RUA Life Sciences plc

("RUA Life Sciences", the "Company" or the "Group")

Final results for the year ended 31 March 2021

RUA Life Sciences, the holding company of a group of medical device businesses focused on the exploitation of the world's leading long-term implantable biostable polymer (Elast-Eon^TM), announces its audited final results for the year ended 31 March 2021.

 Highlights:

·     Results include full year trading of RUA Medical acquisition now fully integrated into the Group, therefore, year-on-year comparisons are less meaningful

o  Revenue amounted to £1,528,000 (2020: £489,000)

o  Operating loss was £1,551,000 (2020: £941,000), impacted by Covid restrictions on elective surgeries

·      Year-end cash balances amounted to £6,294,000 (2020: £1,976,000)

·      Covid disruption successfully managed with little impact on key R&D projects

·      Board strengthened with appointment of two new directors

·      Biomaterials revenues exceeded original expectations

·      Successfully completed £7 million equity fund raise

·      Major capital expenditure programme underway to scale up commercial production of vascular products and accelerate heart valve R&D

·      Vascular graft testing met expectations - anticipated commercial launch during current financial year

Bill Brown, Chairman of RUA Life Sciences, commented:  "We set very demanding objectives for the RUA Medical business on its acquisition and, despite the considerable disruption to normal business activities caused by the pandemic, I am very proud of how much the team has achieved over the past year. RUA Life Sciences is now well positioned to benefit from this hard work with the anticipated commercial launch of the vascular graft product range in the current financial year."

For further information contact:

RUA Life Sciences

Bill Brown, Chairman                                                            Tel: +44 (0)1294 317073  

David Richmond, CEO                                                         Tel: +44 (0)1294 317073

Shore Capital (Nominated Adviser and Joint Broker)    Tel: +44 (0)20 7408 4080 

Tom Griffiths/David Coaten                                             

Cenkos Securities plc (Joint Broker)                               Tel: +44 (0)20 7397 8900

Max Gould (Corporate Finance)

Michael Johnson (Sales)

About RUA Life Sciences

The RUA Life Sciences group was created in April 2020 when RUA Life Sciences Plc (formerly known as AorTech International Plc) acquired RUA Medical Devices Limited to create a fully formed medical device business. RUA Life Sciences is the holding company of the Group's four trading businesses, each exploiting the Group's patented polymer technology.

Our vision is to improve the lives of millions of patients by enabling medical devices with Elast-Eon^TM, the world's leading long-term implantable polyurethane.

Whether it is licensing Elast-Eon^TM, manufacturing a device or component, or developing next generation medical devices, a RUA Life Sciences business is pursuing our vision.

Elast-Eon™'s biostability is comparable to silicone while exhibiting excellent mechanical, blood contacting and flex-fatigue properties. These polymers can be processed using conventional thermoplastic extrusion and moulding techniques. With over 7 million implants and 14 years of successful clinical use, RUA's polymers are proven in long-term life enabling applications.

The Group's four business units are:

A copy of this announcement will be available shortly at www.rualifesciences.com/investor-relations/regulatory-news-alerts.

CHAIRMAN'S STATEMENT

On behalf of the Board, I am pleased to present the Company's audited final results for the year ended 31 March 2021.

On the first day of the financial year under review, the Company completed the strategically important acquisition of RUA Medical Devices Limited ("RUA Medical"). Since 2018, the Company has been pursuing a strategy of moving up the value chain within medical device manufacturing, from being a licensor of the world class long term implantable polymer Elast-Eon^TM to ultimately seeking to market the Company's own range of Elast-Eon^TM enabled devices. The acquisition of RUA Medical has enabled the Company to accelerate its ambitions by bringing a fully regulated manufacturing and device design business into the Group. The progress made over the past year in pursuit of our strategic objectives has been very positive particularly given the extended lock downs and disruption to supply chains as a result of Covid-19. 

