Evolva announces financial results for 2010
17.03.11 07:11

Reinach, Switzerland, 17 March 2011 – Evolva Holding SA (SIX: EVE) today announced its financial results for the period 1 January to 31 December 2010. The annual report is available for download on Evolva’s website (www.evolva.com).

Highlights

Revenues in line with expectations at CHF 18.6 million (2009: CHF 18.9 million). Excluding currency effects revenues increased 5%.
Net loss was CHF 23.3 million (2009: CHF 9.6 million).
Net cash outflow was CHF 15.2 million. Total cash position as of 31 December 2010: CHF 37.7 million. Funded through year-end 2012.
Discovery contract in Pharma with Roche for Cancer and Infectious Diseases.
New contracts in the Nutrition and Food Chain area with Abunda and the Danish Council for Strategic Research, followed by International Flavors & Fragrances and BASF in early 2011.
Continuing progress made with ongoing partnerships.
EV-077 entered a Phase I multiple ascending dose study, and showed promising utility in ex-vivo studies on diabetics with coronary artery disease
Solid progress on other compound programmes, though EV-086 clinical entry delayed until 2011.
 
Neil Goldsmith, CEO and Managing Director commented, “In 2010, Evolva achieved significant progress across the business. We expanded our partnering portfolio, advanced our ongoing programmes and further developed our technology platform. Through the addition of several partnerships in Nutrition, we have now firmly established our second strategic unit. These developments demonstrate how Evolva is an exciting, evolving company with a technology that has the potential to transform multiple industries.”
 

Strategy

Evolva seeks to build a high-growth, and sustainably profitable, company that is focused on the discovery and development of innovative products for the pharmaceutical, consumer healthcare and nutrition sectors.
 
We are maximising our technology platform to discover innovative products, rather than commodities, leveraging both our technological and corporate strengths. Innovative products can stem from novel compounds (novel chemical entities) or from novel production methods (biosynthesis or fermentation) but have as a common theme that they provide patients or consumers with medical or wellness benefits that existing products do not provide.
 
Our strategy is to enter into multiple discovery and co-development collaborations with industry partners to develop new compounds and methods to optimise production. These partnerships not only generate revenue for Evolva but can also provide ongoing success related development milestones as well as income from royalties.
 
We are also developing our own proprietary pharmaceutical products which we will out license for further development and commercialisation.
 
We believe having a dual focus on pharmaceuticals and the broader area of nutrition and consumer health offers significant benefits for Evolva and our shareholders.
 

Operational Review

2010 saw progress on partnerships, product pipeline and on the corporate side.
 

Partnering

We expanded our portfolio of partnerships through the signing of three collaboration contracts, one in the pharmaceutical sector and two in consumer healthcare and nutrition. These deals underpin our conviction that our technology has the potential to change multiple industries.
 
In pharmaceuticals we announced a discovery collaboration with the major pharmaceutical company Roche in January, focusing on targets in oncology and anti-infectives. This contract adds to our existing partnerships in pharma and bio-defence, including the US Defense Threat Reduction Agency (DTRA) and the US Army Research Office.
Our antiviral programme, funded by the US DTRA, progressed well in 2010. In addition to EV-075, we also studied the potential antiviral application of EV-077 and we expect to file an IND for one of these compounds in 2011.  
 
In consumer healthcare, nutrition & food chain, we have signed a number of agreements. In March we entered a collaboration that is financially supported by FØSU (the Danish Council for Strategic Research).  Evolva will, together with groups from the University of Copenhagen and the Danish Technical University, find and develop routes to the commercially viable and environmentally acceptable production of vanillin via fermentation in yeast.

In October we signed a contract with Abunda Nutrition, Inc.  In this collaboration our technology is applied to create new and optimised production methods for certain high-value functional food ingredients, again via fermentation in yeast.
 
After year end, we announced a third collaboration in the food sector. In this case we are partnering with IFF (International Flavors & Fragrances, Inc.), one of the world’s leading creators and manufacturers of flavours and fragrances for consumer products.  The objective of the collaboration is to implement a commercially viable biosynthetic route for the production of a key flavouring ingredient.

And very recently, we announced the signing of an agreement with BASF for joint research on the design of novel and optimised biosynthesis routes for selected natural products with crop protection potential.
 

Pipeline

Our proprietary pipeline saw good progress in 2010.
 
A multiple ascending dose Phase I clinical study with EV-077, our drug candidate for complications of diabetes, was initiated with an oral extended release formulation.  This study should allow us to establish the pharmacodynamic and safety profiles of repeat administration of increasing doses, taking us a step closer to establishing proof-of-concept in a patient population – which we aim to initiate in the second half of 2011.  EV-077 also showed promising utility when administered ex-vivo to diabetics with coronary artery disease who were receiving aspirin.
 
EV-086 is our broad-spectrum small-molecule antifungal. In 2010, preclinical work on EV-086 continued and we sought advice from leading experts in the field. The preclinical programme is taking longer than foreseen, but we expect to enter Phase I in  2011.
 

Corporate

Following the acquisition of Arpida in 2009, the Swiss operations were relocated from Allschwil to Reinach (also in the Basel area), giving the company larger R&D facilities. In addition our Indian unit moved from Hyderabad to Chennai, again to access better R&D facilities. Both these relocations took place with limited interruption to our business.
 
