Final Results

RNS Number : 4860E

Oxford Biomedica PLC

10 April 2014

 



OXFORD BIOMEDICA PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

Oxford, UK - 10 April 2014: Oxford BioMedica plc ("Oxford BioMedica" or "the Company") (LSE: OXB), the leading gene-based biopharmaceutical company, today announces its preliminary results for the year ended 31 December 2013.

OPERATIONAL HIGHLIGHTS:

·      LentiVector^® platform becoming established as leading technology in gene and cell therapy

-       Providing development services and manufacturing clinical grade material to Novartis for personalised T-cell therapy CTL019 programme

-       GSK option for non-exclusive license under LentiVector^® platform technology patents for up to six orphan diseases

·      Key positive developments with ocular programmes

-       Pre-clinical proof-of-concept studies for Glaucoma-GT with Mayo Clinic reported positive outcome

-       Successful resolution of impurity issue that caused a voluntary and temporary suspension to clinical trials

·      Parkinson's disease candidate shows greater potency

-       Efficacy arm of OXB-102 non-clinical programme successfully completed, toxicology study continues

-       Analysis indicates OXB-102 at least five-fold more potent than ProSavin^®

·      Manufacturing capabilities integrated into commercial strategy

-       Starting to grow profitable revenues from manufacturing and development services

·      Significant awards to fund product and manufacturing development

-       £1.8 million in grant funding from UK Government's Technology Strategy Board to support next development phase of EncorStat^®

-       £7.1 million grant and loan package awarded by Government's Advanced Manufacturing Supply Chain Initiative

·      5T4 tumour antigen technology developed further

-       Three investigator-led Phase II TroVax^® studies now underway

-       US$1 million milestone payment received from Pfizer, triggered by entry into human clinical trials

·      Post period-end

-       ProSavin^® Phase I/II study results published in The Lancet

-       Regained rights to EncorStat^® in exchange for licensing broader indications to Sanofi for StarGen™ and UshStat^®

-       Completed patient recruitment into RetinoStat^® Phase I trial

FINANCIAL HIGHLIGHTS¹:

·      Revenue of £5.4 million (2012: £7.8 Million)

·      Research & development costs of £13.8million (2012: £14.0 million)

·      Loss for the year of £12.8 million (2012: £10.5 million)

·      Net cash burn² of £11.9 million (2012: £10.5 million)

·      £5 million loan facility agreed with our largest shareholder Vulpes Life Sciences Fund

·      Net cash³ of £2.2 million (2012: £14.1 million)

¹ Audited financial results

² Net cash used in operating activities plus sales and purchases of non-current assets and interest received

³ Cash, cash equivalents and available for sale investments

John Dawson, Chief Executive Officer at Oxford BioMedica, said: "2013 was a challenging year but Oxford BioMedica operationally is now in its strongest position ever. The Company made solid progress throughout the pipeline, notwithstanding the challenge we faced when we voluntarily suspended our clinical studies for five months. Our platform is now truly unique comprising LentiVector^® gene delivery technology know-how, IP and manufacturing and it underpins our own product candidate programmes. 

"The growing income from our development and manufacturing activities alongside our in-house development pipeline development provides us with a leading position in the delivery of gene therapy solutions. Building upon the deals signed with GSK and Novartis in 2013, we plan to make significant strides towards developing our emerging revenue generating business opportunity by providing high-margin development and manufacturing services that will, over time, allow us to reduce our cash burn significantly.

"We will build on these substantial operational achievements in 2014 and are excited about the current buoyancy in our sector which is providing us with confidence that we will be able to deliver value back to shareholders." 

- Ends -

Conference call for analysts

An analyst briefing will be held at 9:30am GMT on 10 April 2014 at the offices of Consilium Strategic Communications, 41 Lothbury, London, EC2R 7HG. There will be a simultaneous live conference call and the presentation will be available on the Company's website at www.oxfordbiomedica.co.uk.

Please visit the website approximately 10 minutes before the conference call, at 9.30am GMT, to download the presentation slides. Conference call details:

Participant dial-in: 08006940257

International dial-in: [phone]

Participant code: 25089507

An audio replay file will be made available shortly afterwards via the Company's website: www.oxfordbiomedica.co.uk.

For further information, please contact:
Oxford BioMedica plc: John Dawson, Chief Executive Officer Tim Watts, Chief Financial Officer	Tel: [phone]
Media Enquiries: Mary-Jane Elliott/Emma Thompson/Matthew Neal Consilium Strategic Communications	Tel: [phone]

Disclaimer

This press release contains "forward-looking statements", including statements about the discovery, development and commercialisation of products.  Various risks may cause Oxford BioMedica's actual results to differ materially from those expressed or implied by the forward-looking statements, including adverse results in clinical development programmes; failure to obtain patent protection for inventions; commercial limitations imposed by patents owned or controlled by third parties; dependence upon strategic alliance partners to develop and commercialise products and services; difficulties or delays in obtaining regulatory approvals and services resulting from development efforts; the requirement for substantial funding to conduct research and development and to expand commercialisation activities; and product initiatives by competitors.  As a result of these factors, prospective investors are cautioned not to rely on any forward-looking statements.  Oxford BioMedica disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Note to editors

About Oxford BioMedica^®

Oxford BioMedica plc (LSE: OXB) is a biopharmaceutical company developing innovative gene-based medicines and therapeutic vaccines that aim to improve the lives of patients with high unmet medical needs. The Company's technology platform includes a highly efficient LentiVector^® gene delivery system, which has specific advantages for targeting diseases of the central nervous system and the eye; and a unique tumour antigen (5T4), which is an ideal target for anti-cancer therapy. Through in-house and collaborative research, Oxford BioMedica has a broad pipeline with current partners and licensees including Sanofi, Pfizer, Novartis, GlaxoSmithKline, MolMed, Sigma-Aldrich, Biogen Idec, Emergent BioSolutions, ImaginAb and Immune Design Corp. Further information is available at www.oxfordbiomedica.co.uk and www.oxbsolutions.co.uk.

CHAIRMAN'S STATEMENT

"2013 at Oxford BioMedica saw challenges as well as great operational progress and we continue to strive towards achieving our goal of becoming a leading and financially self-sustaining gene therapy company"

Gene therapy developments

In my previous Chairman's message, I said that we were seeing greater interest than ever in gene therapy and 2013 has seen a continuation of this trend with a step up in both financing and M&A activity involving gene therapy companies and projects. Much of the financing was driven from the USA and the NASDAQ Biotechnology Index (NBI) that rose by 60% during 2013.

