Yourgene Health plc
(“Yourgene” or the “Group” or the “Company”)
Strong H2 momentum expected to deliver double-digit annual growth but below expectations
Deferred revenue opportunities, investment in offering and further new initiatives expected to drive resumption of stronger subsequent growth
Manchester, UK – 8 February 2021: Yourgene (AIM: YGEN), the international molecular diagnostics group, provides an update on current trading for the second half of the financial year to 31 March 2021 (“H2”).
Whilst the stronger trading patterns being observed in H2 compared to the first 6 months of the financial year (“H1”) mean that double-digit revenue growth is expected for the full year, the ongoing impact of COVID-19 on ordering patterns in UK and international commerce is expected to result in full year revenue being below consensus market estimates.
A number of factors associated with the pandemic have continued to impact customer activity levels and created considerable variability in the timing of revenues, such that full year revenues are now expected to be in the range of £18-20m, lower than previous guidance but representing solid year-on-year growth of the order of 10-20%.
This growth has been driven by the Group’s European-focused product lines in testing for Cystic Fibrosis, prenatal aneuploidies and DPD deficiency which are performing strongly, along with European sales of NIPT. However, this has not been enough to offset the ongoing impact of significant pandemic-related headwinds on international markets for non-invasive prenatal testing (NIPT) outside Europe, as reported in our half-year results on 17 December 2020.
The more recently introduced restrictions on domestic and international travel have had an impact on the Company’s ability to convert new accounts, grow new product sales and commence new initiatives, which would otherwise have been expected to benefit full year revenue and offset headwinds elsewhere. In particular, the activities impacted and the revenue previously expected to be realised in H2 include:
• COVID-19 testing revenues of c. £4m, including those through the UK’s Fit to Fly and Test to Release schemes along with reduced workplace and hospitality testing, as a direct result of the recent lockdown and travel restrictions;
• Approximately £1m from pending reproductive health contracts with US partners, further delayed as a result of customers’ attention being diverted to pandemic response as well as travel restrictions impacting the Company’s ability to complete negotiations and installations within the originally anticipated timescales; and
• Oncology research testing of c. £0.5m from our partners in Taipei due to the recent suspension of existing purchase orders for a key client’s research programmes, as their focus switched to pandemic-related initiatives at present.
Notwithstanding these deferred revenue sources, the Group has worked hard to develop a market leading range of highly innovative products backed by many strategic partnerships that will underpin the creation of longer-term value through delivering a targeted roadmap of products and services. A number of positive developments in H2 are not only expected to contribute further to overall double-digit growth for the current year but will also provide momentum into the next financial year to 31 March 2022. Revenues for next year are now expected to be in excess of £25m, with considerable upside potential depending on the timing and phasing of relaxations to COVID-19 restrictions and the resumption of more accelerated growth. The foundations of this baseline revenue expectation include:
• Material COVID-19 related revenues with a strong network of channel partners primed for the reopening of the UK economy and international travel markets. We have expanded testing capacity in our Manchester facility to 20,000 tests per month but are currently only operating at c. 25%, approximately half of the volume seen in December. Our testing partners using our Clarigene® Sars-CoV-2 assay in the UK Government’s Test to Release international travel programme are experiencing similar volume reductions, but have retained their infrastructure for the anticipated reopening of international mobility;
• Addition of new routes to market such as partnerships to support COVID-19 testing with sizeable travel hubs to give broader geographic coverage;
• The US reproductive health contracts, negotiation of which is expected to conclude in the first half of calendar 2021;
• Anticipated growth in UK NIPT testing volumes as a result of the imminent and long-awaited launch of NHS reimbursed testing for high-risk pregnancies, for which the Company’s long-term partner St George’s NHS Trust has been appointed as one of three national hubs for England; and
• Continued penetration of the Company’s DPYD chemotoxicity test into clinical pathways around the world.
