity and price of the data license to be provided. Licenses provided under each contract are split into the identifiable and distinct performance obligations which are satisfied at or over time, depending on whether the data license deliverable has retrospective or prospective components, and if there are any data consultancy service components included. In determining the performance obligations for the data consultancy service component of the customer contract, judgment may be required in interpreting the contract wording and customer expectation of the data consultancy as a separately identifiable and distinct service if the contract is not explicit.

The transaction price associated with the performance obligation components is determined by reference to the contract and change orders. Where the contract does not determine the transaction price for performance obligations, judgement may be required to determine the transaction price. These judgements include allocating transaction prices to data consultancy services based on an adjusted market assessment approach with the residual transaction price allocated to the retrospective and prospective data license performance obligations pro-rated depending on the data license period of coverage.

Where a contract confers the customer with the right to benefit from existing data insight IP as at a specific date, as is the case for a retrospective data license, that is treated as a right to use licence and the revenue recognised at a point in time when delivered or access is enabled to the data. Where a contract confers the customer with the right to benefit from future data insight IP developments as they occur, as is the case for a prospective data license, that is treated as a right to access licence and revenue recognised on a subscription basis over the period of time that the customer has access to the data and the right to future IP developments. Revenue for data consulting services is recognised as the performance obligation milestones are satisfied.

Insight & Engagement Solution services are invoiced based on predetermined activities or milestones. Where there is a timing difference between the recognition of revenue and invoicing under a contract, a contract asset (accrued revenue) or liability (deferred revenue) is recognised.

Scientific Advisory Services (Professional & Tech-Enabled Services)

Scientific Advisory Services (formerly referred to as Advisory Services and Tech-Enabled Services) comprise a range of services developed to help improve patient care by accelerating the development, delivery and uptake of precision medicine, as well as a suite of services designed to solve the challenges affecting precision medicine commercialisation success at a regional and global level. Typically this includes ranges of Consulting, Strategy and Planning, Insights, Education and Content Production, Impact Assessments, Market Access studies, Lab Alerts, Lab Training, Lab Engagement and Physician Engagement.

The contract with the customer defines the nature, quantity and price of the various services to be provided. Services provided (including those provided by a third party and reimbursed by the customer) under each contract are split into the identifiable and distinct performance obligations which are satisfied over time. The Group is the contract principal in respect of both direct services and the use of third parties that support the service. The transaction price is determined by reference to the contract and change orders, including any pass-through or reimbursable expenses, adjusted to reflect the amount the Group expects to be entitled to in exchange for transferring promised goods or services to a customer.

Revenue for the identifiable and distinct services is recognised as the contract performance obligations are satisfied. The progress towards completion of Scientific Advisory Services performance obligations is measured at a point in time: where milestones specified within client contract are satisfied or based on an input measure being project costs incurred to date as a proportion of total project costs (including third party costs) at each reporting period, depending on the nature of the service obligation.

The service fees for Scientific Advisory Services are invoiced based on predetermined activities or milestones. Third party costs are invoiced to customers as they are incurred. Where there is a timing difference between the recognition of revenue and invoicing under a contract, a contract asset (accrued revenue) or liability (deferred revenue) is recognised. Significant accrued and deferred revenue can arise for the Scientific Advisory Services as a result of these timing differences.

Contract assets and liabilities

The Group recognises contract assets in the form of accrued revenue when the value of satisfied or part-satisfied performance obligations is in excess of the payment due to the Group, and deferred revenue when the amount of unconditional consideration is in excess of the value of satisfied or part satisfied performance obligations. Once a right to receive consideration is unconditional, that amount is presented as a trade receivable.

Changes in contract balances typically arise due to:

·   

adjustments arising from a change in the estimate of the cost to complete the project, which results in a cumulative catch-up adjustment to revenue that affects the corresponding contract asset or liability;

·   

the recognition of revenue arising from deferred revenue; and

·   

the reclassification of amounts to receivables when a right to consideration becomes unconditional.