2013 also saw two major developments from Government and regulatory sectors that are likely to be beneficial for the development of gene therapy products such as ours.  The Food and Drug Administration (FDA) published its draft guidance on the Breakthrough Therapy Designation, which was created under s902 of the 2012 FDA Safety and Innovation Act (FDASIA). This is potentially very significant and positive for the development of drugs for conditions of unmet or poorly met medical needs. In addition, recently in 2014, the UK Government announced an Early Access to Medicines scheme. We will follow these developments closely.

Oxford BioMedica developments

In 2013, we turned some of this growing interest into reality. Besides our long-term relationship with Sanofi, we signed deals with two other major pharma companies: Novartis and GSK. We are providing Novartis with process development services and manufacturing clinical grade material for its CTL019 programme using our LentiVector^® gene delivery technology. We granted GSK an option to a non-exclusive license under our LentiVector^® platform technology patents for the development and commercialisation of up to six product candidates targeting rare orphan diseases.

We also received support for our manufacturing strategy from the UK Government's Advanced Manufacturing Supply Chain Initiative (AMSCI), which awarded us a £7.1 million package of grant and loan funding to expand our capacity, improve our manufacturing processes and develop a centre of excellence in Oxford for the specialist manufacture of ATMPs.  We believe that these relationships are a clear validation of our platform technology and expertise.

We are steadily building a portfolio of gene therapy product candidates. We currently have seven named candidates ranging from StarGen^™ and UshStat^®, which are in Phase I/IIa studies and already licensed to Sanofi; through to MoNuDin^®, which is still in early pre-clinical studies. We are also exploring a number of other concepts which could be brought through into pre-clinical development in future.

In June 2013 we voluntarily paused recruitment into our clinical studies as a precautionary measure while we investigated a potential impurity. I am immensely proud of our employees who investigated this issue. They were able to demonstrate that there were no safety concerns arising and gained agreement within five months from both the FDA and the French regulatory agency, ANSM, to resume recruitment into the clinical studies. Once again, this demonstrates the quality of our people.

We aim to become a financial self-sustaining company with multiple sources of revenue

We continue to work towards building a financially self-sustaining company, based on our proprietary LentiVector^® platform, targeting high-value, fast-growing markets such as ophthalmology. We see potential for several sources of revenue, as follows: 1) partnering or licensing out our existing product portfolio; 2) developing new product opportunities that can be partnered or licensed in the future; 3) providing specialist development and/or manufacturing services to third parties; and 4) our intellectual property. In addition, the Board will continue to evaluate potential complementary acquisitions as a means to secure commercial success.

Financing

Financing remains a challenge. We are pleased to have the continued support of Vulpes, our largest shareholder, and we saw this in the form of the loan facility that we announced in November 2013.

Going concern

The Group is continuing to develop its product pipeline and absorbs cash in doing so. Although it is starting to generate revenues from selling development and manufacturing services, these currently only cover a small portion of the Group's cost base. The Directors estimate that the cash held by the Group including known receivables and future funding available under the Vulpes loan facility will be sufficient to support the current level of activities into the third quarter of 2014. This estimate does not include the benefit of any upfront receipts from licence deals, including the potential option fee which would be payable by Sanofi should they exercise their option over RetinoStat^®. The Directors also continue to explore other sources of finance available to the Group. Taking account of these together the Directors have confidence that they will be able to secure sufficient cash inflows for the Group to continue its activities for the foreseeable future, being not less than 12 months from the date of these financial statements. They have therefore prepared the financial statements on a going concern basis.

These circumstances nonetheless represent a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. Should the Group be unable to obtain further funds, adjustments would be required to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify fixed assets as current assets.

In conclusion

Despite some significant challenges, last year saw great operational progress and the dedication of the staff at Oxford BioMedica has been exemplary. The Board is cautiously confident that the current year will bring further significant success and take us closer to achieving our goal of financial self-sufficiency.

Nick Rodgers

Chairman

CHIEF EXECUTIVE'S STATEMENT

"I believe that during 2013 and the first three months of 2014, the Company's position has strengthened considerably, despite the challenges presented by the temporary suspension of our clinical studies and the difficult financing environment.

"During 2013 we identified a potential impurity in our clinical study material through the use of highly sensitive analytical methods designed to enhance the characterisation of our products. I was delighted by the way our employees responded to this challenge by identifying the nature of the impurity and communicating very effectively with the relevant regulatory authorities and other big stakeholders.

"Although we faced and overcame the substantial challenge of having to suspend our clinical studies for five months, our ocular clinical studies have continued to progress. We are now working to move OXB-102 and EncorStat^® into Phase I studies and we are following these up with two pre-clinical product opportunities.

"Our collaboration with Novartis was a major milestone for the Company as it highlighted the potential we have to generate revenues by providing services to third parties and reduce our cash burn. In 2013 we were awarded grants and loans that will be a major support in advancing EncorStat^® and strengthening our manufacturing and supply chain capabilities."

Portfolio progress

We are building an extensive portfolio of gene therapy products at various stages of development. StarGen^™ and UshStat^® are already in Phase I/IIa studies and are now licensed to Sanofi. Sanofi will take these products forward and we will be entitled to development milestones and, in due course, royalties on sales.

Following the resumption of the clinical studies, we have now completed the recruitment of the 21 patients required for the RetinoStat^® Phase I study. Indicative results from the study are expected towards the end of 2014 and I look forward to reviewing these with Sanofi.  As part of the StarGen^™ and UshStat^® licence negotiations with Sanofi, I was very pleased to be able to negotiate the return to us of full rights to EncorStat^® in exchange for granting Sanofi wider indication rights to StarGen^™ and UshStat^®.

I believe that niche ocular indications have significant market value. Therefore, I am excited by the opportunity to execute our plans and to progress EncorStat^® into Phase I. We have been awarded a £1.8 million grant for EncorStat^® which will fund a significant portion of this programme.

OXB-102, the follow-on to Prosavin^®, has steadily progressed through pre-clinical studies in 2013 and these will be completed in 2014. We are already working on the best way to take this product into clinical studies. Glaucoma-GT and MoNuDin^® are both also progressing satisfactorily through pre-clinical studies and I hope that these could be ready to enter Phase I studies in two to three years.