Our first range of products, large bore vascular grafts, has been fully developed and the key mechanical testing and in-vivo trial results meet all of our design objectives and we are close to submitting the file for regulatory clearance. However, due to the unexpected presence of cellulose, a non-toxic, natural plant-based material, in the recent analysis of the leachable extracts from the graft samples tested, in what the Board believes is likely due to contamination at some stage in the chain of custody, the Company has decided to undertake an additional test on grafts from another production batch and carry out detailed chemical analysis on the original samples before submission to confirm the presence of cellulose as a one-off. The Company continues to anticipate first revenues from the sale of grafts by the end of the current financial year. Meeting this timeframe has been enabled by the acquisition of RUA Medical and the dedication and hard work by the team. During the year, the Company also completed an equity fund raise in December 2020, where the Company raised a total of £7.0 million (before expenses) providing the finance necessary to take the business through the next phase of development.

Trading for Year

Trading for the year represents the consolidated results for the enlarged Group and as such, year on year comparisons are largely meaningless due to the scale of the acquired business being greater than the parent company. As a result, I have sought to split out the key comparatives. Total revenue for the year amounted to £1,528,000 (2020: £489,000) which was represented by revenues from the polymer business of £507,000 and RUA Medical, £1,021,000. The polymer business performed ahead of our initial expectations as a result of royalties from licensees being higher than anticipated at the time of making the trading statement in early May 2021. RUA Medical's revenues were derived from sales of other medical devices produced as a sub-contract manufacturer. Orders from its major customer were impacted by the deferral of elective surgeries and we estimate that the impact was a reduction in revenue of around £400,000. The operating loss for the year was £1,551,000 (2020: £941,000). Of this loss, £249,000 was recognised in the subsidiary, RUA Medical, which, as mentioned above, was adversely affected by Covid-19 related reduction in revenues. Administration expenses within the parent company amounted to £1,818,000 compared to £1,123,000 last year. The increase was due to a significant rise in professional fees for the acquisition of RUA Medical together with the costs attributed to the equity fund raise, plus additional expenditure on R&D activities. Year-end cash balances amounted to £6,294,000 (2020: £1,976,000). After the fund raise completed, the Group commenced a period of capital investment in equipment necessary to scale up the production capacity for both the manufacture of the vascular product range and further development of the heart valve project. Further details of the capital investment plans are discussed in the Group Chief Executive's Report.

Research and Development costs have been charged through the profit and loss account. R&D Tax Credits were recognised in the year of £87,000 (2020: £81,000) which related to expenditure incurred in the preceding financial year. During the year, expenditure on the two main R&D projects, (being the Vascular Graft and Heart Valve projects) increased by 123% to £541,000.

Board

Following the acquisition of RUA Medical, David Richmond who had been a Non-Executive Director of the Group became Group Chief Executive Officer, with the governance benefits of splitting the role of Chairman and CEO. The Executive Board was also strengthened by the appointment of Dr Caroline Stretton in January 2021 as Group Chief Operating Officer.

Gordon Wright, one of the founders of the predecessor company to RUA Life Sciences retired from the Board during the year and I would like to both personally, and on behalf of the Company, thank Gordon for his many years' service and sound counsel. I am pleased that Gordon continues to have a relationship with the Group as Honorary Life President.

The Board had recognised the requirement for an independent Non-Executive director to take on the role of Chair of the Audit Committee. Our search criteria were very exacting as our preferred candidate would not only be a qualified accountant and have experience as a Finance Director of a listed or an AIM quoted company but also have experience in the highly regulated medical device industry. I am delighted that Ian Ardill, who joined the Board in January 2021, was able to meet all of our requirements.

The Board is now very well balanced between Executive and Non-Executive directors with many years' experience and expertise in all the necessary areas required for RUA Life Sciences to reach its potential.

Outlook

While the past year has been very difficult for most businesses, RUA has been able to achieve a great deal during the global pandemic.

Major progress has been made over the past year with the vascular graft development being a significant achievement. The current year is expected to build upon this progress further. The next major step is obtaining FDA clearance to market and, in anticipation of this, we are currently making very good progress with our engagement with potential partners, to both purchase our grafts to incorporate into OEM devices and to take the grafts into US hospitals on a distribution basis. Feedback from commercial partners and key opinion leaders has been positive and the opportunity to replace current animal-derived solutions to the problem of sealing grafts with the unique properties of Elast-Eon^TM has been recognised as potentially game changing disruptive technology. Our primary focus will be to secure a successful commercial launch of this product line during the current financial year.