Cost to obtain and fulfil contracts

Contract fulfilment costs in respect of the service line contracts are expensed as incurred.

The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is awarded.

Intangible assets

Research and development

Expenditure on research activities and patents is recognised in the profit and loss account as an expense as incurred.

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable, and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve design for, construction or testing of the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of infrastructure and direct labour including employer national insurance. Other development expenditure is recognised in the profit and loss account as an expense as incurred. Capitalised development expenditure is stated at cost until it is brought into use. Capitalised development expenditure that is not available for use is tested for impairment annually.

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation

Amortisation is charged to the profit or loss on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

·     

Patents and trademarks                              

3 years (33.3% straight line) from date of registration

·     

Datasets                                             

3 years (33% straight line)

·     

Software                                            

5 years (20% straight line)           

·     

Platform                                             

10 years (10% straight line)

·     

Platform algorithms                                       

6 years (16.7% straight line)

The Group reviews the amortisation period and method when events and circumstances indicate that the useful life may have changed since the last reporting date. In 2023, the Group changed the estimated useful life of its datasets from 4 years to 3 years. The revised useful life is based on management's assessment of the period that more accurately reflect the weighted average timeframes of the data commercial and internal use cases. The nature and amount of the effect of the change in useful life of buildings and improvements in the current period and the expected effect in future periods are disclosed in note 3.

Impairment

Intangible assets, property, plant and equipment, and right-of-use assets are tested for impairment at the reporting date, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

The Group also considered the potential impact of climate change.  This is an area of estimation and judgement.  

 

3.         Judgements in applying accounting policies and key sources of estimation uncertainty

The preparation of the Group and Company financial statements requires management to make judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements and are summarised below.

Sources of estimation uncertainty

 

Source of estimation uncertainty

Description

Useful economic life (UEL) of intangible assets

The assessment of UEL of data purchases and platform require estimation over the period in which these assets will be utilised, it based on information on the estimated technical obsolescence of such assets and latest information on commercial and technical use. The platform has been assessed to have a UEL of 10 years, platform algorithms six years and data three years. In 2023, the Group changed the estimated useful life of its datasets from 4 years to 3 years. The revised useful life is based on management's assessment of the period that more accurately reflect the weighted average timeframes of the data commercial and internal use cases. The change in useful lives were accounted for prospectively. The change in the useful lives of datasets increased amortisation expense by Group of £750,000 and Company (£433,000) in 2023. There were no changes in useful lives of other intangible assets.

Impairment of assets

The assessment of the recoverable amount of property, plant and equipment, intangible assets, and right-of-use assets is made in accordance with IAS 36 Impairment of Assets. The Group performs an annual review in respect of indicators of impairment, and if any such indication exists, the Group and Company are required to estimate the recoverable amount of the asset. Following this assessment, no impairment indicators were present at 31 December 2023. The Group's policy is to test non-financial assets for impairment annually, or if events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Group and Company have considered whether there have been any indicators of impairment during the year to 31 December 2023 which would require an impairment review to be performed. Based upon this review, the Group and Company have concluded that there are no such indicators of impairment at 31 December 2023.

With respect to the impairment considerations of an intangible asset, significant estimates are considered within the value in use calculation.  The most significant estimate would be the revenue growth rate.

Discount rate

Application of IFRS 16 requires the Group and Company to make significant estimates in assessing the rate used to discount the lease payments in order to calculate the lease liability. The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including the Group commercial borrowing rate of 4.3% (2022: 4.3%)

Attrition rate

In the calculation of share-based payments and related costs charge, an assessment of expected employee attrition is used based on expected employee attrition and, where possible, actual employee turnover from the inception of the share option plan. The attrition rate varies depending on the nature of the award, rising to a maximum 3-year rate of 39.9% (2022: 37.6%)

 

Critical accounting judgements

Accounting policy

Description of critical judgement

Revenue

In determining the performance obligations for the data consultancy service component of Insight & Engagement Solutions, judgment may be required in interpreting the contract wording and customer expectation of the data consultancy as a separately identifiable and distinct service, if the contract is not explicit.