Proprietary manufacturing

In 2013 we were able to build on the GMP qualification in 2012 of our manufacturing facilities by starting to manufacture for our own product development needs as well as for third parties. We were delighted to enter a collaboration agreement with Novartis in which we are providing process development services and also manufacturing clinical-grade material for its exciting CTL019 project. I see this as the start of building a profitable business that will generate revenues from third parties and help us to reduce our net cash burn.

As well as the Novartis contract, we were also delighted to be awarded a £7.1 million package of grant and loan funding from the UK Government that will allow us to expand the capacity of our manufacturing facility and to develop better manufacturing processes to increase volume output and yield and so start to reduce the manufacturing cost per patient dose.

5T4 antigen technology platform

There are now three investigator-led Phase II studies for TroVax^® underway in the UK. All of these studies are using a biomarker to select patients for the studies. We are contributing clinical study material to these studies. Other expenditure on the studies is modest.  I was delighted that we were able to announce in August that we had received a US$1 million development milestone from Pfizer, which was triggered by the initiation of a clinical study for its 5T4-targeted antibody therapy.

Partnering initiative

Our business model is based on the assumption that we will need to partner or out-license our products at some point in their development. Therefore we regularly attend business development meetings where we identify potential partners for our unlicensed products. However, to maximise the return to shareholders, I believe it is in our interests to do this later rather than earlier in the development process. 

We also meet companies working with lentiviral vectors to discuss their need for licenses to use our IP. In December, we announced that we have granted GSK an option to license our technology for up to six product candidates targeting rare orphan diseases.

Outlook

In 2014, we will build on the substantial achievements of 2013. Our gene therapy products should all continue to make progress. In particular, the initial RetinoStat^® Phase I results will become available towards the end of the year. I remain confident that RetinoStat^® is a highly attractive product candidate which will either be licensed to Sanofi or to another company.

We also plan to make significant strides towards developing our emerging revenue generating business opportunity by providing high-margin development and manufacturing services that will, over time, allow us to reduce our cash burn significantly.

John Dawson

Chief Executive Officer 

OPERATIONAL REVIEW

Strategy in action

Our strategy is to build and grow a financially self-sustaining company by using our proprietary LentiVector^® technology platform to target high-value, rapidly expanding markets such as ophthalmology. Our business has evolved from being a research-driven organisation into a more commercially focused company.

Our strategic approach for the next two to three years is underpinned by three core objectives:

- Progress product candidates to the next critical decision point

- Assess the optimum point at which to enter into partnerships

- Build OXB Solutions into a profitable business and reduce the group's cash burn.

Currently, we have seven named product candidates at different stages of development, from the pre-clinical phase to Phase I/IIa. StarGen™ and UshStat^® are already licensed by Sanofi. RetinoStat^®, now approaching the end of Phase I, is under option with Sanofi. EncorStat^® and OXB-102 will soon enter Phase I while Glaucoma-GT and MoNuDin^® are pre-clinical. We aim to progress each product through development as fast as possible.

As each product progresses into the next development phase, its value rises incrementally. Accordingly, we seek funding sources that allow us to keep control over each product for as long as possible. At the optimum point, we then select the most suitable partner to help us complete its development.

Progress against strategy

Gene therapy

Ophthalmology product candidates

In the first few months of the 2013 financial year, we made positive progress with patient recruitment into the three active clinical studies for RetinoStat^®, StarGen^™ and UshStat^®. In April 2013, the Drug Safety Monitoring Board for StarGen^™ gave the drug a positive safety review at the end of the third patient cohort. At this point, 12 patients had been treated.

Unfortunately, in June 2013 we had to voluntarily pause recruitment into these studies as a precautionary measure while we investigated a potential impurity that we had detected in the clinical trial material. Over the next five months, we analysed the impurity, which we were able to identify as highly fragmented DNA derived from foetal bovine serum, which is the most widely-used growth supplement in the industry for cell culture media. Following the submission of a comprehensive data package to the FDA and France's ANSM, we received agreement in October from the US and French regulatory authorities to resume recruitment into the clinical trials using the existing clinical trial material. In all three studies, patient dosing has resumed.

We have now completed the recruitment of the 21 patients required for the RetinoStat^® Phase I study which now moves into the patient follow-up phase. We hope that Sanofi will decide to exercise its option to enter into a development and commercialisation license agreement for which we would receive an undisclosed option fee, but, we are confident that there are other companies that would be interested in licensing a Phase II-ready product candidate for a major indication such as wet age-related macular degeneration (wet AMD).

In February 2014, we announced that we had completed and signed the development and commercialisation licence agreement covering StarGen^™ and UshStat^® with Sanofi. Under this licence, we will be entitled to undisclosed future development milestone payments and royalties.

We also announced that, in return for broadening the indications to those products, we negotiated the return of Encorstat^®which was originally included in our 2009 collaboration with Sanofi. We are excited about regaining control of EncorStat^®. It is a gene-based, tissue-engineered product for preventing corneal graft rejection. EncorStat^® uses our LentiVector^® platform technology to deliver endostatin and angiostatin ex vivo to donor corneas before transplant to block vascularisation and prevent graft rejection.

Although corneas are amongst the most successfully transplanted tissues, with over 100,000 grafts performed annually worldwide, a significant number of grafts are rejected due to vascularisation. The prognosis in these patients can be so poor that they are not offered a replacement transplant and are left blind. Given the obvious benefits to both patients and healthcare systems, we estimate that the potential annual revenue from EncorStat^® could reach US$60 million.

In November 2013, we confirmed that we had been awarded a grant of £1.8 million by the UK's innovation agency, the Technology Strategy Board (TSB), under the 2013 Supporting Regenerative Medicines and Cell Therapies competition. This grant will make a significant contribution to the costs of the EncorStat^® Phase I/IIa clinical study which we are now actively planning.

Glaucoma

Glaucoma-GT is a gene-based treatment for chronic glaucoma. Chronic glaucoma results from a partial blockage within the eye's trabecular meshwork, the tissue primarily responsible for draining the eye's internal fluid, aqueous humour. As the aqueous humour builds up, it causes increased intraocular pressure (IOP), which can damage the optic nerve and lead to premature patches of vision loss or, in some cases, blindness.

Current treatments are topically-applied drugs. These suffer from disadvantages such as wash-out from the eye and poor compliance, which can lead to disease progression and the need for surgery in 10-20% of patients. Surgery is costly, only partially effective and has high failure rates, often necessitating repeat procedures.

