Final Results

Finsbury Emerging Biotechnology Tst 10 June 2005 NEWS RELEASE 10 June 2005 Preliminary results for the year ended 31 March 2005 Finsbury Emerging Biotechnology Trust PLC today announces preliminary results for the year ended 31 March 2005 (Unaudited) (Audited) 31 March 2005 31 March 2004 % change Shareholders' Funds (£'000) 30,538 33,617 (9.1) Net Asset Value per share 101.5p 111.7p (9.1) Share Price 91.3p 92.0p (0.8) Discount 10.0% 17.6% - NASDAQ Biotechnology Index (sterling adjusted) 344.3 423.4 (18.7) Lehman's UK and European Biotechnology Index (€) 175.8 170.5 3.1 FTSE All Share Index (total return) 2,704.5 2,340.2 15.6 For and on behalf of Close Finsbury Asset Management Limited - Company Secretary 10 June 2005 - ENDS - The following are attached: • Chairman's Statement • Consolidated Statement of Total Return • Balance Sheets of the Group and the Company • Consolidated Cash Flow Statement • Notes to the Financial Statements For further information please contact: Alastair Smith, Close Finsbury Asset Management Limited 020 7426 6240 Tracey Lago, Close Finsbury Asset Management Limited 020 7426 6219 Jo Stonier, Quill Communications 020 7763 6970 Chairman's Statement Performance During the year ended 31 March 2005 the Company's net asset value (NAV) per share declined from 111.7p to 101.5p, a fall of 9.1%. This compares with an increase in the FTSE All Share Index (total return) of 15.6% and an increase in the Lehman's UK and European Biotechnology Index of 3.1%. The Company's share price over the year decreased by 0.8% to 91.3p per share and the discount to NAV narrowed from 17.6% to 10.0%. Since the year end to 8 June 2005 (the latest practicable date) the NAV per share had decreased by 3.7% from 101.5p to 97.7p, and the mid market share price had increased by 1.3% over the same period from 91.3p to 92.5p, reflecting the loss in NAV and a narrowing in the share price discount from 10.0% to 5.3%. This compares to an increase in the FTSE All Share Index (total return) of 2.7% and a decrease in the Lehman's UK and European Biotechnology Index of 0.2%. Results and Dividend The total deficit for the year ended 31 March 2005 was 10.2p per share (2004: return of 46.6p). This was made up of a revenue deficit of 1.4p per share (2004: 1.5p) and a capital deficit of 8.8p per share (2004: return of 48.1p). No dividend is recommended in respect of the year ended 31 March 2005 (2004: nil). Recent Changes to your Company Various changes have recently been made to the Company. The changes were proposed in order to widen the geographic exposure and to change the nature of the companies in which the Company invests. In order to manage the Company's investment portfolio under the broadened investment remit, the Board proposed to appoint OrbiMed Capital, LLC ("OrbiMed") as Investment Adviser in place of Reabourne and Merlin; additionally the Company implemented an active discount management policy. I am pleased to confirm that all proposals put to the EGM held on 19 May 2005 to effect the proposed changes were approved and all changes came into effect on 19 May 2005. Investment Objective and Policy The Board believes that by widening the geographic universe in which the Company could invest Shareholders will benefit from increased investment opportunities in the biotechnology sector. At the time of launch it was believed that the relative importance of Europe in the global biotechnology market would increase, but this has not occurred: the US remains dominant, and biotechnology in the Far East is growing also. The Board therefore believes that a continuing focus on Europe alone would offer less attractive prospects to investors than a worldwide remit. By way of comparison, the European biotechnology industry was estimated to have a market capitalisation of approximately US$32 billion, whereas the North American industry was in excess of US$250 billion and the Far East approximately US$15 billion. As well as widening the geographic mandate, the Board proposed that the Company's investment focus should be on emerging biotechnology companies, though typically not on those at an early stage of development. The emerging biotechnology companies that the Company would invest in were likely to be companies with a market capitalisation of less than US$3 billion that had undergone an IPO but were, as yet, unprofitable. They would typically be focused on drug research and development, with their valuations driven by pipeline developments, clinical trial results and partnerships. This would not only widen the range of investments open to the Company but would also allow the portfolio to be diversified in a way that was not previously possible. The Company would seek to invest in those companies at discounted valuations as a result of their lack of profitability but benefit from a significant re-rating as a result of them achieving sustained profitability. Emerging biotechnology companies frequently benefit from increased investor exposure as a result of greater analyst research coverage and from a broader institutional investment base. Companies at Chairman's Statement (continued) this stage are likely to have sufficient financial resources and a more developed product than earlier stage companies, such that the risk of failure as a result of vulnerability to clinical development risk is reduced. The Company may often seek to exit its investment when the general investor community starts to value the newly profitable