The transaction price associated with the performance obligation components of Insight & Engagement Solution services is determined by reference to the contract and change orders. Where the contract does not determine the transaction price for performance obligations, judgement may be required to determine the transaction price. These judgements include allocating transaction prices to data consultancy services based on an adjusted market assessment approach with the residual transaction price allocated to the retrospective and prospective data license performance obligations pro-rated depending on the data license period of coverage.

In revenue recognition for certain Scientific & Advisory Services where the input method is used to determine the revenue over a period of time, a key source of estimation will be the total budgeted hours to completion for comparison with the actual hours spent.  Further details are disclosed in note 4 revenue and segmental analysis.

Deferred tax

In assessing the requirement to recognise a deferred tax asset, management carried out a forecasting exercise to assess whether the Group and Company will have sufficient future taxable profits on which the deferred tax asset can be utilised. This forecast required management's judgment as to the future performance of the Group and Company.

Intangible assets

The Group capitalises costs associated with the development of the DXRX platform and data lake. These costs are assessed against IAS 38 Intangible Assets to ensure they meet the criteria for capitalisation.

 

4.  Revenue and segmental analysis

 

Operating Segments

The Group currently operates under one reporting segment, there are no individual groups of assets generating distinct and separately identifiable cashflows. Revenue is analysed under two separate revenue streams. Revenue represents the amounts derived from the provision of services which fall within the Group's ordinary activities, stated net of value added tax. Revenue is principally generated from the DXRX platform Insight & Engagement Solutions lines, as well as the Scientific Advisory Services lines. Revenue is disaggregated by primary geographic market, timing of recognition and by product/service line. Timing of revenue recognition and product/service line are the primary basis on which management reviews the business.

Revenue

For all periods reported the Group operated under one reporting segment but revenue is analysed under two separate product / service lines.             

The following tables present the disaggregated Group revenue for the current and prior financial years:

a. Major product/service line


2023

2022


£000's

£000's




Insight & Engagement Solutions

17,150

12,653

Scientific & Advisory Services

6,549

6,851


23,699

19,504

 

b. Timing of recognition

 


2023

2022


£000's

£000's




Point in time revenue recognition

9,359

9,370

Over time and input method revenue recognition

14,340

10,134


23,699

19,504

 

c. Geographical market by customer location

 


2023

2022


£000's

£000's




North America

20,832

14,454

UK

352

561

Europe

2,470

2,696

Asia and Rest of World

45

1,793


23,699

19,504

 

In 2023 there was one customer who had sales which exceeded 10% of total revenue, accounting for £3,659,000 (15.4%) of Group revenues. In 2022 no customers each had sales which exceeded 10% of total.

The receivables, contract assets and liabilities in relation to contracts with customers are as follows:

 

2023

2022

 

£000's

£000's

Contract assets



Trade receivables

7,430

5,792

Accrued revenue

2,402

2,582




Contract liabilities



Deferred revenue

306

284

 

Accrued revenue primarily relates to consideration for work completed but not billed at the reporting date. The contract assets are transferred to trade receivables when the rights become unconditional.

Deferred revenue primarily relates to the advance consideration received from customers. There are no significant financing components associated with deferred revenue.

There were no significant amounts of revenue recognised in the current or prior year arising from performance obligations satisfied in previous periods.

The carrying value of trade receivables and accrued revenue approximates to their fair value at the reporting date. Information about the Group's exposure to credit risks and expected credit losses for trade receivables and accrued revenue is included in note 8.