Glaucoma-GT uses the LentiVector^® platform technology in a one-off treatment that delivers two genes − a COX-2 gene and a PGF-2a receptor gene − to the front of the eye, leading to a constant, steady-state production of prostaglandins to reduce IOP leading to long-term therapy. We estimate that five years after its launch, Glaucoma-GT could be generating annual sales approaching US$200 million.

In November 2013, we announced that the Glaucoma-GT pre-clinical programme conducted in collaboration with the Mayo Clinic in the USA had demonstrated gene expression maintained out to five months. We are now planning to continue the pre-clinical programme by generating the key manufacturing development, safety and efficacy data needed to progress this project to clinical evaluation.

Central Nervous System (CNS) product candidates

ProSavin®/OXB-102

Parkinson's disease (PD) is a progressive, degenerative condition of the CNS with a rising incidence in an ageing population caused by the degeneration of dopamine-producing nerve cells in the brain. The early stages of the disease are effectively managed by oral dopaminergic treatments.

But after five years around half of patients develop motor problems such as dyskinesias. Treatment options for mid-to-late stage PD patients include deep brain stimulation and apomorphine pumps that are costly and require regular calibration or replacement.

ProSavin^®/OXB-102 use our LentiVector^® gene delivery technology to deliver the genes for three enzymes that are required for dopamine synthesis. The product is administered locally to the region of the brain called the striatum, converting cells into a replacement dopamine factory within the brain, replacing the patient's lost source of the neurotransmitter.

In January 2014, The Lancet published online results from the ProSavin^® Phase I/II study in patients with advanced PD, previously reported in April 2012. According to the key findings published in The Lancet, ProSavin^® has demonstrated a favourable safety profile and a statistically significant improvement in motor function relative to baseline at six and 12 months post-treatment. We are pleased that our research was recognised by such a highly regarded peer-reviewed journal as The Lancet, highlighting the significance of our findings.

Since April 2012, we have been evaluating a more potent product, which we are calling OXB-102, to ensure the greatest chance of success in future randomised Phase II studies by increasing the benefit for patients. We initiated a non-clinical programme in 2012 to evaluate the efficacious dose range of OXB-102 using the gold standard MPTP model of PD.

The efficacy arm of this programme successfully completed in the third quarter of 2013, with Positron Emission Tomography (PET) data analysis demonstrating direct expression of transgenes and that expression following administration of OXB-102 increases relative to ProSavin^®. Behavioural and movement analysis also indicated that OXB-102 is at least five times more potent than ProSavin^®. These data are encouraging and we are currently completing a non-clinical toxicology and bio-distribution study which we anticipate will conclude during the first half of 2014.

Anticipating a successful outcome of the OXB-102 pre-clinical work, we are now evaluating the best way to take it forward into clinical studies. It is projected that there will be 2.8 million patients with PD in the USA, Japan and the five largest European markets by 2021 (source: Datamonitor Epidemiology, April 2012). We believe there is a substantial sales potential for OXB-102 as it represents a significant leap forward from existing treatment strategies.

ALS (Amyotrophic Lateral Sclerosis)

Meanwhile, the pre-clinical development of MoNuDin^® is supported by the UK Motor Neurone Disease Association (MNDA).  Although it is one of the most common adult onset neurodegenerative diseases, motor neurone disease has a high unmet need.  Amyotrophic Lateral Sclerosis (ALS), often referred to as Lou Gehrig's disease, is the most prevalent type of motor neurone disease. In the US, there are an estimated 30,000 patients with ALS and nearly 6,000 new cases are diagnosed annually (source: ALS Association).

In collaboration with VIB/University of Leuven, we are exploring novel approaches to treating ALS. One of the major hurdles to treating motor neurone disease is ensuring that therapeutic agents are delivered to the relevant action site in the brain and spinal cord. An administration route directly into the cerebrospinal fluid bathing the spinal cord has been established. Two forms of vascular endothelial growth factor (VEGF) have since been evaluated using this method.

If MoNuDin^® proves to be an effective neuroprotective treatment that can slow or arrest injury to patients' motor neurones, it would have compelling competitive advantages.

Research concepts

During the second half of 2013, we conducted an exercise to identify and screen potential concepts for lentiviral vector product candidates which might be suitable for bringing into pre-clinical development. As a result of this exercise, we have added several ideas to those we were already exploring. Many of these ideas, but not all, would be for ophthalmology indications.

Other assets

5T4 Tumour Antigen Platform

Oxford BioMedica's proprietary 5T4 antigen is a unique protein found on most common types of solid cancer. Given its restricted expression in normal tissues and its high prevalence on the surface of both primary and metastatic cancerous cells, it is potentially a valuable target for novel anti-cancer interventions.

TroVax^® is a therapeutic vaccine that stimulates the immune system to destroy cancerous cells expressing the 5T4 tumour antigen, which is present on most solid tumours. Using a simple blood test, we have identified a biomarker that predicts both the magnitude of the induced 5T4 antibody response and treatment benefit. This enables us to identify those patients who are most likely to benefit from treatment with TroVax^®.

Led by academic collaborators, three sponsored Phase II TroVax^® studies are currently underway in the UK in colorectal and ovarian cancers and mesothelioma. All three studies are using the biomarker to select patients for the studies. The studies are expected to conclude during 2015/2016. Our expenditure on these studies is modest and relates primarily to the supply of study material.

The 5T4-targeted antibody therapy, licensed to Pfizer, is an antibody drug conjugate which binds to the 5T4 antigen on the surface of cancerous cells. Once bound, the complex is internalised by the tumour cell, the anti-cancer agent is released from the antibody, and the free drug kills the cancerous cell. In August 2013, we received a US$1 million milestone payment from Pfizer, triggered by the entry of Pfizer's product into human clinical trials. The potential value of this licence is up to US$28 million compromising upfront payments, option fees and milestones.

In 2012 ImaginAb acquired an exclusive worldwide licence for commercialisation of an in vivo 5T4-based imaging diagnostic. Oxford BioMedica could receive up to US$4 million in future development milestone payments in addition to royalties on product sales.  

Intellectual Property and Technology Licensing

The LentiVector^® platform technology is protected by a comprehensive patent portfolio. These patents cover the use of minimal lentiviral vectors, which are essential for clinical applications, and also a number of important safety features. The lives of these patents range from 2017 to 2023. In December 2013, we signed an agreement with GlaxoSmithKline (GSK) that grants GSK an option to a non-exclusive licence under Oxford BioMedica's LentiVector^® platform technology patents for developing and commercialising up to six product candidates targeting rare orphan diseases. Financial terms were not disclosed. We have regular discussions with other companies working with lenti viruses.