biotechnology company in excess of its anticipated future growth. Such companies also benefit from their products typically being at an earlier stage in their life cycle and therefore do not suffer as much threat of generic product entry as more mature products. The Board, therefore, sought Shareholder approval for a revised investment objective as follows: "The Company will seek capital appreciation through investment in the worldwide biotechnology industry principally by investing in emerging biotechnology companies." There would be no change in the Company's policy of investing no more than 15 per cent. of its gross assets in other listed investment companies (including listed investment trusts) nor will there be more than 15 per cent. of the investments of the Company invested in the securities of any one company or group. Investment Adviser As a result of the change to the investment objective, a review of the investment management arrangements was conducted in order to ensure that the Company benefited from the investment skills of a leading investment adviser with a proven track record of investing in the biotechnology and healthcare sector on a global basis. Accordingly, after having received presentations from a number of managers with expertise in this sector, the Board selected OrbiMed to replace the Company's existing two investment advisers. Close Finsbury Asset Management Limited ("CFAM") remains as the manager. OrbiMed is a leading independent speciality investment manager in this sector. It focuses exclusively on the biotechnology and healthcare sector and, as at 31 December 2004, had over US$5 billion in assets under management. Its investment expertise ranges across the entire enterprise life cycle from early, seed-stage investments through to very large listed pharmaceutical companies. Based in New York, OrbiMed is well placed to capitalise on the significant weighting of US biotechnology companies within the Company's proposed mandate. OrbiMed's investment advisory business was founded in 1989 by Sam Isaly and has grown to become a stable organisation with 19 investment professionals, most with postgraduate qualifications and significant investment experience. The OrbiMed team combines extensive scientific, medical, finance and operational expertise and has in aggregate over 200 years of investment experience. OrbiMed and CFAM are also the investment adviser and manager, respectively, to Finsbury Worldwide Pharmaceutical Trust PLC ("FWPT"). FWPT, which as at 31 March 2005 had gross assets of £253 million, invests worldwide in pharmaceutical and biotechnology companies but with the principal focus on large capitalisation global pharmaceutical companies, rather than that which is proposed for the Company. The Board believes that the proposed investment objective for the Company will be differentiated from, and complementary to, that of FWPT. Following Shareholder approval of the change of investment objective, the existing investment management agreement and investment advisory agreement were terminated. A new management agreement was entered into with CFAM and a new investment advisory agreement was entered into with CFAM and OrbiMed to take effect from the termination of the existing investment management and investment advisory agreements. Under the new investment management and investment advisory agreements the annual investment management and advisory fee was reduced from the current 1.25 per cent. per annum on gross assets, excluding the Merlin Fund L.P., to 1 per cent. per annum of net assets. The performance fee was also reduced from 20 per cent. to 16.5 per cent. of the out-performance of the investment portfolio over the benchmark index (proposed to be the NASDAQ Biotechnology Index). Chairman's Statement (continued) The performance fee will be calculated quarterly by comparing the cumulative performance of the investment portfolio with the cumulative performance of the benchmark index since the Reference Date. The fee will be payable based on the lower of the cumulative out-performance of the portfolio over the benchmark as at quarter end and the cumulative out-performance of the portfolio over the benchmark as at the corresponding quarter end date in the previous year. The effect of this is to ensure that the out-performance is sustained over the period of a year in order for a fee to become payable. In addition for a fee to become payable the lower of the cumulative fee amount as at the quarter end and that as at the corresponding quarter end in the previous year needs to be greater than the cumulative fees paid to date. The annual management fee will be split 0.65 percentage points to OrbiMed and 0.35 percentage points to CFAM. Of the 16.5 per cent. performance fee, 15 percentage points will be payable to OrbiMed and 1.5 percentage points to CFAM. The previous management and investment advisory agreements were terminable on 12 months' notice, notice; was given earlier this year, and payments were required to be made to the investment advisers based on the shortfall in the notice period actually given. The payments made amounted to £202,352 (excluding VAT) in aggregate. No termination fee was payable to the investment manager, CFAM, which made an allowance against its future management fees of £20,000 towards the costs of the proposals. Provision was made for these costs in the calculation of the Company's NAV. Change of Name Further to the approval of the change of investment objective