Order Book

The aggregate amount of the transaction price allocated to product and service contracts that are partially or fully unsatisfied as at the 2023 year end ('Order Book') are as follows:

 

2024

2025

2026+

Total

 

£000's

£000's

£000's

£000's

Platform-based products and services

12,238

9,509

4,674

26,421

Advisory services

96

-

-

96


12,334

9,509

4,674

26,517

 

Order book as at the 2022 year end:

 

2023

2024

2025+

Total

 

£000's

£000's

£000's

£000's

Platform-based products and services

10,621

4,108

1,922

16,651

Advisory services

277

-

-

277


10,898

4,108

1,922

16,928

The order book as at 31 December 2023 includes future contracted revenue beyond 2024 which, although subject to annual customer break clauses, the Group expects will not be exercised by customers, and the revenue and performance obligations deliverable under these contracts will be realised.

5.         Operating (loss)/profit

 

2023

2022

 

£000's

£000's

Employee benefit costs

 


Wages and salaries

11,487

11,045

Social security costs

1,416

1,446

Pension costs

376

317

Benefits

325

130

Share-based payments and related costs

445

536

Capitalised development costs

(1,026)

(1,895)

Total employee benefit costs

13,023

11,579

 Other cost of sales and administrative expenses



Amortisation of intangible fixed assets

4,459

2,704

Depreciation of tangible fixed assets

161

147

Right-of-use depreciation

153

157

Subcontractor costs

1,060

              779

Platform transaction value

1,892

907

Travel costs

516

352

Legal and professional

1,687

1,202

(Loss)/gain on foreign exchanges

360

(130)

Other expenses

3,466

1,346

 Total other cost of sales and administrative expenses

13,754

7,464




Total cost of sales and administrative expenses

26,777

19,043

Included within other expenses in 2023 is the accrual of £0.6 million related to US sales tax costs pertaining to 2023 and prior years. These sales tax costs would usually be charged to customers, recovered and remitted to the relevant US state authorities with no impact to the costs of the Group. However, because the Group had not historically registered for sales taxes in certain states, the related costs could not be charged and recovered from customers. As such, the Company is in the process of disclosing this historic position to the relevant state authorities and will settle this liability during 2024. Future sales taxes arising on sales in these states will be charged to customers, recovered and remitted with no significant further impact to the costs of the Group.

6.         Earnings per share 

Basic earnings per share are calculated based on the profit & loss for the financial year attributable to equity holders divided by the weighted average number of shares in issue during the year.

Basic earnings per share are calculated based on the profit & loss for the financial year. Diluted earnings per share is calculated on the basic earnings per share adjusted to allow for the issue of ordinary shares on the conversion of the convertible loan notes and employee share options. In the current year there are no exceptional items and therefore there is no adjustment required to basic earnings per share or to diluted earnings per share.

 

Profit attributable to shareholders

 

2023

2022

 

£000's

£000's


 


(Loss)/Profit for the financial year

(1,746)

724

 

Weighted average number of shares to shareholders    


2023

2022

 


Number

Number


 

 

Shares in issue at the end of the year

84,501,390

84,472,431


 

 

Weighted average number of shares in issue

84,478,882

84,357,387

Less treasury shares

(252,063)

(207,791)

Weighted average number of shares for basic and adjusted earnings per share

84,226,819

84,149,596




Effect of dilution of share options

-

1,939,925

Weighted average number of shares for diluted earnings per share

84,226,819

86,089,521

 

Earnings per share

2023

2022


Pence

Pence

Basic

(2.07)

0.86

Diluted

(2.07)

0.84

 

The group has outstanding share warrants and share options that could potentially dilute basic earnings per share in the future. These were not included in the calculation of diluted earnings per share during the year because these are antidilutive for the period.