Oxford BioMedica could also potentially benefit from future milestone payments and royalties from several other non-LentiVector^® licensing agreements with partners who are developing mid-to-late stage products including MolMed, Bavarian Nordic and Emergent BioSolutions.

OXB Solutions

Development and manufacturing services

2013 saw a significant development in our business model. In 2012, the UK Medicines and Healthcare products Regulatory Agency (MHRA) approved our manufacturing facility to manufacture bulk drug material for Investigational Medicinal Products (IMPs). This has broadened our range of capabilities for our in-house development projects − and which we can offer to partners and collaborators to help with their programmes.

We are increasingly recognised as having a unique array of skills and expertise in the Advanced Therapy Medicinal Products (ATMP) arena. In September 2013, we were delighted to be awarded a combination of grant and loan funding worth £7.1 million as lead member of a consortium we have established to support us in becoming a world-leader in ATMP manufacture and supply chain expertise. The award was made under the UK Government's Advanced Manufacturing Supply Chain Initiative (AMSCI) and recognises the potential we can offer.

Oxford BioMedica, supported by the consortium, will expand its proprietary manufacturing facility in Oxford to incorporate a third production suite and a state-of-the-art fill and finish operation; and develop our capability in serum-free, non-adherent manufacturing techniques. The overall project cost is estimated at £9.2 million and is expected to take two years to complete. The project will bring significant benefits to our clinical programmes and further strengthens our position as a partner of choice for companies seeking manufacturing and process development solutions for gene-based ATMPs.

Further evidence of third party recognition of our capabilities came in May 2013, when we announced a collaboration with Novartis to provide process development services and manufacture clinical grade material using our LentiVector^® gene delivery technology. Under the contract we are responsible for manufacturing several batches of a lentiviral vector encoding CTL019 technology.

Novartis will use this vector to transduce patients' immune cells (T-cells) in an ex vivo process before they are re-infused into patients. CTL019 targets a protein called CD19 that is associated with a number of B-cell malignancies including chronic lymphocytic leukaemia, B-cell acute lymphocytic leukaemia and diffuse large B-cell lymphoma.

During 2013, we also continued to perform work for Immune Design under the master services agreement signed in 2012.

FINANCIAL REVIEW

"2013 marked an important step in the evolution of Oxford BioMedica with the emergence of new and profitable revenues that could potentially develop over the next two to three years into a significant and sustainable cash contributor to offset our cash burn."

Financial Overview

In recent years, our revenues have been almost entirely derived from the ocular product collaboration with Sanofi. The accounting recognition of the US$26 million received upfront in 2009 and the reimbursement of research and development (R&D) expenditure − primarily the out-licensed spend with third parties − provided most of these revenues. In 2013, these items were significantly lower than they were in previous years as the collaboration begins to reach its conclusion.

But they are now being replaced by new, profitable revenues derived from providing services to third parties. These new revenues have an important future role to play in reducing the net cash burn from our platform and infrastructure costs.

Key financial performance indicators

-       Profit-generating revenues £2.6 million (2012: £0.1 million)

-       Cash burn (net cash used in/generated from operations plus sales and purchases of non-current assets and interest received) £11.9 million (2012: £10.5 million).

-       Cash balance (total of cash, cash equivalents and current financial investments) £2.2 million (£14.1 million at the start of the year)

-       Headcount 106 employees (81 at the start of the year)

Revenue £5.4 million (2012: £7.7 Million)

Although revenues dropped, there has been a significant change in their composition. In 2012, 44% (£3.4 million) of revenue was the non-cash recognition of revenue deferred from the US$26 million upfront payment received from Sanofi in 2009; 25% (£1.9 million) came from the reimbursement of R&D spent on the ocular products, mainly the pass-through of spend incurred with third parties; and a further 25% (£1.9 million) came from the one-off exercise by Sanofi of its option over StarGen^™ and UshStat^®; leaving only 6% (£0.5 million) of revenue of a recurring nature.

By contrast, in 2013, only 15% (£0.8 million) of revenue was represented by the non-cash recognition of deferred revenue; 17% (£0.9 million) from the reimbursement of R&D pass-through costs; and 12% (£0.6 million) from Pfizer's one-off milestone payment. This left 56% (£3.0 million) of 2013 revenues derived from recurring sources, mainly the provision of manufacturing and development services to Novartis and other third parties.

While the cash revenues in 2013 (£4.6 million) and 2012 (£4.3 million) are similar, the recurring element generated from services and license receipts is much higher in 2013 (£3.0 million compared with £0.5 million).

Cost of sales £1.1 million (2012: £0.7 million)

As the composition of revenues has changed since 2012, so has the cost of sales composition. Previously, the cost of sales consisted entirely of royalties payable by us to third party licensors. The £0.7 million in 2012 comprised the recognition of royalties which were paid in 2009 when we received the upfront payment from Sanofi; and those paid in 2012 on the option fees we received from Sanofi in respect of StarGen^™ and UshStat^®. In 2013, the royalties component of the cost of sales was £0.1 million while £1.0 million consisted of the cost of manufacturing the batches manufactured and sold to Novartis. The cost of manufacture includes raw materials, direct and indirect labour costs and overheads incurred in manufacture.

Gross profit £4.2 million (2012: £7.1 million)

The £2.9 million fall in gross profit is due to the reduction of £2.6 million in non-cash Sanofi deferred revenue; the £1.3 million lower one-off option and milestone receipts; and the £1.0 million lower R&D pass-through cost reimbursement, partially offset by £1.6 million gross profit from the fee-for-service activities.

Research & development costs £13.8million (2012: £14.0 million)

R&D costs overall were slightly lower in 2013 than in 2012. This is mainly due to lower external spend on R&D projects of £2.8 million in 2013 compared with £3.8 million in 2012, partially offset by higher in-house costs of £10.6 million, compared with £9.8 million in 2012. Amortisation of intangible assets was unchanged at £0.4 million.

The reduction in external project spend came mainly from the Sanofi collaboration products on which £1.3 million was spent, compared with £1.9 million in 2012. £0.7 million in aggregate was incurred in 2013 on ProSavin^®/OXB-102, Glaucoma-GT, MoNuDin^® and other new product opportunities, and the TroVax^® Phase II studies. The remaining £0.8 million was incurred on a number of activities, including the resolution of the impurity issue

In-house R&D costs include all the relevant staff and facility costs, R&D consumables, IP costs and depreciation of R&D physical assets. However, they exclude that portion of costs which are allocated to cost of sales because they relate directly to the manufacturing of product for sale.