The new technology invented as part of the graft project is now being further exploited for other Group projects. The vascular patch development is now advancing well utilising the core graft IP, and a separate 510k incorporating a wider range of applications than originally anticipated is also expected to be submitted during the year.

Similarly, the Heart Valve project has now moved beyond the initial proof of concept stage with the polymeric leaflet system currently undergoing a number of manufacturing improvements. Some of the data received from the animal testing on the graft programme has very interesting implications for the next generation of heart valves and we are now committing further resources to the project in both engineers and in house testing equipment.

Your Board looks forward to the current year and beyond with a great deal of confidence.

William Brown

Chairman

9 July 2021

GROUP CHIEF EXECUTIVE OFFICER'S REPORT

I am pleased to present my Report to shareholders of RUA Life Sciences on the activities of the last year and our plans for the current year. I would like to thank two key stakeholder groups for their support of the Group over the past year. Firstly, the employees who have embraced the new Group culture and objectives whilst contributing so much during the uncertainties and disruption of the global pandemic, and secondly our shareholders, both old and new, who supported the fund raise to enable us to pursue our ambitious plans. Our employees should feel very proud of what they have achieved, and our shareholders are hopefully seeing that we are delivering on the vision set out for the business. As development continues, our plans for future investment in the business are given below.

People

On acquisition of RUA Medical, the head count of the business amounted to 25 split across production, quality, research and development and administration functions. Despite the global pandemic, we have grown the capacity of the business by investing in our technical departments and recruited a number of highly experienced engineers in both production and R&D thus head count has now increased to 32. This growth is anticipated to continue as the graft project transitions from R&D and is handed over to production once regulatory clearance is received and the not inconsiderable task of validating the new equipment necessary to meet our production targets is achieved.

Capital Investment

On conclusion of the fundraise, the Group set the investment plans for the business in train. Some of this investment was made in the year to 31 March 2021 however, the scale of the total project amounts to just over £2.5 million. The plans are summarised as set out below.

RUA Medical textile capacity - £300,000 invested in new warper and creel system together with weaving looms to scale up production of graft materials. The capacity introduced should provide the feed stock to allow around 18,000-20,000 grafts to be manufactured per annum. Further graft and patch manufacturing equipment has also been committed to at a total investment of around £750,000. The manufacturing process has been highly automated and designed for a single shift of 9 operatives to manufacture and pack 900 grafts a month on a single shift basis (1,700 on a double shift).

The heart valve project also required further capital investment. The total budget amounts to approximately £800,000, split between testing equipment, manufacturing machinery and associated tooling. Testing has been brought in house to reduce lead time on testing prototype valves while shortening the time between iterations and determination of the ultimate manufacturing settings. Around 75 per cent. of the heart valve capital budget is however contingent upon satisfactory results from the initial testing regime.

RUA has always sought to anticipate future production needs and it is currently anticipated that the production capacity for patches and grafts from the current facility could be exhausted within 24 months of market launch. For this reason, we recently agreed to purchase the neighbouring industrial unit to our graft manufacturing plant in Irvine, Scotland. This factory which is the mirror image of the current facility includes 11,064 sq ft of office and production space which can be configured to more than triple clean room space while meeting production needs for a number of years to come. Additionally, by consolidating the two units, this will provide opportunities for further extensions on the attached land. The budget for both the initial purchase, cleanroom, office construction and fit out amounts to around £700,000 or a little under £60 per square foot.

Research and Development

R&D activities are key to the future value creation of the business. The investment made over the past year has taken the grafts through around 80 prototypes, through design freeze and subsequent in vitro and in vivo testing to allow FDA submission. Further investment is planned to allow scale up of production capacity and to bring the patches to a similar level of progress. The budget for the current year amounts to around £700,000 with deliverables being three FDA cleared product ranges.

