Yourgene Health : Interim Report - Sept 2022

Yourgene Health plc

("Yourgene", the "Group", or the "Company")

Half-year report

Steady growth in core business for H1

Manchester, UK - 21 December 2022: Yourgene (AIM: YGEN), a leading integrated technologies and service group enabling the delivery of genomic medicine, announces its unaudited half-year report for the six months ended 30 September 2022 ("H1 FY23"). Unless otherwise stated, comparative data shown is for the six-month period ended 30 September 2021 ("H1 FY22").

The first half of the financial year saw a steady return to growth in the core business reflecting a transition away from COVID related services and product sales which helped generate the higher revenues seen in FY22.

Financial highlights

• Revenues (excluding COVID) up by 14% to £7.9m (H1 FY22: £7.0m) o Genomic Services segment up 27% to £1.9m
  o Genomic Technologies segment up 11% to £6.1m
• Revenue growth in Americas and return to pre-pandemic form in APAC has led to year-on-year growth of 51% for international (non-UK/Europe) sales
• Reported revenue (including COVID) down by 45% to £9.6m (H1 FY22: £17.5m)
• Gross profit of £5.2m (H1 FY22: £10.2m) with gross margins at 55% (H1 FY22: 58%)
• General administrative expenses down by 12% to £7.2m (H1 FY22: £8.1m)
• Adjusted EBITDA* loss of £1.9m (H1 FY22: £2.1m)
• Net operating cash outflow of £4.1m (H1 FY22: cash neutral) including £1.1m of debt repayments
• Cash and cash equivalents as at 30 September 2022 of £2.4m (31 March 2022: £4.7m)

Operational highlights

• Progress on Ranger® Technology sample preparation portfolio:

1. Launch of LightBench® Detect with unique EDTA capability to support NIPT growth and other applications

1. Ranger® Technology run rate now over US $2.0m per annum

• 1. Ranger® Technology now embedded in 80% of Yourgene NIPT solutions (included in NIPT revenue)
• Restructure and cost saving programme has reduced annualised H1 FY23 administrative expenses by £3.7m when compared to the previous full financial year, with further savings to come once all synergy benefits of the move to new single site at Skelton House are realised
• Dr John Brown CBE appointed as Chairman

Post period end

• Several new NIPT contracts won with annualised revenue of approximately £2.7m
• Commercial team enhanced with new appointments in key regions including EMEA and North America
• First DPYD adoption in North America and FDA pre-submission complete to understand regulatory landscape
• Received HSA regulatory approval for IONA® Nx NIPT Workflow in Singapore
• Ranger® Technology IP providing exciting market opportunity in the US

Current Trading and Outlook

Due to uncertainty around the timing and implementation of contract wins and realisation of recurring revenue pipeline opportunities, and in the interest of prudence, the Board's expectations for full year revenue are being revised to within the range of £18m-£20m, which would represent year-on-year growth of 20% in the Company's core revenue streams. At current gross margins, this would generate an adjusted EBITDA loss in the range £3.5m - £4.5m before exceptional items. Guidance for subsequent years will also be tempered, however the Board believes

there is potential to deliver upside against these expectations from margin improvement, further cost savings and/or an increase in the rate of pipeline conversion and contract implementation.

The Company continues to benefit from the support of its lender and is in advanced discussions regarding a possible divestment under a previously announced operational and strategic review and is also involved in discussions on a possible strategic investment in the Company. The timelines for completing these two initiatives run into the next calendar quarter and, as neither is guaranteed to complete, the Company has also been preparing additional funding options and a further announcement will be made in this regard.

Lyn Rees, Chief Executive Officer of Yourgene, commented: "It is pleasing to see our customer base returning to pre-pandemicgrowth levels. The US market remains our largest growth opportunity and it is frustrating that access to this key market was closed during the pandemic. However, we are encouraged by recent NIPT contract wins, the completion of our DPYD FDA pre-submissionand the growing body of clinical evidence to support Ranger® Technology application in different fields. All indicators show that our core markets are growing.