Administration expenses £3.4 million (2012: £3.6 million)

Administration costs of £3.4 million were £0.2 million lower than in 2012 which included a one-off amount of £0.4 million professional fees on a confidential corporate project.

Loss for the year £12.8 million (2012: £10.5 million)

The operating loss for the year of £12.8 million was £2.3 million higher than in 2012. This is explained by the £2.9 million fall on gross profit offset by £0.5 million lower costs. Finance income was £0.1 million lower in 2013 due to lower average cash balances, but the tax credit at £1.7 million was £0.1 million higher than in 2012. This means that the after-tax loss for the year of £11.1 million was £2.4 million greater than the £8.7 million loss in 2012.

Cash flow

The cash burn in 2013 was £11.9 million, £1.4 million higher than the £10.5 million in 2012. Although the loss before tax in 2013 was £2.3 million higher than in 2012, this is almost entirely explained by the reduction in non-cash revenue. The increased cash burn is largely explained by an increase of £1.6 million in working capital outflows, notably including £0.7 million in inventory, both raw materials and work-in-progress, arising for the first time because of our manufacturing contract with Novartis.

The operating loss for the year, as described above, was £12.8 million. After adjusting for non-cash items such as depreciation and amortisation, the charge for share-based payments and working capital, the cash used in operations was £13.0 million. We incurred £0.8 million expenditure on tangible fixed assets, mainly on manufacturing equipment, and a further £0.1 million on intangible assets.

During the year we received £2.0 million in tax credits, which included the UK R&D Tax Credit tax credit for 2012; the residual element of the tax credit for 2011; and also a small credit arising from BioMedica Inc, our US subsidiary, which ceased trading in 2012. The net result was a cash burn of £11.9 million in 2013. As we started 2013 with £14.1 million cash and cash equivalents, we finished the year with £2.2 million.

Headcount

The increase in headcount during 2013 is explained by the need to fully staff the manufacturing operations to support the Novartis contract including manufacturing, quality control and analytical staff.

Financial outlook

In 2013, we made a promising start towards developing a more commercial focus by bringing in £2.6 million of profitable revenues from providing manufacturing and development services to third parties. We intend to develop this activity further in 2014 and to create a growing revenue stream to offset partially the cost of our operations. We also have opportunities to bring in license revenues, in particular: the significant option fee should Sanofi exercise its option over RetinoStat^®.

On 6 January 2014, shareholders approved a loan facility arranged with our largest shareholder, Vulpes Life Sciences Fund, which has provided some operational flexibility in the first half of 2014 while we develop these opportunities.

Going concern

The Directors' assessment of the Company's going concern status is set out in the Chairman's Statement on page 4 and in Note 1 to the Preliminary Financial Information on page 19.

Tim Watts

Chief Financial Officer 

Consolidated statement of comprehensive income

for the year ended 31 December 2013

				2013	2012
Continuing operations	Notes			Total £'000	Total £'000
Revenue				5,375	7,756
Cost of sales				(1,140)	(667)
Gross profit				4,235	7,089
Research and development costs				(13,750)	(14,015)
Administrative expenses				(3,422)	(3,619)
Other operating income: grants receivable				114	58
Operating loss				(12,823)	(10,487)
Finance income				64	141
Finance costs				(4)	(3)
Loss before tax				(12,763)	(10,349)
Taxation	3			1,667	1,619
Loss for the year				(11,096)	(8,730)
Basic loss and diluted loss per ordinary share	4			(0.79p)	(0.76p)

The notes on pages 19 to 25 form part of this preliminary information.

Balance sheet

as at 31 December 2013

		Group
	Notes	2013 £'000	2012 £'000
Assets
Non-current assets
Intangible assets	5	2,633	2,931
Property, plant and equipment	6	4,070	3,902
		6,703	6,833
Current assets
Inventories	7	680	-
Trade and other receivables	8	2,592	1,705
Current tax assets		1,500	1,824
Available for sale investments		-	5,105
Cash and cash equivalents		2,169	8,956
		6,941	17,590
Current liabilities
Trade and other payables	9	2,934	2,702
Deferred income	10	1,280	1,568
		4,214	4,270
Net current assets		2,727	13,320
Non-current liabilities
Provisions	11	532	510
		532	510
Net assets		8,898	19,643
Equity attributable to owners of the parent
Ordinary shares		14,162	14,162
Share premium account		130,304	130,304
Merger reserve		14,310	14,310
Other reserves		(682)	(682)
Accumulated losses		(149,196)	(138,451)
Total equity		8,898	19,643

The notes on pages 19 to 25 form part of this preliminary information.

Statement of cash flows

for the year ended 31 December 2013

		Group
		2013	2012
	Notes	£'000	£'000
Cash flows from operating activities
Cash used in operations	12	(13,005)	(11,470)
Interest paid		(4)	(3)
Tax credit received		1,990	1,500
Overseas tax paid		-	(64)
Net cash used in operating activities		(11,019)	(10,037)
Cash flows from investing activities
Purchases of property, plant and equipment		(839)	(476)
Purchases of intangible assets		(98)	(195)
Net maturity of available for sale investments		5,105	2,395
Interest received		64	172
Net cash generated from investing activities		4,232	1,896
Cash flows from financing activities
Proceeds from issue of ordinary share capital		-	11,779
Costs of share issues		-	(1,517)
Net cash generated from financing activities		-	10,262
Net (decrease)/increase in cash and cash equivalents		(6,787)	2,121
Cash and cash equivalents at 1 January		8,956	6,835
Cash and cash equivalents at 31 December		2,169	8,956

The notes on pages 19 to 25 form part of this preliminary information.