The heart valve project is not as far advanced as the graft project due to the complexity of the task, however, the achievements of the past year have given the Board the confidence to commit to an R&D budget of a further £700,000 in this area with the objective of reaching design freeze and having durability trials well under way. The leaflet system design allows the valve to function well under hydrodynamic testing whilst the computational modelling indicates very low stress levels on the leaflets. The key to success of a polymeric leaflet heart valve is a combination of long-term durability together with bio-stability of the material. Having the IP to the Elast-Eon^TM material is a major advantage in development of this project. A detailed literature review indicated that a number of projects were trialled with textile leaflets which had good durability but fell short in animal trials due to tissue ingrowth. The trials undertaken on our graft project confirmed this tissue ingrowth issue with the control grafts, however, the Elast-Eon^TM sealant allowed tissue ingrowth on the inside of the graft only and the external surface remained remarkably free of any adhesion. As a result, the heart valve project has been expanded to consider this textile reinforcement opportunity based on the graft technology. The 100 per cent. polymer leaflet is still being developed, however, in parallel we are also pursuing a textile variant of the design. The theory being that the mechanical properties of the leaflet material expressed as a factor of the maximum stress on the leaflets would increase by a factor of 30.

It is intended to trial both manufacturing methods against each other through durability trials.

Elast-Eon^TM

RUA Biomaterials is the IP licensing division that owns the family of medical grade polymers known as Elast-Eon™. Elast-Eon™ has been in long term human implants for well over 15 years and is the enabling technology behind over 7 million life sustaining devices. Elast-Eon™ has an FDA Masterfile and testing data has demonstrated the material to have all of the characteristics necessary for a long-term implantable biomaterial.

RUA Biomaterials has licensed manufacturing rights to Biomerics and the rights to use the material to a number of other medical device companies. During the year to 31 March 2021, royalty income and licence fees from this business activity grew from £489,000 to £507,000. Whilst the increase in GBP terms is approximately 4 per cent., the increase in USD terms is closer to 12 per cent. increasing from $608,000 to $679,000 in invoiced currency.

Elast-Eon™ is also being exploited by other Group companies as the enabling technology behind the grafts and patches being developed by RUA Vascular and the heart valve being developed by RUA Structural Heart. Both RUA Biomaterials and our licensed manufacturing partner are investing in the marketing of the Elast-Eon^TM polymer, and we expect to see further growth in this area over the next few years as the material is adopted by more device companies.

RUA Medical

RUA Medical was acquired by the Group at the start of the financial year under review. It is a specialist end to end subcontract designer, developer and manufacturer of bespoke engineered medical devices with two facilities and four cleanrooms. The business is unique in the field of implantable textile devices, in being equipped to take a customer's product idea and progress it from design straight through to delivering retail packaged devices for clinical use. RUA Medical will continue to provide and grow these services to third party customers but through the availability of Elast-Eon™ polymers and know how, will expand the offering to include textile medical devices enabled by Elast-Eon™. Additionally, the RUA Medical team, facilities and systems are now fully available to continue the product developments for RUA Vascular and RUA Structural Heart.

This business was impacted most out of the Group by Covid restrictions on surgeries. We worked hard to support our customers through these difficult times and have been praised for quality of service and on-time delivery. Having demonstrated this high level of service, we believe it provides the opportunity to take on additional product lines for our major customer.

The business also successfully retained its ISO 13485:2016 certification, and formally added the new cleanrooms to its Irvine site and 'Contract Design and Development' to its current scope of certification.

Commercial Opportunities

The priority for the current year on business development activities is to organise the route to market for initially the vascular graft products and secondly the soft tissue patches. Due to the current regulatory regimes in place globally, we have identified the North American market for first launch which co-incidentally is also the highest value market by unit hospital pricing. We estimate that annual global demand for large bore surgically implanted grafts is around 200,000 units per annum of which North America represents around 45 per cent. by volume. Hospital pricing ranges from $1,000 to $3,000 depending on size and complexity (i.e. our one piece aortic root graft). Additionally, there is a market for grafts within the medical device industry for use in heart assist devices and valved conduits. RUA Life Sciences does not intend to sell grafts direct to hospitals but leverage the existing infrastructure of cardiovascular salesforces by partnering with distributors. This strategy reduces sales value potential through the need to provide distributor margin but is compensated for by the significantly lower costs of sales and marketing.

We are actively engaged with a number of potential distribution partners and the product has been met with much enthusiasm both from these sales focussed organisations and also from the KOL surgeons who have been exposed to the concept of a non-animal derived vascular graft. Most new products brought to the market are "me too" versions of existing technology, ours on the other hand has been described as a game changer and truly disruptive. We understand that current recommendations to hospitals is that if a non-biogenic (not animal sourced) product is available, this should be offered to patient groups as an alternative.

