Interim Results
RESULTS FOR THE SIX MONTHS ENDED 3Oth JUNE 2007
HIGHLIGHTS
* Commercialisation
> Notice of allowance for TMT® patent in US published, completing patent
allowances for all TMT® product claims.
> Actively engaged to complete TMT® commercialisation in second half 2007.
> TMT® reagents manufactured and available for customer dispatch in Q4 2007.
> New high value/high volume applications TMT®calibrator and TMT Reference
Materials launched.
> Major increase in H1 revenue from ProteoSHOP® to continue in H2.
> Industry sources predict biomarker growth to quadruple by 2012 to $21.2bn.
ProteoSHOP® strongly positioned to exploit this growth.
> Conversion of stroke research licences in to full commercial licences
expected to start in second half 2007.
> Strong and additional data and new discoveries across all primary areas of
biomarker research, particularly in brain damage and Alzheimer's disease.
> ISO 9001 certification end of 2007.
* Intronn
> VIRxSYS Corp acquired core technology and assets of Intronn Inc in all
stock transaction. Proteome Sciences retains its 43% shareholding in
Intronn.
> Intronn to fully participate in the upside value of VIRxSYS through
preferred stock.
> Transaction secures future funding for Intronn and entry of its
technology into clinical trials.
* Corporate
> Dr Rainer Voegeli joined in August 2007 as Commercial Director.
* Financial
> Reduced loss for period of £2.32million (2006: £2.83m).
> Revenue of £198k (2006: £0.07k).
> Level of costs expected to remain unchanged in second half 2007.
* Outlook
> Expected TMT® licence agreements, full commercial licences for stroke
and growing adoption of ProteoSHOP® set to provide strong and
sustainable revenue stream.
> There is now a firm basis on which to expect significant moves in
commercialisation of research and IP portfolio.
> Board looks forward to reporting further developments over next few months.
Commenting on these results, Christopher Pearce, Chief Executive of Proteome
Sciences, said:
"With the TMT® patent allowances now complete we are progressing the final
stages of the licensing of TMT® which we expect to announce before the end of
the year. We are also confident of starting to convert the existing stroke
licences into full commercial licenses in the same time frame. Together with
the growing revenues we are already generating from ProteoSHOP®, the Company is
now in a position where it is well set to deliver a strong and sustainable
revenue stream. The Board looks to the rest of the year and beyond with
confidence."
ENDS
Attached: Full text of Chairman's statement, consolidated profit and loss
account, consolidated balance sheet, consolidated cash flow statement and notes
to the financial information.
For further information please contact:
Proteome Sciences plc
www.proteomics.com Tel: +44 (0)1932 865065
Christopher Pearce, Chief Executive James Malthouse, Finance Director
Email: christopher.pearce@proteomics.com Email:james.malthouse@proteomics.com
Public Relations
IKON Associates Coast Communications
Adrian Shaw Matt Baldwin
Tel: +44 (0)1483 535102 Tel: +44 (0)1233 503200
Mobile: +44 (0)797 9900733 Mobile: +44 (0)7930 439739
Email: adrian@ikonassociates.com Email: matt@coastcommunications.com
Nominated Adviser
Landsbanki Securities (UK) Ltd.
Gareth Price / Thilo Hoffman Tel: +44 (0)20 7426 9000
Notes to Editors:
Proteome Sciences plc applies high sensitivity proteomics to identify and
characterise differential protein expression in diseases for diagnostic,
prognostic and therapeutic applications. It has discovered blood biomarkers
principally for stroke, vCJD, BSE, brain damage, solid organ transplant
rejection and Alzheimer's disease. The main focus of its research currently
addresses neurological, neurodegenerative, oncology and cardiovascular
conditions.
In addition to its own proprietary biomarkers, Proteome Sciences has developed
ProteoSHOP® (Proteome Sciences High Output Proteomics), a toolbox that offers
high sensitivity and high throughput gel and gel-free proprietary technologies
for the identification and validation of potential biomarkers and drug targets,
including specialisation in membrane proteins and protein phosphorylation.