Recent investments in the Group’s UK-based Genomic Services offering and adaptation to constrained international mobility through the recruitment of in-territory commercial and support teams in North America, mainland Europe and South East Asia, coupled with the lower than expected revenue growth, mean that significant profitability improvements expected in the current financial year are now expected to be realised in the next financial year. Guidance on COVID-19 testing related revenues, by contrast, had been forecast to the end of March 2021 only, whereas these are now expected to make a significant contribution to the next financial year.
The Group sees an increasing range of growth opportunities in the next financial year, particularly in US markets where continued investment is being made into Yourgene’s capabilities, including the recent recruitment of a highly experienced Sales VP to crystallise this growth opportunity. A number of our US pipeline customers for reproductive health are in the late stages of validation, with contracts expected to be concluded over the first half of calendar 2021, triggering recurring reagent and software sales. The Company also expects to soon conclude licensing and supply agreements utilising Coastal Genomics technologies acquired in August 2020, which would further contribute to the expected growth for the next financial year.
Commenting, Lyn Rees, CEO of Yourgene, said: “Whilst achieving double-digit growth during this pandemic is welcome, it is still a disappointment to report delivery below our original expectations which we had revised upward at the time of our AGM in September 2020, in response to the short-lived reopening of UK and international markets.
“Our COVID-19 and core business streams have proved more sensitive than expected to the severe mobility restrictions imposed globally since Christmas, particularly in response to the new virus strains. However, we have continued to expand our capabilities and, along with our partners, we expect to capitalise on a number of upcoming opportunities as and when these restrictions are lifted.
“In our core business, the anticipated US contracts which are currently in advanced stages of negotiation, our strengthened commercial footprint in the US and Europe, and our pipeline of growth opportunities have not been lost, but deferred into the next financial year. Yourgene remains well positioned to benefit as domestic and international travel markets re-open, which will enable us to drive our core business and continue to broaden our geographic reach. Our prospects beyond the current financial year remain very exciting and, whilst cognisant of short-term delays and the challenges of forecasting revenue timing due to the pandemic, the Board remains highly confident about the longer-term future of the Company.”
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. The Directors of the Company take responsibility for this announcement.
Yourgene Health plc
Lyn Rees, Chief Executive Officer
Tel: +44 (0)161 669 8122
Cairn Financial Advisers LLP (NOMAD)
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N+1 Singer (Joint Corporate Broker)
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Stifel Nicolaus Europe Limited (Joint Corporate Broker)
Nicholas Moore / Matthew Blawat / Ben Maddison
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Walbrook PR Ltd (Media and Investor Relations)
Paul McManus / Lianne Cawthorne
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About Yourgene Health
Yourgene Health is an international molecular diagnostics group which develops and commercialises genetic products and services. The group works in partnership with global leaders in DNA technology to advance diagnostic science.
Yourgene primarily develops, manufactures, and commercialises simple and accurate molecular diagnostic solutions, for reproductive health, precision medicine and now infectious diseases. The Group’s flagship products include non-invasive prenatal tests (NIPT) for Down’s Syndrome and other genetic disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests, and a recent extension into the oncology space with DPYD genotyping.
The launch of Yourgene Genomic Services has enabled Yourgene to offer a global laboratory service network equipped to be a full life-cycle partner for clinical, research and pharmaceutical organisations to support partners at the preclinical, clinical, and post-market stages to develop, manufacture, obtain regulatory approval and commercialise new products and services. In addition, Yourgene Genomic Services offers an NIPT and high throughput COVID testing service.
In August 2020, Yourgene acquired Coastal Genomics, Inc., a sample preparation technology company based in Vancouver, Canada, enabling the Company to extend its offering and IP portfolio in the DNA sample preparation sector. The acquisition increased Yourgene’s geographical penetration into the US and Canada, supplementing existing coverage in the UK, Europe, MEA and Asia.
Yourgene Health is headquartered in Manchester, UK with offices in Taipei and Singapore, and is listed on the London Stock Exchange’s AIM market under the ticker “YGEN”. For more information, visit www.yourgene-health.com and follow us on twitter @Yourgene_Health.