Contract with US-based TransGenRx Inc stalled on financing issues
Angel Biotechnology has issued a trading update warning problems with a contract with US-based TransGenRx Inc “will have an adverse impact on earnings in the current financial year”.
The Edinburgh-based pharmaceutical manufacturing contractor announced in April it had secured its first contract, valued at more than £800,000 TransGenRx Inc after entering into a framework agreement with the US firm last December.
That framework agreement was to manage development and production of a protein product for the Louisiana-based firm.
It was to be the first contract handled by Angel Biotechnology's Cramlington facility in the north east of England, which is in the process of being re-commissioned.
However, Angel Biotechnology said today: “The group has reason to believe that TransGenRx Inc. is not currently in a position to proceed with the contract and, although the contract is still in place, the resulting delay to the start of commercial operations at Cramlington will have an adverse impact on earnings in the current financial year.
“The group shall continue to press TransGenRx Inc. for a resolution of the current inactivity and will report as soon as TransGenRx Inc has clarified its situation.
Angel Biotechnology said it is seeing an upturn the number of enquiries and bids for biomedical collagen products but warned market conditions remain "very difficult" and cleint funding issues are leading to delays.
And the group added it continues to “make good progress” towards finalising another joint venture for product development contracts for Russian firm Materia Medica Holding (MMH) first announced in October 2011.
However the group added it is “aware that the elapse of time, in putting that joint venture in place “has created some uncertainty in the marketplace”.
The statement adds: “The proposed joint venture covers contracts and resources that currently form a substantial part of the group's business and every care is being taken to ensure that the joint venture agreements will present an optimal result not only in the balance of commercial terms between the parties but also in providing a practicable and sustainable working relationship going forward and all this has taken time.
“At present the final versions of the legal agreements covering the joint venture and the services to be provided by Angel to the joint venture are being worked through and MMH has placed a project manager with Angel to oversee the smooth transfer of work from Angel to the joint venture.
"The group's priority is that the joint venture is completed before the end of the calendar year and it is assured that this matches the intentions of MMH.
“In the meantime the Group is continuing to work on the contracts with MMH under the agreement announced on 14 September 2012 as a prelude to transferring the contracts and their work in progress into the joint venture.
“The agreement provides for a monthly fee structure which has been designed to be broadly cash neutral in line with the transfer of commercial risks to the joint venture.”
Angel Biotechnology said it is continuing its “operational resource review, including staff rationalisation” announced in September.
This has led to the group cutting its staff numbers from 37 at the year end to March down to 24 by the end of November this year.
Newly appointed chairman, Nicholas Smith, said: "In the next few months the Group has to deliver the joint venture involving the MMH product development work and execute a strategy that broadens our commercial offering and reduces our exposure to uncontrollable third party risks.
“Success in the completion of the tasks and delivery of earnings is fundamental and the board and the Group's management are clear on what is expected of them.”
Shares in Angel Biotechnology down 14 per cent on the announcement before making a recovery, though still down more than five per cent on yesterday's closing price.