The Company has developed a range of specialist reagents to improve the
performance and quantitation of protein separation and characterisation with
mass spectrometry, bioinformatics, statistics and pattern recognition. These
include Sensitizer®, PST®, qPST™ and TMT®. Proteome Sciences has patent
allowances in the major global jurisdictions for isobaric tandem mass tags (TMT
®) for the manufacture and use of any type of isobaric mass tags.
Commercialisation is actively pursued across the portfolio of the Company's
programmes and technologies with licensing deals signed in biomarkers for
Stroke and TSEs and for ProteoSHOP®.
Proteome Sciences has its headquarters in Cobham, Surrey in the UK and has
laboratories at Kings College Hospital, London and Frankfurt Innovations
Zentrum (FIZ), Frankfurt. It employs 32 full time scientists in addition to its
corporate and business development staff, and has collaborative research
agreements with leading academic institutes. The Company is listed on the
Alternative Investment Market.
Chairman's Statement :
Reagents
The much awaited Notice of Allowance for the Company's US patent application in
isobaric mass labelling for tandem mass tags (TMT®) TMT1 was published shortly
after the AGM at the end of July, 2007. The US patent contains broad claims to
sets of isobaric mass tags. This followed the grants of the corresponding cases
in Australia, New Zealand, Canada, and most recently in Europe in May 2007.
These allowances for TMT1 have been complemented by the Rule 51(4) Notice of
Intention to grant from the European Patent Office for TMT2, that incorporates
isobaric mass tags with peptide structures and various methods of use.
The US and European allowances for TMT1 patents now provide Proteome Sciences
with the ability to exploit the broad claims across the fast growing market of
isobaric tandem mass tagging, as a product in its own right, for third party
licences and for the manufacture or use of any type of isobaric tandem mass
tags. The latest patent grants should now enable us to complete the
commercialisation of TMT® through outlicensing and to generate strong revenue
through licence income, product sales and royalties. We are actively engaged to
complete this process in the second half of the year.
In anticipation of the impending outlicensing of the TMT® product, Proteome
Sciences has been producing substantial amounts of the TMT® reagents in order
to enable licencees to have materials immediately available and to bring the
product to the market in the 4th quarter of 2007. This will provide two
significant benefits to our cashflow, both from the early sale of TMT® raw
materials and also from the accelerated timing of royalty payments. Our
prototype TMT® kit, first unveiled to shareholders at the AGM in the summer,
will be despatched to customers in the fourth quarter of 2007.
The initial introduction of TMT® Reference Materials at the Biomarker World
Congress has been substantively bolstered by major presentations and
endorsement at the European Biomarker Summit in Amsterdam and the Biomarker
Discovery Summit in Philadelphia this September. At these meetings, Proteome
Sciences has been able to leverage the same stage and audiences with the launch
of TMT®calibrator, a multipoint calibration method to quantify known peptides/
proteins in a single LC-MS/MS experiment with a very high level of accuracy.
This method can be used to validate multiple biomarker candidates and developed
as an assay for the routine measurement of biomarkers in clinical trials.
Proteome Sciences is now able to dramatically reduce the timescales to develop
and manufacture calibration mixtures for customers when compared to
conventional immunoassay approaches.
The new TMT® applications have substantially raised both the corporate and the
TMT® profile in the life sciences industry, and this has already resulted in
considerable positive feedback and activity from the pharma industry. These are
high value, high volume revenue applications for TMT® that will address and
open up substantial new markets and opportunities.
ProteoSHOP®
The increased emphasis placed on marketing ProteoSHOP® last year has been
further expanded in 2007 and the successful introduction of TMT® isobaric
tandem mass tags (TMT®zero, TMT®duplex and TMT®sixplex) has contributed to a
major increase in revenue in the first half of the year. This should be further
enhanced by the introduction of TMT® Reference Materials and, most recently,
the launch of TMT®calibrator in September. Collectively these should be the
main drivers behind ProteoSHOP® revenue moving into 2008 and beyond. New
marketing materials for TMT® and TMT® products and applications were produced
for the recent product launches. These are available on our website
(www.proteomics.com).