and policy, the Board believed it was appropriate to change the Company's name to one that better reflected the changed investment remit. The Board therefore proposed that the Company's name be changed to 'Finsbury Emerging Biotechnology Trust PLC'. The change of name was approved and became effective on 19 May 2005. Discount Management Policy and Buyback Authority The Board is confident that, with the changed investment objective and the new investment adviser, the Company should be capable of outperforming the NASDAQ Biotechnology Index. The Board also believes that the proposed investment objective will prove attractive to new investors and provide the prospect of a sustained improvement in the rating of the Company's Shares. In order to support an improved rating in the Company's Shares, the Board intends to apply an active discount management policy, buying back Shares if the market price is at a discount greater than 6 per cent. to NAV. However, the making and timing of any Share buyback will be at the absolute discretion of the Board. In order to have full flexibility in operating the active discount management policy referred to above, the Board took the opportunity at the EGM on 19 May to renew the ability to buyback up to 14.99 per cent. of the issued share capital of the Company at a minimum price of 25 pence per share and a maximum price of an amount equal to 105 per cent. of the mid market price as defined in the Resolution, by seeking fresh Shareholder approval at the EGM. In order to keep this authority refreshed, a resolution will be put to the Annual General Meeting to seek Shareholder approval to renew this authority. Since the year end a total of 2,610,000 shares have been bought back for cancellation. Continuation Vote and Amendment of the Articles of Association In accordance with the package of proposals approved at the AGM in 2003 the Board was obliged to propose a continuation vote at the AGM later this year and under the Articles of Association the Board is obliged to propose a continuation vote at the Company's AGM in 2007. However, in order to provide OrbiMed with sufficient opportunity to implement the Company's new investment objective, Chairman's Statement (continued) the Board proposed to remove the requirement to hold a continuation vote this year and to amend the Articles of Association in order that the next continuation vote would be proposed at the AGM in 2010 and every five years thereafter. The proposal was also approved. Outlook Biotechnology valuations were weak in the first half of 2005 due in part to the withdrawal from the market of a prominent multiple sclerosis drug in late February. This unexpected event, coming so soon after Merck's highly-publicized withdrawal of its painkiller Vioxx, led investors to question whether the FDA might become more hesitant about approving new drugs. In recent weeks, we believe this cautious sentiment on the sector has lifted, driven by several positive clinical trial announcements in cancer, anticipation of a US government-sponsored prescription drug benefit in 2006, and the impending confirmation of a new FDA commissioner. Fundamental growth among the major biotechnology companies remains strong, and emerging biotechnology companies continue to develop a number of innovative drug candidates. We believe biotechnology share prices will continue their rebound into the second half of this year, historically the best performing quarters for the sector. A detailed investment review by Reabourne and Merlin for the year ended 31 March 2005 will be provided in the Annual Report. Additionally, a report from our new Investment Adviser, OrbiMed, on the future of the Company and the biotechnology industry will also be included. Annual General Meeting The Annual General Meeting of the Company will be held at 10 Crown Place, London EC2A 4FT, on Tuesday, 26 July 2005 at 12noon, and I hope as many shareholders as are able will attend. This will be an opportunity to meet the Board and to hear a presentation from OrbiMed Advisors, the new Investment Adviser to the Company. John Sclater Chairman Consolidated Statement of Total Return Incorporating the revenue account for the year ended 31 March 2005 (Unaudited) (Audited) Revenue Capital Total Revenue Capital Total 2005 2005 2005 2004 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 ------------------- ------- ------- ------- ------- ------- ------- (Losses)/gains on investments - (2,234) (2,234) - 14,906 14,906 Exchange losses - (31) (31) - (37) (37) on currency balances Income (see note 2) 95 - 95 97 - 97 Investment management fee (see note 3) - (391) (391) - (386) (386) Other expenses (508) - (508) (556) - (556) ------------------- ------- ------- ------- ------- ------- ------- Net (loss)/return before finance costs and taxation (413) (2,656) (3,069) (459) 14,483 14,024 ------------------- ------- Interest payable (8) - (8) - (6) (6) and similar charges ------------------- ------- ------- ------- ------- ------- ------- (Loss)/return on ordinary activities before taxation (421) (2,656) (3,077) (459) 14,477 14,018 Taxation on ordinary activities (2) - (2) (4) - (4) ------------------- ------- ------- ------- ------- ------- ------- (Loss)/return on ordinary activities after taxation (423) (2,656) (3,079) (463) 14,477 14,014 ------------------- ------- ------- ------- ---- ------- ------- ------- Transfer (from)/to reserves (423) (2,656) (3,079) (463) 14,477 14,014 ------------------- ------- ------- ------- ------- ------- ------- (Loss)/return per Ordinary share (see note 4) (1.4)p (8.8)p (10.2)p (1.5)p 48.1p 46.6p All revenue and capital items in the above statement derive from continuing operations. Balance Sheets of the Group and the Company as at 31 March 2005 (Unaudited) (Audited) (Unaudited) (Audited) Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 -------------------- -------- ------- --------- ------- Fixed assets - investments Shares in group - - - - undertaking Other investments 30,492 33,748 30,492 33,748 -------------------- -------- ------- --------- ------- Current Assets Debtors 39 42 46 42 Cash at bank 301 289 301 289 -------------------- -------- ------- --------- ------- 340 331 347 331 Creditors Amounts falling due within one year (294) (462) (301) (462) -------------------- -------- ------- --------- ------- Net current assets/(liabil ities) 46 (131) 46 (131) -------- ------- --------- ------- Net assets 30,538 33,617 30,538 33,617 -------------------- -------- ------- --------- ------- Capital and reserves Called up share capital 7,525 7,525 7,525 7,525 Capital reserve - realised 3,772 8,079 3,765 8,071 Capital reserve - unrealised (1,269) (2,920) (1,269) (2,920) Special reserve 21,679 21,679 21,679 21,679 Revenue reserve (1,169) (746) (1,162) (738) -------------------- -------- ------- --------- ------- Total shareholders' funds 30,538 33,617 30,538 33,617 -------------------- -------- ------- --------- ------- Net asset value per Ordinary 101.5p 111.7p 101.5p 111.7p share (see note 5) -------------------- -------- ------- --------- ------- Consolidated Cash Flow Statement For the year ended 31 March 2005 (Unaudited) (Audited) 2005 2004 £'000 £'000 -------------------- ----------- ----------- Net cash outflow from operating (705) (858) activities Servicing of finance Bank overdraft and loan interest (8) (6) paid Taxation Withholding tax recovered 1 1 Financial investment Purchases of investments (20,923) (15,713) Sales of investments 21,913 17,655 -------------------- ---- ----------- ----------- Net cash inflow from financial 990 1,942 investment -------------------- ----------- ----------- Net cash inflow before financing 278 1,079 Repayment of loans - (1,000) -------------------- ----------- ----------- Net cash outflow from financing - (1,000) -------------------- ----------- ----------- Increase in cash 278 79 -------------------- ----------- ----------- Reconciliation of net cash flow to movement in net funds Increase in cash as above 278 79 Cashflow from debt repayment - 1,000 Exchange movements (31) (37) -------------------- ----------- ----------- Movement in net funds 247 1,042 Net funds/(debt) at 1 April 54 (988) -------------------- ----------- ----------- Net funds at 31 March 301 54 -------------------- ----------- ----------- Notes to the Financial Statements 1 Revenue Account The revenue column of the Consolidated Statement of Total Return is the profit and loss account of the Group. 2 Income Income for the year was derived from the following sources: (Unaudited) (Audited) 2005 2004 £'000 £'000 ---------- ---------- Income from listed investments 54 45 Unfranked interest 8 5 Franked dividends 13 37 Overseas dividends ---------- ---------- 75 87 Other operating income 13 10 Interest receivable 7 - Other income --------------------- ---------- ---------- Total Income 95 97 3 Investment Management Fee (Unaudited) (Audited) Revenue Capital Total Revenue Capital Total 2005 2005 2005 2004 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 ----------- ------- ------- ------- ------- ------- ------- Periodic fee - 336 336 - 329 329 Irrecoverable VAT thereon - 55 55 - 57 57 ----------- ------- ------- ------- ------- ------- ------- Total - 391 391 - 386 386 4 (Loss)/return per Ordinary share Revenue loss per Ordinary share is based on the revenue loss attributable to equity shareholders of £423,000 (2003: £463,000 loss). Capital loss per Ordinary share is based on the capital loss attributable to equity shareholders of £2,656,000 (2004: £14,477,000 return). Both the revenue and the capital loss are based upon 30,100,000 Ordinary shares in issue throughout the year (2004: 30,100,000). Notes to the Financial Statements (continued) 5 Net Asset Value per Ordinary share The net asset value per Ordinary share is based on the net assets attributable to equity shareholders of £30,538,000 (2004: £33,617,000) and on 30,100,000 (2004: 30,100,000) Ordinary shares in issue at 31 March 2005. 6 Comparative information This preliminary statement is not the Company's statutory accounts. The above results for 2005 have been agreed with the Auditors and are an abridged version of the Company's full draft accounts, which have not yet been approved, audited or filed with the Registrar of Companies. They have been prepared using the same accounting policies as those adopted in the financial statements for the year ended 31 March 2004. The statutory accounts for the year end 31 March 2004 have been delivered to the Registrar of Companies and those for 31 March 2005 will be despatched to shareholders shortly. The 2004 accounts received an audit report, which was unqualified and did not contain statements under Section 237 (2) and (3) of the Companies Act 1985. Close Finsbury Asset Management Limited Company Secretary 10 June 2005 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

Companies

Biotech Growth Trust (The) (BIOG)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today