During the year, Evolva attracted three prominent new members for the Board of Directors.  Sir Tom McKillop and Dr. Claus Braestrup have both held CEO positions at large pharmaceutical companies, whilst Dr. Nicole Dubois is a strategy and management consultant to major corporations, in particular in the healthcare sector. At the same time Dr. Jacques Mallet and Dr. André Lamotte departed from the board.

Two members of group management left the company during the year, and their activities are being covered by other members of management. We are searching for replacements for these positions.
 
The Evolva share had a good year, rising 49% from CHF 1.04 at year-end 2009 to CHF 1.55 at year-end 2010.  Trading in the share was particularly lively during the first quarter of the year.

In December, Evolva announced that a group of core shareholders, holding approximately 82% of Evolva's share capital, had agreed to partially extend the lock-up on their holdings (which was due to expire on 14 December 2010). A staggered release and a coordinated sale of shares from the lock-up is ongoing to ensure a gradual and coordinated increase of free-float and liquidity.  
 
 
Introduction

This review presents the financial development of Evolva Holding SA and its subsidiaries
(together “the Evolva Group”) during 2010 which is the first full financial year after the combination of Evolva SA and Arpida Ltd. in December 2009. For comparison, the consolidated financials of Evolva SA and its subsidiaries are included for 2007 - 2009. The financials of the former Arpida Ltd. (now Evolva Holding SA) prior to the combination with Evolva SA are not included.
 

Overview

The Evolva Group generated total revenues of CHF 18.6 million in 2010 compared with CHF 18.9 million in 2009. Operating expenses increased by CHF 13.9 million from CHF 27.8 million to CHF 41.7 million primarily due to increased R&D and a non-cash charge for the Group’s incentive option programme. The net loss increased from CHF 9.6 million in 2009 to CHF 23.3 million in 2010, while the cash outflow from operating activities was CHF 15.8 million. At the end of 2010, the total cash position amounted to CHF 37.7 million compared with CHF 52.9 million at the end of 2009, reflecting a net cash outflow of CHF 15.2 million.

 
Income statement

The major part of group revenues in 2010 came from R&D collaborations based on Evolva’s technology. Two contracts with the US Department of Defense represented 78% of total revenues. In addition, Evolva had significant revenues from contracts with Roche (Switzerland) and with Abunda Nutrition (USA).
 
Revenues (measured in Swiss Francs) were negatively impacted by currency changes during 2010. The major part of Evolva’s revenues is generated in US dollars and secondly in Euro. On average, the US dollar declined by 11% during 2010 compared with 2009 while the Euro declined by 9%. Overall, currency changes reduced revenues by 7% in 2010 compared to 2009.
 
Half (CHF 7.0 million) of the total increase in the operating expenses in 2010 concerned (non-cash) expenses related to the Company’s incentive option programme. Only a small part of these options was actually exercised during 2010. The incentive option programme will also result in non-cash charges in the coming years.

Technology and discovery costs (excl. option charges) increased from CHF 14.4 million to CHF 18 million due to increased activity both in the pharmaceutical and in the nutritional area. Costs related to compound development (excl. option charges) increased from CHF 6.1 million to CHF 9.7 million reflecting the advance of our compounds along their development path. Total G&A costs (excl. option charges) increased from CHF 6.2 million to CHF 7.1 million.
 

Balance sheet and cash flow

The non-current assets of the company were at the same level as in 2009, except that the former facility in Allschwil (Switzerland), including all related mortgages, was re-classified as an asset held for sale. The cash reserves declined from CHF 52.9 million at the end of 2009 to CHF 37.7 million at the end of 2010. This reflects three main factors:
the operating cash flow (- CHF 15.8 million);

the payment of CHF 3.4 million into Evolva India by the minority shareholder in the Indian
company as fulfillment of a commitment made in December 2009;

capital expenditure of CHF 2.3 million.

Equity decreased to CHF 53.0 million at the end of 2010 compared with CHF 67.9 million at the end of 2009.
 

Outlook

The total revenues in 2011 will depend on the number and size of new partnership contracts to be signed during the year. One existing contract will expire during 2011 but the related loss in revenues will be at least partly compensated by increased revenues from other current and new contracts. Operating costs will increase during 2011, mainly because of increased costs for the clinical programmes. The cash outflow from operating and investing activities is expected to be approximately CHF 20 million in 2011. Based on current plans for operating activities and projected revenues, the current cash position is expected to cover activities through the end of 2012.


The key elements of Evolva’s product outlook for 2011 are the following.

For the EV-077 programme in complications of diabetes, we will publish the results of the Phase I and ex-vivo studies during 2011. During the second half of 2011 we intend to start a Phase IIa study.

We expect to enter Phase I with EV-086 for topical infections during the second half of 2011. Regarding the EV-086 programme in invasive infections, we expect to complete additional studies in 2011, after which a decision will be taken on whether to enter into clinical development.

For the anti-viral programme, Evolva expects to file an IND (Investigational New Drug application) for EV-075 or EV-077 in 2011.

During 2011 Evolva expects to conduct studies under field conditions with EV-050 and test the compound for post-harvest disease management.

In the Vanillin partnership with FØSU, the focus in 2011 will be on increasing the yield that we obtain.
The Company expects to sign additional partnerships, or extensions to existing agreements, during 2011.
 
The Company is also investigating the potential for acquisitions that support its overall business strategy of using synthetic biology to build a distinctive and balanced portfolio of products with strong profit potential.
 
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