Industry estimates have projected that growth in biomarkers will quadruple by
2012 to $21.2bn. We believe that within that growth, biomarker validation using
proteomic tools will be one of the fastest areas and, as a consequence, that
Proteome Sciences with its core activities focussed on biomarker validation and
portable assay development will be particularly well placed to exploit that
market. The industry feedback from recent conferences and meetings has been
most encouraging and this interest should convert into substantial additional
ProteoSHOP® revenue.
The current commercial director, James Green, has reached retirement and will
be resigning as a director of the Company on 2nd October, 2007. We would like
to take this opportunity to thank him for his contribution and to wish him well
in the future.
Dr. Rainer Voegeli has been recruited as his successor. Dr. Voegeli qualified
with a PhD in biochemistry and developed considerable proteomics expertise in
peptides and proteins before moving into technology and business development.
He joined the Company in August from BioVision, AG, where he was Chief Business
Officer and where he concluded deals with many major pharmaceutical companies
including Merck, Abbott, Novartis and Astra Zeneca..
The excellent progress made in our application to obtain ISO 9001 certification
for our facilities in Frankfurt is running ahead of its targeted completion in
the first half of 2008, and means that the process may now be concluded by the
end of 2007. ISO 9001 approval will provide further substance to our ProteoSHOP
® workflows and will strengthen its ability to provide services to the
pharmaceutical industry, CRO's and regulators with the appropriate
international levels of certification.
Biomarkers
The main objective for our biomarker research activities has been to discover
and validate differentially expressed protein biomarkers for diagnostic and
prognostic uses in major human diseases, for the evaluation of new compounds
and to monitor and assess the efficiency of treatment. Increasingly, the focus
of interest and need for biomarkers is being affected by regulatory issues
provoked to a great extent by the US FDA's Critical Path initiative. The likely
requirements that such information will become mandatory in the near future has
shifted the emphasis to biomarker validation and the need for effective, timely
and robust methodologies.
Proteome Sciences has been at the forefront in the development and application
of its ProteoSHOP® workflows in biomarker discovery and validation as
illustrated by the proprietary research undertaken in stroke. This resulted in
four research licences by the end of 2006 in high-throughput stroke with global
leaders in clinical diagnostics. The research continues to generate excellent
data and new biomarkers to enhance the IP position and to further improve the
performance of our stroke panel for stroke treatment and management.
Against this background, we are confident that the stroke research licences
previously announced should convert into full commercial licences as the
testing and integration processes start to come to completion in the second
half of the year.
Similar patterns of strong and additional data and new discoveries have flowed
from the research across all our primary areas of proprietary biomarker
research, in particular brain damage and Alzheimer's disease. Following the
high profile publication in the journal Brain (co-authored with the Institute
of Psychiatry, Kings College London) of a 500 patient study in Alzheimers
disease (AD), considerable additional media attention has revolved around the
earlier data generated and from the subsequent discoveries made from a later
study using a combination of three different proteomic approaches. A total of
36 differentially expressed proteins were found in blood, and these are
currently being evaluated for their utility for diagnosis and monitoring AD
progression.
At the European Proteomics Society meeting in Pau, France held this September,
Professor J-C Sanchez from the Hôpital Cantonal Universitaire de Genève
presented results from our collaborative biomarker research programme in
post-mortem CSF as a model of massive brain injury and cell death. A total of
299 proteins were identified, of which 172 proteins were not previously known
to be present in CSF. Of these, more than 75% have been described as
intra-cellular proteins suggesting that they were released from damaged cells.
Five of these proteins have been validated as biomarkers in plasma for the
early diagnosis of stroke, one for monitoring the thrombolytic treatment of
ischemic stroke and one for neurodegenerative dementia. The identification of
these proteins in CSF, when combined with validation in plasma, demonstrates
the power of this approach to discover brain injury biomarkers in blood which
span a range of different neurodegenerative disorders and the way to utilise
such biomarkers for novel diagnostic, prognostic and therapeutic applications.
Intronn / Veri-Q
It was announced on 21st September that VIRxSYS Corporation acquired the core
technology and assets of Intronn Inc. (a company in which Proteome Sciences
retains a 43 percent shareholding) in exchange for the issuance of preferred
stock in VIRxSYS. Through this holding, Intronn will fully participate in any
upside value in VIRxSYS but at the same time benefiting with the downside
protection conferred through the rights attaching to preferred stock.
