Shares in Angel slumped 17% in early trading
Angel Biotechnology has reported a loss of £2.86 million for the six months to September 30.
The Edinburgh-based pharmaceutical manufacturing contractor said the bulk of the losses were down to a write back of accrued revenue and contract liabilities linked to joint ventures.
First-half revenues dropped to £1.07 million against £1.4 million the previous year, and Angel said a number of promising contracts had fallen away or had to be deferred due to funding issues in the last six months.
Shares in Angel fell more than 17 per cent on the news.
The group said it had secured contracts worth £1.3 million in the first half, though an £800,000 contract with US-based TransGenRx Inc has yet to start.
Angel issued a profit warning in October after the contract with US-based TransGenRx Inc stalled on financing issues.
TransGenRx has yet to give Angel a start date for that contract, and Angel said its current pipeline of work “judged to be be near order” total around £3 million.
Angel announced its first contract, valued at more than £800,000, with TransGenRx Inc in April after entering into a framework agreement with the US firm in December 2011.
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 re-commissioned Cramlington facility in the north east of England.
The group said today it had been forced to make redundancies at Cramlington and at its Pentlands headquarters in the first half and pay cuts have also been imposed on the group's remaining 24 staff.
Angel said in its October update it was making “good progress” towards finalising another joint venture for product development contracts for Russian firm Materia Medica Holding (MMH) first announced in October 2011.
However Angel said in an interim results statement today the first half of the financial year “has been dominated by issues arising from contracts undertaken by Angel for MMH”.
Those problems include: “...the protracted negotiations for the transfer of the MMH contracts into a new joint venture company and by difficult market conditions caused by funding restraints for many of our existing and prospective clients”, Angel said.
Angel said its development of five active antibody products for MMH had run into a “number of technical difficulties” which would have left Angel with “open-ended costs” to complete.
“Resources were devoted to finding solutions and reducing disruption but in the end proved fruitless,” the group added, and MMH agreed in August to cover costs on a monthly basis until the five contracts could be transferred to the joint venture company.
A subsequent audit requested by MMH to review the completion stage of the ongoing contracts put the difference between amounts invoiced and settled at approximately £2.6 million – and the joint venture company will assume a £1.7 million contract liability to MMH.
Dr Stewart White, commercial director and acting chief executive of Angel, said: "The first half of 2012 has been a challenging period for Angel.
“The operational review of our business, measured against client requirements, has been thorough and has resulted in what we believe is the best outcome in the circumstances for our customers, staff and shareholders.
“The main outcome has been to progress the formation of the joint venture company with MMH, using our Pentlands facility, in addition to the proposed transfer of existing MMH contracts from Angel to the joint venture company.”
Non-executive chairman Nicholas Smith added: "Looking back, it is disappointing to see how events beyond Angel's control such as the global funding squeeze and technical problems with the MMH contracts have derailed the promising business plan that delivered its maiden profit less than two years ago.
“My disappointment reinforces my determination to reduce Angel's exposure to uncontrollable risks, to build on its strengths to provide a broader commercial offering and, in particular, to focus on strategic partnerships with those looking for a manufacturing base for their products.
“I look forward to the delivery of the joint venture agreement and to helping the joint venture company achieve its goals in the future.”