Statement of changes in equity attributable to owners of the parent company

for the year ended 31 December 2013

		Ordinary shares	Share premium account	Merger reserve	Other reserves	Accumulated losses	Total equity
Group	Notes	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2012		9,449	124,755	14,310	(682)	(130,061)	17,771
Year ended 31 December 2012:
Loss for the year		-	-	-	-	(8,730)	(8,730)
Total comprehensive expense for the year		-	-	-	-	(8,730)	(8,730)
Transactions with owners: Share options
Value of employee services		-	-	-	-	340	340
Issue of shares excluding options		4,713	7,066	-	-	-	11,779
Costs of share issues		-	(1,517)	-	-	-	(1,517)
At 31 December 2012		14,162	130,304	14,310	(682)	(138,451)	19,643
Year ended 31 December 2013:
Loss for the year		-	-	-	-	(11,096)	(11,096)
Total comprehensive expense for the year		-	-	-	-	(11,096)	(11,096)
Transactions with owners: Share options
Value of employee services		-	-	-	-	351	351
At 31 December 2013		14,162	130,304	14,310	(682)	(149,196)	8,898

The notes on pages 19 to 25 form part of this preliminary information.

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

for the year ended 31 December 2013

1        Basis of preparation

This financial information for the years ended 31 December 2013 and 31 December 2012 does not constitute the statutory financial statements for the respective years and is an extract from the financial statements. It is based on, and is consistent with, that in the Group's statutory accounts for the year ended 31 December 2013 and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Financial statements for the year ended 31 December 2012 have been delivered to the Registrar of Companies. The auditors' reports on the financial statements for the years ended 31 December 2013 and 31 December 2012 were unqualified and did not contain statements under section 498 of the Companies Act 2006. The auditors' report for the year ended 31 December 2013, whilst unmodified, contains reference to the significant uncertainty disclosed below. The financial information in this report does not constitute statutory financial statement within the meaning of sections 434-436 of the Companies Act 2006.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are prepared in accordance with the historical cost convention. Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRSs adopted for use in the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

Copies of this announcement and the Annual report for 2013 are available from the Company Secretary and are on the Company's website. The audited statutory financial statements for the year ended 31 December 2013 are expected to be distributed to shareholders by 30 April 2014 and will be available at the registered office of the Company, Medawar Centre, Oxford Science Park, Oxford, OX4 4GA. Details can also be found on the Company's website at: www.oxfordbiomedica.co.uk.

This announcement was approved by the Board of Oxford BioMedica plc on 9 April 2014.

Going concern

The Group is continuing to develop its product pipeline and absorbs cash in doing so. Although it is starting to generate revenues from selling development and manufacturing services, these currently only cover a small portion of the Group's cost base. The Directors estimate that the cash held by the Group including known receivables and future funding available under the Vulpes loan facility will be sufficient to support the current level of activities into the third quarter of 2014. This estimates does not include the benefit of any upfront receipts from licence deals, including the potential option fee which would be payable by Sanofi should they exercise their option over RetinoStat^®. The Directors also continue to explore other sources of finance available to the Group. Taking account of these together the Directors have confidence that they will be able to secure sufficient cash inflows for the Group to continue its activities for the foreseeable future, being not less than 12 months from the date of these financial statements and have therefore prepared the financial statements on a going concern basis.

These circumstances nonetheless represent a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. Should the Group be unable to obtain further funds, adjustments would be required to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify fixed assets as current assets.

Critical accounting judgments and estimates

In applying the Group's accounting policies, management is required to make judgments and assumptions concerning the future in a number of areas. Actual results may be different from those estimated using these judgments and assumptions. The key sources of estimation uncertainty and critical accounting judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue recognition

In 2009 the Group received an up-front non-refundable payment of US$26.0 million (£16.6 million) from Sanofi under the ocular product collaboration.  This has been recognised as revenue over the expected duration of the collaboration for each of the products.  During 2013, the remaining £787,000 (2012: £3,414,000) of this receipt was recognised such that the full amount of £16,641,000 has now been recognised and there is no further deferred revenue.

Over the term of the ocular product collaboration with Sanofi, Oxford BioMedica may recover up to US$24.0 million in research and development funding and recognise this as revenue.  Project costs in excess of US$24.0 million will be borne by Oxford BioMedica.  The amount of research and development funding that is recognised as revenue is based on an estimate of the amount of project costs expected to be borne by the Group by the end of the collaboration.  Up to 31 December 2013 £14.2 million (2012: £13.3 million) had been recognised as revenue and £0.7 million (2012: £0.6 million) had been classified as current deferred income. If the estimated total project expenditure had been 5% higher, the amount of revenue recognised to 31 December 2013 would have been £0.6 million (2012: £0.6 million) lower and the amount of deferred income higher by the same amounts.

Intangible asset impairment

The Group has significant intangible assets arising from purchases of intellectual property rights and in-process R&D.  Amortisation is charged over the assets' patent life on a straight line basis from the date that the asset becomes available for use.  When there is an indicator of a significant and permanent reduction in the value of intangible assets, an impairment review is carried out.  The impairment analysis is principally based on estimated discounted future cash flows.  Actual outcomes could vary significantly from such estimates of discounted future cash flows, due to the sensitivity of the assessment to the assumptions used.  The determination of the assumptions is subjective and requires the exercise of considerable judgment.  Any changes in key assumptions about the Group's business and prospects or changes in market conditions affecting the Group or its development partners could materially affect whether an impairment exists.  This risk is now concentrated on purchased patent rights which have been sublicensed to collaborative partners. At 31 December 2013 the book value of intangible assets was £2.6 million of which £1.7 million related to PrimeBoost technology.

Going concern

Going concern is as stated in several places in this report including the Chairman's statement (page 5) and  the Financial review (page 15). It requires management and Directors to make critical judgments concerning the Group's future cash flows and availability of funding.

2        Segmental analysis

The chief operating decision-maker has been identified as the Executive Committee, comprising the Executive Directors. The Committee considers that the business comprises a single activity, which is biotechnology research and development, and the related manufacturing. The Committee reviews the Group's financial performance on a whole-company, consolidated basis in order to assess performance and allocate resources.  Therefore the segment financial information is the same as that set out in the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of cash flows and the consolidated statement of changes in equity.

3        Taxation

The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure. The amount included in the statement of comprehensive income for the year ended 31 December 2013 comprises the credit receivable by the Group for the year less overseas tax paid in the year. The United Kingdom corporation tax research and development credit is paid in arrears once tax returns have been filed and agreed. The tax credit recognised in the financial statements but not yet received is included in current tax assets in the balance sheet. The amounts for 2013 have not yet been agreed with the relevant tax authorities.

