15 March 2023 | Wednesday | News
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Prenetics Global Limited (NASDAQ: PRE) ("Prenetics" or the "Company"), a leading genomics and precision oncology company, today announced financial results for the fourth quarter and full year ended December 31, 2022.
Danny Yeung, Chief Executive Officer and Co-founder of Prenetics, said "Looking back over the last twelve months, we are pleased with our recent transformative progress. When the pandemic started three years ago, we made a strategic decision to pivot from our core genomics business to play a leading role in fighting COVID-19 in the United Kingdom and Hong Kong. We are extremely proud to have safe-guarded those communities with more than 28 million COVID-19 tests processed. It was truly a monumental team effort and something that I'm sure my team and I will remember for the rest of our lives. With the pandemic behind us, our team has rehomed our focus back to our foundational genomics business. This has already been evidenced with the formation of our distinguished Scientific Advisory Board, our acquisition of ACT Genomics, enabling us to offer an FDA-cleared cancer genomics profiling test. Furthermore, I am immensely optimistic with our new business strategy in precision oncology. With our strong balance sheet, we intend to make significant investments to develop our oncology product pipeline, especially in early detection for cancer. Given our progress, we believe our current market cap (currently below cash and cash equivalent) is not reflective of our true value and will now look to execute upon our previously announced US$20 million share buy-back program in which we believe our shareholders will benefit from it."
Danny continued: "We are also proactively restructuring our operations with a focus on streamlining resources and reducing cost, including executing a global workforce reduction of approximately 60% since December 2022, resulting in annual headcount reduction costs of approximately US$10 million. These are important moments to sharpen our focus, control our costs, and deploy our resources and capital to our highest priorities. While implementing such changes are challenging, we are confident this restructuring will allow us to effectively and efficiently achieve our new objective of delivering innovative solutions in precision oncology."
New Business Strategy on Precision Oncology
Prenetics is focusing its business strategy to genomics and precision oncology, and is dedicated to transforming patients' care through advanced genomic and molecular technologies. The acquisition of ACT Genomics marked Prenetics' first milestone in positioning itself in the global precision oncology market. ACT's flagship product ACTOnco+ is currently the first and only Asia-based product to receive FDA clearance for a comprehensive genomic profiling test for solid tumors.
Recently, the Company also appointed Prof. Tony S. K. Mok, Chairman of the Department of Clinical Oncology of the Chinese University of Hong Kong, non-executive director of AstraZeneca PLC., independent director of HUTCHMED (China) Limited and a world-renowned expert in the application of precision medicine for advanced lung cancer, as Chairperson of its Scientific Advisory Board. Prof. Mok will lead the Scientific Advisory Board in advancing Prenetics' mission to acquire, develop, and commercialize innovative solutions in the field of precision oncology, and overcome cancer through early detection and precision medicine.
COVID-19 Update and Rebalancing of Resources
Prenetics has been at the forefront of the fight against COVID-19 by providing highly accurate and rapid testing at scale and dedicating significant resources to the social responsibility of protecting our community. With the pandemic and COVID-19 testing now behind us, the company has been developing a new strategic focus on genomics and precision oncology. In view of the Company's new strategic focus, it is undergoing a rebalancing of resources to improve efficiency, reduce costs in less strategic areas, and deploy resources and capital to areas of high priority. Prenetics believes that these initiatives are important to enable it to achieve its largest growth opportunities in genomics and precision oncology. Prenetics remains committed to investing in strategic areas of its business, aligning talent to delivering innovative solutions in genomics and precision oncology, especially in early detection of cancer.
Fourth Quarter 2022 Financial Highlights
Full Year 2022 Financial Highlights
Full Year 2022 Financial Results
The Company had net loss for the year mainly due to non-cash and/or non-recurring: (i) impairment loss in respect of restructuring costs in relation to diagnostic business; (ii) fair value loss on preference shares liabilities; (iii) fair value loss on financial assets; and (iv) share-based payment on listing. After adjusting for such non-cash losses and other non-recurring items, the Company recorded an adjusted profit attributable to equity shareholders of Prenetics of US$39.2 million and adjusted EBITDA was US$58.3 million for the year ended December 31, 2022.