"In addition, we have a key focus on reducing cost base with operational efficiencies at our new single site UK headquarters including improvements to our manufacturing process."

• Adjusted EBITDA is the operating profit/(loss) before interest, tax, depreciation, amortisation, and expenses shown separately disclosed on the face of the Income Statement

This announcement contains inside information for the purposes of the UK Market Abuse Regulation.

The Directors of the Company take responsibility for this announcement.

Yourgene Health plc	Tel: +44	(0)161 669 8122
Lyn Rees, Chief Executive Officer	[e-mail]
Barry Hextall, Chief Financial Officer
Joanne Cross, Director of Marketing
Cairn Financial Advisers LLP (NOMAD)	Tel: +44	(0)20 7213 0880
Liam Murray / James Caithie / Ludovico Lazzaretti
Singer Capital Markets (Corporate Broker)	Tel: +44	(0)20 7496 3000
Aubrey Powell / Tom Salvesen / George Tzimas
Walbrook PR Ltd (Media and Investor Relations)	Tel: [phone] or [e-mail]
Paul McManus / Lianne Applegarth / Alice Woodings	Mob: [phone]	/ 07407 804 654

About Yourgene Health

Yourgene Health is an international molecular diagnostics group which develops and commercialises integrated genomic technologies and services enabling genomic medicine in over 60 territories. The group works in partnership with global leaders in DNA technology to advance diagnostic science and support precision medicine.

Yourgene primarily develops, manufactures, and commercialises simple and accurate molecular diagnostic solutions, for reproductive health, precision medicine and now infectious diseases. The Group's flagship products include non-invasive prenatal tests (NIPT) for Down's Syndrome and other genetic disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests, and an extension into the precision medicine space with DPYD genotyping.

Yourgene has a range of innovative DNA sample preparation platforms, and launched Yourgene Genomic Services in 2020, which has enabled Yourgene to offer a global laboratory service network equipped to provide high quality genetic testing and bioinformatics solutions and serve as a full life-cycle partner for clinical, research and

pharmaceutical organisations to support partners at the preclinical, clinical, and post-market stages to develop, manufacture, obtain regulatory approval and commercialise new products and services.

Yourgene Health is headquartered in Manchester, UK with offices in Taipei, Singapore, the US and Canada, and is listed on the London Stock Exchange's AIM market under the ticker "YGEN". For more information visit www.yourgene-health.comand follow us on twitter @Yourgene_Health.

BUSINESS REVIEW

As announced in the trading update released on 3 November 2022, the first half of the financial year has delivered a steady 14% increase in core (non-COVID) revenues to £7.9m (H1 FY22: £7.0m), giving continued confidence that the original business thesis is back on track following the pandemic. Overall revenues reflect the slowdown in pandemic testing activities due to the changes in the UK Government's PCR testing guidelines. Total revenues were £9.6m for H1 FY23 representing over 40% of consensus market expectation for the full year and a consistent expected weighting over the two halves of the year.

In line with other businesses in the UK, inflationary and economic pressures have impacted margins. Cost base reduction has also been a key focus this year, including an organisational restructure. Measures and workstreams have been put in place as we continue to navigate the changing economic landscape our business is facing. Additional reductions in operating expenditure are planned over the next 12 to 18 months. The benefits for this will further be supported by the recent investments in facilities completed with a consolidated move to a single site in the UK.

Strategy

Our strategy remains to build a global molecular diagnostics business focusing on our core strength and expertise in cell-free DNA applications such as NIPT, oncology, liquid biopsy and other precision medicine applications. We remain on track with our focus on growing our product and service portfolio, as well as increasing market penetration for key growth drivers, such as Ranger® Technology. Continued steady geographic expansion through direct and distributor channels and key strategic partnerships is progressing with partners such as Ambry Genetics and EKF Diagnostics Holdings plc and we expect to see further rewards from prior investment in the business and its technologies.