	Group
	2013	2012
	£'000	£'000
Current tax
United Kingdom corporation tax research and development credit	(1,500)	(1,497)
Overseas taxation	(3)	1
	(1,503)	(1,496)
Adjustments in respect of prior periods
United Kingdom corporation tax research and development credit	(142)	(120)
Overseas taxation	(22)	(3)
Taxation credit	(1,667)	(1,619)

4       Basic loss and diluted loss per ordinary share

The basic loss per share has been calculated by dividing the loss for the year by the weighted average number of shares in issue during the year ended 31 December 2013 (1,416,149,005; 2012: 1,146,473,109).

As the Group is loss-making, there were no potentially dilutive options in either year. There is therefore no difference between the basic loss per ordinary share and the diluted loss per ordinary share.

5        Intangible assets

			Intellectual property rights
Group			£'000
Cost
At 1 January 2013			5,493
Additions			98
At 31 December 2013			5,591
Accumulated amortisation and impairment
At 1 January 2013			2,562
Amortisation charge for the year			396
At 31 December 2013			2,958
Net book amount at 31 December 2013			2,633
Cost
At 1 January 2012			5,298
Additions			195
At 31 December 2012			5,493
Accumulated amortisation and impairment
At 1 January 2012			2,192
Amortisation charge for the year			370
At 31 December 2012			2,562
Net book amount at 31 December 2012			2,931

For intangible assets regarded as having a finite useful life amortisation commences when products underpinned by the intellectual property rights become available for use. Amortisation is calculated on a straight line basis over the remaining patent life of the asset. Amortisation of £396,000 (2012: £370,000) is included in 'Research and development costs' in the statement of comprehensive income.

An intangible asset is regarded as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. There are currently no assets with indefinite useful lives.

6        Property, plant and equipment

	Freehold property	Short leasehold   improvements	Office  equipment & computers	Manufacturing & Laboratory equipment	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2013	3,130	2,604	591	3,570	9,895
Additions at cost	95	19	30	695	839
At 31 December 2013	3,225	2,623	621	4,265	10,734
Accumulated depreciation
At 1 January 2013	258	2,449	467	2,819	5,993
Charge for the year	218	66	76	311	671
At 31 December 2013	476	2,515	543	3,130	6,664
Net book amount at 31 December 2013	2,749	108	78	1,135	4,070

		Freehold property	Short leasehold   improvements	Office  equipment & computers	Manufacturing & Laboratory equipment	Total
		£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2012		3,115	3,011	606	3,316	10,048
Additions at cost		15	17	30	254	316
Disposals		-	(424)	(45)	-	(469)
At 31 December 2012		3,130	2,604	591	3,570	9,895
Accumulated depreciation
At 1 January 2012		45	2,810	388	2,592	5,835
Charge for the year		213	63	98	227	601
Disposals		-	(424)	(19)	-	(443)
At 31 December 2012		258	2,449	467	2,819	5,993
Net book amount at 31 December 2012		2,872	155	124	751	3,902

7        Inventories

	2013	2012
	£'000	£'000
Raw Materials	558	-
Work in progress	122	-
Total inventory	680	-

Inventories constitute raw materials held for commercial manufacturing purposes, and work-in-progress inventory related to contractual manufacturing obligations.

8        Trade and other receivables

			Group
			2013	2012
			£'000	£'000
Current
Trade receivables			1,040	315
Accrued income			637	400
Other receivables			28	184
Other tax receivable			285	140
Prepayments			602	666
Total trade and other receivables			2,592	1,705

9        Trade and other payables

			Group
			2013	2012
			£'000	£'000
Trade payables			1,218	881
Other taxation and social security			201	157
Accruals			1,515	1,664
Total trade and other payables			2,934	2,702

10      Deferred income

Group	2013 £'000	2012 £'000
Current	1,280	1,568
Total deferred income	1,280	1,568

On 28 April 2009 the Company entered into a collaborative programme with Sanofi to develop gene therapy products to treat ocular diseases. An initial non-refundable sum of US$26 million (£16,641,000) was received. This has been recognised as revenue over the expected duration of the collaboration for each of the products.  During 2013, the remaining £787,000 (2012: £3,414,000) of this receipt was recognised such that the full amount of £16,641,000 has now been recognised and there is no further deferred revenue.

Over the term of the collaboration with Sanofi, Oxford BioMedica may recover from Sanofi up to US$24 million in research and development funding. Project costs in excess of US$24 million will be borne by Oxford BioMedica. To date, £14,191,000 ($22,428,000) has been recognised as revenue, of which £872,000 was recognised in 2013. £673,000 (2012: £621,000) has been classified as current deferred income.

£413,000 (2012: £nil) deferred income arises from the collaboration with Novartis.

11      Provisions

Group	Dilapidations £'000	Onerous lease £'000	Total £'000
At 1 January 2013	510	-	510
Unwinding of discount	4	-	4
Change of discount rate - adjustment to recognised property, plant and equipment	18	-	18
At 31 December 2013	532	-	532
At 1 January 2012	501	41	542
Utilised in the year	-	(41)	(41)
Unwinding of discount	3	-	3
Change of discount rate - adjustment to recognised property, plant and equipment	6	-	6
At 31 December 2012	510	-	510

The dilapidations provision relates to anticipated costs of restoring the leasehold property in Oxford, UK to its original condition at the end of the present leases in 2016, discounted using the rate per the Bank of England nominal yield curve. The equivalent rate was used in 2012. The provision will be utilised at the end of the leases if they are not renewed.

12      Cash flows from operating activities

            Reconciliation of loss before tax to net cash used in operations

			Group
			2013	2012
			£'000	£'000
Continuing operations
Loss before tax			(12,763)	(10,349)
Adjustment for:
Depreciation			671	601
Amortisation of intangible assets			396	370
Loss on disposal of property, plant and equipment			-	26
Charge for impairment			-	-
Finance income			(64)	(141)
Finance expense			4	3
Charge in relation to employee share schemes			351	340
Changes in working capital:
(Increase)/decrease in trade and other receivables			(886)	1,224
Increase/(decrease) in trade and other payables			232	(524)
(Decrease) in deferred income			(288)	(2,988)
Increase/(decrease) in provisions			22	(32)
(Increase) in inventory			(680)	-
Net cash used in operations			(13,005)	(11,470)

13      Subsequent events

On 6 January 2014 shareholders approved a £5 million secured loan facility provided by Vulpes Life Sciences Fund to the Group. Under the facility, the Group may draw down the loan in tranches of at least £1 million, as necessary, at any time from 1 January 2014 until 10 days before the maturity of the facility on 31 December 2014. £1.5 million of this facility has been drawn down at the date of this report.

 

END

 

 

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