Kromek receives Innovate UK funding to advance Biological-Threat Detection solution

Kromek Group

Kromek Group plc (LON:KMK), a worldwide supplier of detection technology focusing on the medical, security screening and nuclear markets, has announced that it has commenced a £1.25m programme funded by Innovate UK to customise its biological threat-detection solution for the automated detection of all airborne viruses, including COVID-19, to support end-use cases.

The Group’s solution is designed to be deployed in high footfall locations, such as airports, hospitals, retail outlets and entertainment venues. The base technology, which is fully developed, samples the air in-situ to detect and analyse airborne pathogens using DNA sequencing. In response to the pandemic, the initial focus is on productising the technology to develop a system that will rapidly test for the presence of SARS-CoV-2, the virus that causes COVID-19. It will run automatically and the results will not require analysis by trained individuals or specialist laboratories.

By detecting the virus in the air in real time, rather than solely relying on the testing of individuals or development of symptoms in individuals, the system will enable earlier identification of potential infection exposure to help reduce transmission. It will also support facilities management such as by enabling site operators to know what level of ventilation is required from the HVAC system or when decontamination is necessary.

In addition, the system will have the capability to test for a wide spectrum of viruses, including mutations of SARS-CoV-2. This will support the development of a bio-resilience solution against the spread of new strains of COVID-19 or other novel viruses that could result in future pandemics.

Kromek is engaging with potential customers for the COVID-19 detection system to develop deployment models and identify how it can best fit their needs. The Group will provide any necessary customisation of the system ahead of piloting by those user groups. The Group expects the first pilots with potential users to commence by the end of this financial year and anticipates commercial deployment in 2021/22.

The funding has been awarded under an 18-month programme of UK Research and Innovation (“UKRI”), which is a non-departmental public body sponsored by the UK government’s Department for Business, Energy and Industrial Strategy that brings together the UK’s seven research councils, Innovate UK and Research England. The programme seeks to support the development of solutions to address and mitigate the health, social, economic, cultural and environmental impacts of the COVID-19 outbreak.

Dr Arnab Basu, CEO of Kromek Group, said: “We are very pleased to have received backing from UKRI and Innovate UK to progress the deployment of our solution for the detection of airborne COVID-19. Our system can augment the government’s Test and Trace system by enabling early identification of potential exposure to the virus while supporting the safe return of visitors to public spaces like mass transport, retail outlets and entertainment venues. We also believe that the continuous monitoring with our system, which can test for a wide spectrum of viruses as well as mutations of COVID-19, has significant potential for protecting against the outbreak of pandemics in the future.” 

The company went on to announce its interim results for the six months ended 31 October 2020.

Financial Summary

·      Revenue of £4.6m (H1 2019/20: £5.3m)

·      Gross margin was 54% (H1 2019/20: 58%; FY 2019/20: 47%)

·      Adjusted EBITDA* was £0.9m loss (H1 2019/20: £0.6m loss)

·      Loss before tax was £3.4m (H1 2019/20: £2.7m loss)

·      Cash and cash equivalents at 31 October 2020 were £5.8m (30 April 2020: £9.4m; 31 October 2019: £13.4m)

*Adjusted EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, other income and share-based payments. For further details, see the Financial Review below.

Operational Summary

·     Resumption of orders and shipments across all segments in final two months of the period with business patterns starting to return to normal and increased commercial activity post period

·     Continuing commercial traction and development of D3S family of products, which has been sold in over 25 countries

o  Expansion of global footprint with sales commencing in a new country and engagement of five new distributors

o  Continued to supply products to Irish Civil Defence following contract win in 2019/20

o  Launch of next-generation D3 PRD and D5 RIID high-performance radiation detectors

·      Nine new customers won in the civil nuclear segment and continued sales through distribution channels

·      Significant progress in fast-growing bio-security market

o  Awarded $5.2m contract extension by the Defense Advanced Research Projects Agency (“DARPA”), an agency of the US Department of Defense, to advance the development of a mobile wide-area bio-security system capable of detecting and identifying airborne pathogens

o  Building field deployable systems to detect presence of pathogens in high footfall areas such as hospitals, mass transport hubs and entertainment venues

·     Extended medical application for CZT-based detectors from cancer diagnosis to cancer surgery through new R&D project with Adaptix Ltd and the University of Manchester

·      Received first commercial order from security screening OEM customer following achievement of highest level of European liquid explosive detection certification for cabin baggage for its scanner

·      Four new patents were filed and five were granted during the period

Current Trading and Outlook

·      Entered H2 2020/21 with extensive commercial pipeline and experiencing rebound in commercial activity

o  OEM customer that awarded $58.1m contract has commenced the installation, in multiple countries, of its medical imaging devices for the early detection of cardiovascular diseases. The rollout is expected to ramp-up from H2 2020/21

o  Two contract extensions for networked radiation detection technologies with a European government-related customer – a key step towards customer’s full wide-area system rollout

o  Secured new sector-leading global OEM customer for development of customised detectors for industrial applications; expected to transition into multi-year supply contract

·     Bio-security activity to accelerate with airport and hospital piloting of pathogen detection platform expected to commence in H2 2020/21

·   Increased trading and improved visibility gives confidence of significant revenue growth in H2 2020/21 as compared to H1 2020/21

Dr Arnab Basu, CEO of Kromek, said: “I am pleased to report that we finished the first half of 2020/21 in a stronger position than we entered the year, resulting from a considerable uptick in trading in the last two months of the period. We are starting to see a return to some normality in business patterns as our customers recommence their commercial activities. In particular, our largest medical OEM customer has begun shipping their next-generation scanner, which, as they continue to ramp up installations in the second half of the year, will enable the fulfilment of the long-term contract we have with them.

“We have also made substantial progress in the development – for DARPA and other national governments – of an automated bio-detection system capable of detecting airborne pathogens. In situ trials are expected to commence during the second half of the year and we believe this new market segment will be a significant contributor to revenues in the short- to medium-term.

“Looking ahead, the positive momentum seen in the last two months of the first half has continued into the second half of the year with increasing detector shipments. The renewed level of activity within our customer base is underpinned by the commercial traction Kromek has demonstrated in recent years in winning multiple, high-value contracts and we are excited about our new opportunities in the bio-security market. As a result, we expect to see significant growth in second half revenue compared with H1 2020/21 and the Board continues to look to the future with confidence and optimism.”

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