The expanded capabilities and infrastructure, which were both driven and funded by COVID testing, have been redeployed and consolidated within the Genomic Services offering, to provide additional services such as oncology panels and whole exome sequencing (WES). In addition, some technical skills and instrumentation have been utilised to support product development and front-line customer technical support teams.

Group revenue	Unaudited	YoY	Unaudited	Audited
by territory	6 months to	Change	6 months to	12 months to
	30 Sept 2022		30 Sept 2021	31 Mar 2022
	£m		£m	£m
UK	3.7	-70%	12.5	26.5
Europe	2.0	-17%	2.4	5.5
International	3.9	+50%	2.6	5.6
	9.6	-45%	17.5	37.6
Total excl. COVID	7.9	+14%	7.0	14.4

	Unaudited	YoY	Unaudited	Audited
	6 months to	Change	6 months to	12 months to
	30 Sept 2022		30 Sept 2021	31 Mar 2022
	£m		£m	£m
Genomic Services
NIPT services	1.3	+44%	0.9	1.6
COVID-19 services	0.3	-97%	9.0	18.7
Other services	0.6	-	0.6	1.3
	2.2	-79%	10.5	21.6
Total excl. COVID	1.9	+27%	1.5	2.9

	Unaudited	YoY	Unaudited	Audited
	6 months to	Change	6 months to	12 months to
	30 Sept 2022		30 Sept 2021	31 Mar 2022
	£m		£m	£m
Genomic Technologies
NIPT	2.7	+18%	2.3	5.4
Reproductive health	1.8	-	1.8	3.9
COVID related assays	1.3	-7%	1.4	4.5
Precision Medicine (Ranger®,	1.5	+6%	1.4	2.2
DPYD and other)
	7.4	+7%	6.9	16.0
Total excl. COVID	6.1	+11%	5.5	11.5

Genomic Services

Genomic Services has seen a dramatic reduction in COVID-19 services revenue since UK testing guidelines changed in March 2022, with revenue of £0.3m during the period, a decrease of 97% against H1 FY22. The small testing volume still seen is due to private testing with third-party partners.

However, a rise in demand for NIPT services for both the UK and Taiwan labs has been evident, with a 44% increase against the same period last year. In the UK, the acquisition of a new customer partner with a broad network of clinics has been a growth driver. A broader clinical menu, through the launch of microdeletions, has enabled a more competitive offering for all regions as a number of customers were calling for this service as this capability is increasingly part of customer tenders/requests.

Additional research and clinical genome testing services, offered from Yourgene's UK and Taipei laboratories, continued to perform in line with last year with sales of £0.6m.

Genomic Technologies

The Genomic Technologies business stream provides an integrated portfolio of instruments, reagents, consumables and software, all aimed at supporting global clinical laboratory customers. Our flagship screening and diagnostic products include NIPT, Cystic Fibrosis, DPYD genotyping and other reproductive health assays. In addition, we supply our Ranger® Technology portfolio of platforms and consumables, which provides next generation size selection in cell-free DNA applications such as NIPT, oncology and liquid biopsy. The Ranger® Technology is a key component of our NIPT workflows, providing a highly differentiated offering of enhanced fetal fraction enrichment both for our NIPT service and in those operated by our customers using Yourgene's technologies.

Our Clarigene® SARS-CoV-2 PCR product supplied to third-party UK testing providers contributed revenues of £1.3m in the period (H1 FY22: £1.4m), a reduction of 7%. Reflecting reduced testing levels, further reductions are expected with substantially decreased clinical demand for the product from H2 FY23.

Non-COVID technologies revenue for the first half was up 11% to £6.1m (H1 FY22: £5.5m), showing a steady return to pre-pandemic growth. Run rate revenues from the differentiated Ranger® Technology is now over US $2.0m per annum, with a pipeline of opportunity for further growth.