Fair value loss on preference shares liabilities
This loss was attributable to Prenetics' preference shares issued prior to our listing on NASDAQ. This is a non-cash loss and would not recur subsequent to our listing on May 18, 2022.
The Company had preference shares with mandatory conversion provision that required them to be converted in full to ordinary shares at time of listing. These preference shares were accounted for as financial liabilities under IFRS, and its conversion provision was recognized as derivative financial liabilities and measured at fair value through profit or loss. An increase of the equity value of the Company (prior to our listing) therefore would result in a corresponding increase in the derivative financial liabilities and a non-cash fair value loss.
For the year ended December 31, 2022, the fair value loss on preference shares liabilities was US$60.1 million. At completion of our listing on NASDAQ on May 18, 2022, all of the preference shares were fully converted into ordinary shares, and therefore such fair value loss would not recur going forward.
Share-based payment on listing
Share-based payment on the listing was US$89.5 million and was non-cash and non-recurring in nature. Prenetics was listed on NASDAQ on May 18, 2022 via a de-SPAC transaction by merging with Artisan Acquisition Corp. ("Artisan"). This acquisition of the net assets of Artisan has been accounted for as a share-based compensation for the service of a stock exchange listing and is charged to our profit and loss upon the completion of the transaction. The amount of this payment is calculated based on the excess fair value of consideration transferred over the fair value of Artisan's identifiable net assets acquired.
Fair value loss on financial assets at fair value through profit or loss
This loss is unrealized. Fair value loss on financial assets at fair value through profit or loss was US$9.4 million due to market volatility.
Restructuring costs (including assets write-downs) in relation to diagnostic business
This is a non-cash and non-recurring item. Restructuring costs (including assets write-downs) in relation to the diagnostic business were US$30.4 million, due to impairment loss arising from our exit from the COVID-19 testing business, recognised on (i) intangible assets of US$19.1 million; (ii) goodwill of US$3.3 million; (iii) property, plant and equipment of US$4.5 million; and (iv) write-off of prepayment of US$3.5 million.
The restructuring primarily involves realigning workforce to ensure the Company's resources are focused on business areas with more robust growth prospects and higher profitability. This restructuring of operation will result in significant cost savings in the long run and position the Company for sustainable growth. Prenetics holds positive outlook toward the future of business and are committed to transparent communication with our stakeholders.
2023 Financial Guidance
The Company will be discussing guidance upon release of Q1 2023 results and providing an update on M&A discussions.
 Represents current assets, including cash and cash equivalents and short-term deposits totaling US$166.6 million, financial assets at fair value through profit or loss of US$17.5 million, and trade receivables of US$41.7 million, amongst other accounting line items under current assets.
 Adjusted profit (non-IFRS) represents profit/(loss) attributable to equity shareholders of the Company under IFRS before employee equity-settled share-based payment expenses, other strategic financing, restructuring costs in relation to diagnostic business, transactional expense and non-recurring expense and fair value adjustments. See the section titled "Unaudited Financial Information and Non-IFRS Financial Measures" and the table captioned "Reconciliation of profit/(loss) attributable to equity shareholders of Prenetics under IFRS and adjusted profit/(loss) attributable to equity shareholders of Prenetics (Non-IFRS)" for more details.
 Adjusted EBITDA (non-IFRS) represents profit/(loss) from operations under IFRS before employee equity-settled share-based payment expenses, depreciation and amortization, other strategic financing, transactional expense, restructuring costs in relation to diagnostic business and non-operating recurring expense, and finance income, exchange gain or loss. See the section titled "Unaudited Financial Information and Non-IFRS Financial Measures" and the table captioned "Reconciliation of profit/(loss) from operations under IFRS and adjusted EBITDA (Non-IFRS)" for more details.