 

7.         Intangible assets

 

Patents and trademarks


Datasets

Development expenditure*

Platform

Software


Total

 

£000's

£000's

£000's

£000's

£000's

£000's

Cost







At 1 January 2022

1,144

4,849

216

9,727

562

16,498

Transfer from development expenditure to Platform

-

-

 

 

(2,401)

2,401

 

-

-

Foreign exchange translation

59

228

4

301

1

593

Additions

1

2,169

2,359

-

155

4,684

At 31 December 2022

1,204

7,246

178

12,429

718

21,775

Foreign exchange translation

(25)

(164)

-

(159)

(1)

(349)

Transfer from development expenditure to platform

-

-

(178)

178

-

-

Additions

-

3,554

-

918

258

4,730

At 31 December 2023

1,179

10,636

-

13,366

975

26,156


 

 

 

 

 

 


Patents and trademarks

Datasets

Development expenditure*

Platform

Software

Total

Amortisation

£000's

£000's

£000's

£000's

£000's

£000's

At 1 January 2022

1,085

1,692

-

721

179

3,677

Foreign exchange translation

59

77

-

35

1

172

Charge for the year

41

1,313

-

1,112

238

2,704

At 31 December 2022

1,185

3,082

-

1,868

418

6,553

Foreign exchange

(26)

(64)

-

(27)

(1)

(118)

Charge for the year

15

2,944

-

1,316

184

4,459

At 31 December 2023

1,174

5,962

-

3,157

601

10,894

 

 

 

 

 

 

 

Net book value at 31 December 2023

5

4,674

-

10,209

374

15,262

Net book value at 31 December 2022

19

4,164

178

10,561

300

15,222

 

8.         Trade and other receivables

 

2023

2022

 

£000's

£000's

Trade receivables

7,430

5,792

Contract assets

2,402

2,582

Other receivables

294

207

Prepayments

1,241

628


11,367

9,209

Other receivables primarily consist of recoverable taxes and as such are considered to have low credit risk. Derivative financial instruments consist primarily of foreign currency forward contracts and are considered to have low credit risk. The maturity period of these assets were less than 12 months, and given their nature, the expected credit loss allowance recognised in the period against these assets were £Nil (2022: £Nil).

 

 

Total

0-30 days

31-60 days

61-90 days

>90 days

 

£000's

£000's

£000's

£000's

£000's

9,832

5,864

1,472

1,635

861

2022

8,374

6,568

1,354

319

133

The Group's contract assets as at the statement of financial position date are expected to be invoiced and received in the following year. The maturity period of these assets were less than 12 months, and given their nature, the expected credit loss allowance recognised in the period against these assets were £Nil.

 

 

2023

2022

 

£000's

£000's

Contract assets recognised at start of the year

2,582

1,003

Revenue recognised in prior year that was invoiced in the current year

(2,582)

(1,003)

Amounts recognised in revenue in the current year that will be invoiced in future years

2,402

2,582

Balance at the end of the year

2,402

2,582

  

2023

2022

 

£000's

£000's

UK sterling

1,105

881

Euro

382

504

US dollar

9,762

7,737

Canadian dollars

73

31

Singapore dollars

45

56


11,367

9,209

9.         Trade and other payables

 

2023

2022

 

£000's

£000's

Creditors: falling due within one year

 


Trade payables

1,065

759

Accruals

2,255

1,996

Other payables

38

39

Other tax and social security

471

423

Contract liabilities

305

284

Deferred grant income

103

127


4,237

3,628

 

2023

2022

 

£000's

£000's

Contract liabilities recognised at start of the year

284

208

Amounts invoiced in prior year recognised as revenue in the current year

(284)

(208)

Amounts invoiced in the current year which will be recognised as revenue in the later years

305

411

Balance at the end of the year

305

411

 

2023

2022

 

£000's

£000's

UK sterling

2,062

3,079

Euro

415

203

US dollar

1,587

326

Singapore dollar

130

16

Other

43

4


4,237

3,628

10.       Equity share capital

 

2023

2022

 

£000s

£000s

Authorised, allotted, called up and fully paid

 


84,501,390 (2022: 84,472,431) Ordinary shares of £0.002 each

Authorised 84,501,390. (2022: 84,472,431)

169

169


169

169

Number of shares

£000's

2023

2022

2023

2022

44,272

74,791

49

98

252,063

207,791

312

263

 

11.       Post balance sheet events

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