NIPT product revenue is returning to growth again with an increase of 18% to £2.7m (H1 FY22 £2.3m). This is due to growth in Americas with new lab installations completed in USA and Mexico, and the commencement of Ambry's NIPT programme. Growth has also been seen in APAC with new NIPT installs across India, Taiwan, Singapore in the first half, with a pipeline of further opportunities for the second half for Malaysia, Australia and Japan. We continue to evaluate third-party products to offer our customer base, and to support our portfolio growth ambitions.

FINANCIAL REVIEW

The Company's results for the six months to 30 September 2022 are presented in the financial statements below and show a reduction in reported revenue of 45% to £9.6m (H1 FY22: £17.5m), due to the decline in COVID revenue to £1.6m (H1 FY22: £10.5m). Core (non-COVID) revenues increased by 14% to £7.9m over the period (H1 FY22: £7.0m). This was driven by NIPT services (44% growth), NIPT product sales (18% growth) and Ranger® Technology sales to third party customers, i.e. excluding where Ranger® is embedded in NIPT bundled revenues (17% growth).

Gross margins slipped back to 55% (H1 FY22: 58%) due to inflationary pressures and the mix effect of the reduction in higher margin COVID services towards lower margin NIPT sales as well as some inventory run-off expenses.

General administrative expenses decreased to £7.2m (H1 FY22: £8.1m) with the notes to the accounts providing a breakdown of some of the significant items. This overall reduction in expenditure is after increased investment in future growth drivers such as: £1.1m spend on the operating resource and infrastructure expenditure in Canada to facilitate continued growth of Ranger® sales (H1 FY22: £0.7m); £0.6m spend on US market entry (H1 FY22: £0.5m), reflecting further investment in commercial resource; and net R&D spend of £0.8m (H1 FY22: £0.6m).

Adjusted EBITDA was a loss of £1.9m (H1 FY22: profit of £2.0m). Exceptional costs of £1.3m were incurred (H1 FY22: nil), encompassing £0.7m of restructuring costs, primarily from redundancy processes undertaken in the UK and Taiwan, and £0.5m of relocation costs arising from the move to a single UK site at Skelton House.

Net financing expenses were £0.6m (H1 FY22: £0.2m) reflecting the drawdown of a new bank debt facility of £5.0m

at the end of FY22. The total comprehensive loss for the period was £6.8m (H1 FY22: loss of £0.5m). Earnings per

share were a loss of 0.8 pence (H1 FY22: 0.0 pence per share; FY22: loss of 0.3 pence).

In the reporting period, the Company incurred operational cash outflows of £4.1m (H1 FY22: cash neutral), which included £0.6m adverse net working capital movement, primarily from the payments of large COVID related liabilities at the start of FY23 (net payables reduction of £3.1m), which were only partly offset by the unwind of receivables (£1.8m) and inventories (£0.8m). Capex of £0.5m is consistent with that incurred in FY22 (£0.9m) on a run rate basis.

Skelton House lease cash incentives of £0.7m were received from the landlord, which were invested in the fit out of the new premises. The Skelton House lease is rent free up until August 2024. The previous UK premises have been partially exited, which resulted in a £1.0m reduction in the IFRS16 lease liability. Some legacy premises costs remain, so the synergy benefit from the Skelton House move has not yet been fully realised.

At the end of the reporting period, the Group had £2.4m in cash and cash equivalents (H1 FY22: £7.0m). Borrowings

outside IFRS16 lease commitments were £4.1m (SVB bank loan), with net debt of £1.7m (30 Sept 2021: £4.6m). The reduction in cash was weighted to the first quarter of the financial year and was affected by year end creditor and VAT overhangs arising from a sharp drop in COVID-related activity running alongside a significant business restructuring. Cash burn rates reduced for the second quarter of the reporting period to c£0.5m per month on average. Cash levels continue to be carefully managed and on current burn rates additional capital injections will be required to navigate the business to a self-sustaining cash position. The Company is pursuing multiple avenues to ensure the availability of funding to enable it to pursue its strategic plan.