We are now working on our plans for a European launch and similar discussions are underway in key European territories however the focus here is on organising the key centres to undertake the clinical trials required. European commercial launch is around 18 months to 2 years behind North America.

David Richmond

Group Chief Executive Officer

9 July 2021

STRATEGY

The strategy of the Group is simple. To exploit the benefits of the Company's IP and the family of biostable polymers with exceptional long-term performance. This is being undertaken through:

·      licensing Elast-Eon™ to third parties through RUA Biomaterials;

·      developing textile based and Elast-Eon™ coated implantable devices through RUA Vascular;

·      developing a revolutionary and market disrupting Elast-Eon™ leaflet polymeric heart valve through RUA Structural Heart; and

·     becoming a centre of excellence for designing, developing and manufacturing Elast-Eon™ based medical devices through RUA Medical, whilst continuing to serve and expand its current customer base.

RUA Life Sciences is the holding company of each of these subsidiaries and will seek to maximise shareholder value by growing each business to achieve attractive levels of profitability or disposing of business areas if the valuations are attractive.

In the financial year to March 2022 it is intended that RUA Vascular Limited and RUA Structural Heart Limited will begin to trade as separate entities. All Research and Development work for those two business areas has been undertaken through RUA Life Sciences for the year ended 31 March 2021.

Summarised consolidated income statement

Summarised consolidated statement of financial position

 Summarised consolidated cash flow statement

NOTES TO THE EXTRACTS FROM THE CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of preparation

The extracts from the Consolidated financial statements are for the year ended 31 March 2021. They have been prepared in compliance with International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006.

The Consolidated financial statements have been prepared under the historical cost convention, with the exception of fair value adjustments made in connection with the acquisition of RUA Medical.

The accounting policies remain unchanged from the previous year.

2. Going concern

After considering the year end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts to 31 October  2022 which incorporate planned investment in new product development and assumptions related to the return towards normal business particularly relating to the RUA Medical Devices subsidiary, the Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. For this reason, the Directors consider that the adoption of the going concern basis in preparing the consolidated financial statements is appropriate.

3. Preliminary announcement

The summary accounts set out above do not constitute statutory accounts as defined by section 434 of the UK Companies Act 2006. The summarised consolidated statement of financial position at 31 March 2021, the summarised consolidated income statement, the summarised consolidated statement of changes in equity and the summarised consolidated cash flow statement for the year then ended have been extracted from the Group's statutory financial statements for the year ended 31 March 2021 upon which the auditor's opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 31 March 2021 did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2020 have been delivered to the Registrar of Companies. The 31 March 2021 accounts were approved by the Directors on 9 July 2021, but have not yet been delivered to the Registrar of Companies.

4. Earnings per share

The basic and diluted loss per ordinary share of 8.20 pence (2020: loss of 5.55 pence) is calculated on the loss of the Group of £1,415k (2020: loss of £816k) and on 17,697,120 (2020: 14,686,608) ordinary shares, being the weighted average number of shares in issue during the year.

Posting and availability of accounts

The annual report and accounts for the year ended 31 March 2021 will be sent by post or electronically to all registered shareholders on 29 July 2021.  Additional copies will be available for a month thereafter from the Company's office 2 Drummond Crescent, Riverside Business Park, Irvine, Ayrshire KA11 5AN. Alternatively, the document may be viewed on, or downloaded from, the Company's website: www.rualifesciences.com.

Notice of Annual General Meeting

Notice of the twenty-fourth Annual General Meeting of RUA Life Sciences plc will be posted with the Annual Report and Accounts and will be held at RUA Medical's premises at 2 Drummond Crescent, Riverside Business Park, Irvine, Ayrshire KA11 5AN on Tuesday, 31 August 2021 at 11:00am.

COVID-19 AND THE AGM PROCESS

The Company has been monitoring developments in relation to the Covid-19 pandemic, including the public heath guidance. Given the continued social distancing, travel restrictions and other safety measures imposed by the Government as a result of Covid-19, we strongly advise that shareholders do NOT attend the AGM in person, but instead appoint the Chairman of the meeting as proxy to vote on their behalf.

Further details will be included in the Annual Report and will published on the Company's website at www.rualifesciences.com.