Prenetics Global Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; it does not provide a clear standalone Q4 financial results comparison. Financial statements are prepared under IFRS and audited by KPMG, which issued an unqualified opinion on the financial statements. Comparative results were re-presented to show exited businesses as discontinued operations.
Business context
Prenetics is a Cayman Islands holding company whose operations are primarily in Hong Kong and other markets outside mainland China. Its continuing businesses are consumer preventive genetic testing, principally CircleDNA, and precision oncology testing through ACT Genomics. In July 2023, it formed the 50%-owned, equity-accounted Insighta joint venture to develop multi-cancer early-detection tests. The company discontinued COVID-19 diagnostic services globally and other DNA-testing operations in EMEA during 2023.
Financial performance and liquidity
| Metric (US$ millions, except percentages) | FY2023 | FY2022 |
|---|---|---|
| Total revenue | 35.2 | 275.8 |
| Revenue from continuing operations | 21.7 | 13.2 |
| Continuing-operations gross profit / margin | 8.8 / 41% | 3.6 / 27% |
| Operating loss from continuing operations | (51.9) | (66.0) |
| Loss from continuing operations | (56.4) | (225.6) |
| Loss from discontinued operations | (8.4) | 35.1 profit |
| Net loss | (64.8) | (190.5) |
| Net cash from/(used in) operating activities | (13.8) | 14.5 |
| Cash and cash equivalents at year-end | 45.7 | 146.7 |
| Short-term bank deposits | 16.0 | 19.9 |
Total revenue fell about 87%, primarily as COVID-19 testing revenue largely disappeared: discontinued-operation revenue was $13.5 million in 2023 versus $262.6 million in 2022. Continuing revenue rose 65%, reflecting ACT precision-oncology testing revenue of $15.6 million, partly offset by a 53% decline in prevention revenue to $6.2 million.
Continuing gross margin improved to 41% from 27%. Administrative and other operating expenses declined to $41.4 million from $59.3 million, while selling and distribution expenses increased to $8.2 million and R&D expenses to $11.7 million. The company reported an impairment loss on goodwill of $3.9 million and a fair-value loss on financial assets of $7.1 million. It also wrote down $3.1 million of inventory.
Cash, cash equivalents and short-term deposits totaled approximately $61.7 million at year-end, down from $166.6 million. Investing cash outflow was $83.0 million, including the $80.0 million cash contribution to Insighta; financing cash outflow was $4.7 million. Total assets were $254.2 million, total liabilities $44.0 million and total equity $210.2 million.
The filing reports $2.4 million of lease liabilities and a $14.6 million current liability for a puttable instrument related to ACT’s non-controlling shareholders. It reports no trade-financing balance at year-end. The puttable instrument is potentially exercisable within twelve months, according to the filing.
Material changes, outlook and risks
- Portfolio transition: The exit from COVID-19 testing sharply reduced reported revenue and contributed to a discontinued-operation loss of $8.4 million, compared with $35.1 million of discontinued-operation profit in 2022.
- Investment and impairment: Prenetics contributed $80 million in cash and issued shares for its 50% Insighta interest. ACT-related goodwill was impaired by $3.9 million in 2023. Management’s valuation estimates for ACT goodwill rely on projected growth and discount-rate assumptions.
- Outlook: The company expects net losses for the foreseeable future and plans continued investment in R&D, product development and sales and marketing. It stated that existing cash should be sufficient for operating working capital and capital expenditure requirements for the foreseeable future, while also noting that additional capital may be needed for strategic initiatives. No specific revenue or earnings guidance was provided.
- Commercial and execution risks: Future performance depends on gaining customers and commercial acceptance for CircleDNA, ACTOnco and other tests, integrating ACT, and developing Insighta’s FRAGMA technology. Insighta completed a 500-participant liver-cancer case-control study; results were expected to be published in the second half of 2024, with a multi-country trial planned for 2024.
- Other significant risks: The filing highlights sensitive genetic-data privacy and cybersecurity obligations, regulatory approvals across markets, supplier dependence, competition, continued losses and financing needs. Although the company says it has no mainland China operations or revenue and believes no relevant PRC permissions are currently required, it warns that regulatory developments affecting Hong Kong could have adverse consequences.
- Listing and governance: Prenetics regained Nasdaq’s minimum-bid-price compliance in November 2023 after a 1-for-15 reverse stock split, but continued listing is not assured. The CEO’s Class B shares carry 20 votes each and represented approximately 74.8% of voting power as of April 2024. The company is a foreign private issuer and controlled company and intends to rely on specified Nasdaq governance exemptions.
Important facts for investors to verify
- Liquidity runway: reconcile the decline in cash and deposits, the 2023 operating cash outflow, planned spending and any expected financing needs.
- ACT put option: verify exercise terms, timing, potential cash obligations and whether the reported $14.6 million liability could change.
- Insighta: confirm clinical-study results, trial progress, development and commercialization milestones, and the joint venture’s future funding requirements.
- Revenue quality: assess recurring demand and margins in ACT diagnostics and CircleDNA following the COVID-19 exit, including the sustainability of the reported 41% continuing gross margin.
- Credit exposure: trade-receivable expected loss rates rose to 37.4% from 3.68%; check collections, customer concentration and the assumptions supporting the allowance.
- Share and warrant disclosures: verify post-split share counts and warrant terms. The filing’s cover-page share-count wording and financial-statement share table are not fully consistent; the stated warrant effective exercise price after the reverse split is $103.60 per share.
- Controls and audit coverage: confirm the status of internal-control assessments. The filing reports effective disclosure controls, but the independent auditor did not attest to internal control over financial reporting.