VIRxSYS is a substantial private US biotechnology company founded in 1998
developing gene therapies for HIV and genetic disorders using a lentiviral
vector delivery platform. VIRxSYS's initial focus was directed towards HIV and
genetic diseases. Intronn brings advanced pre-clinical programmes in
haemophilia and dyslipidemia that integrate extremely well and should
significantly accelerate the programmes recently established by VIRxSYS in the
same areas and with the ability to use SMaRTTM across a broad range of other
disease applications.
VIRxSYS lead application, VRX496 (a CD4 T cell treatment against HIV),
successfully completed Phase I trials in November 2006 and has now moved on to
Phase II trials. VRX496 continues to be the only lentiviral vector currently
administered in human ethical trials approved by the US Food & Drug
Administration. Both companies recognise the considerable synergy between the
two technologies, with SMaRTTM providing a strong pipeline of RNA products
through the VIRxSYS lentiviral vector delivery platform and their clinical
trials expertise.
By combining the two technologies in an all stock transaction, both companies
will participate directly from the considerable upside potential of the
combined platforms and remove duplication of costs and effort. Financial terms
have not been disclosed.
Proteome Sciences will keep shareholders appraised of significant developments
at VIRxSYS, in particular, news relating to the Phase II clinical trials.
Further details can be found in the press release at www.virxsys.com.
No material events of significance have taken place at Veri-Q over the period,
however, the programme to develop further antibodies against the deprotecting
groups is well advanced and close to completion.
Financial Results
The financial results for the six months to the 30 June, 2007 have been
prepared for the first time using policies consistent with International
Financial Reporting Standards ("IFRS") and show a loss for the period of £
2,320,876, compared with £2,832,478 in the corresponding period in 2006, the
figures for which have also been re-stated to comply with the requirements of
IFRS. Full details of the adjustments arising from this change are set out in
the note 1 to these accounts.
Costs have remained close to those incurred in 2006, and the reduction in the
loss for the period largely reflects a fall in the charge for share-based
payment and a positive contribution from the group's associate company. The
cash outflow for the period remained carefully controlled, and benefited not
only from revenue of £198,718 in the period, but also from the continuing
non-payment of certain directors' salaries. Subject to unforeseen
circumstances, we expect the level of costs to remain broadly unchanged in the
second half of the year.
As previously announced, the Company filed a claim on 29th December 2005 in the
District Court of Frankfurt am Main ("the Court") against Sanofi-Aventis
Deutschland GmbH ("Sanofi-Aventis") under which it is seeking damages of up to
€30 million for, amongst other things, the breach of certain warranties
provided by Sanofi-Aventis at the time of the acquisition of Xzillion
Proteomics GmbH & Co KG (now Proteome Sciences R&D GmbH & Co KG) on 4th July
2002. The process appears to have moved along favourably for the Company in
2007, but there have been no major developments to date. Further news may be
forthcoming in the second half of the year.
Current Outlook
Over the summer, the allowances of our TMT1 patents initially in Europe and
most recently in the US are core elements in the commercialisation process to
successfully conclude the licences in the field of isobaric tandem mass tags
and for the TMT® product. With the final allowance published only this week at
the United States Patent and Trademark Office, allowances have now been
obtained for all the key TMT® product claims and we intend to complete the
licence agreements and to have the TMT® product available as soon as possible
in the second half of the year. The completion of the TMT® licences will
generate substantial revenue for our Company and these will be further enhanced
by new and additional high value/high volume applications.
With the anticipated conversion of the research licences in stroke into full
commercial licences and the recent introduction of TMT® Reference Materials and
TMT®calibrator into the ProteoSHOP® workflow, the Company should convert the
considerable potential of its research into a strong and sustainable revenue
stream.
By putting together the major global patent allowances of TMT, the production
of TMT® chemical materials, the TMT® test kit and the impending completion of
TMT® licences over the next three months, the changed emphasis and importance
of our reagent activities and their entry into mainstream proteomic workflows
and biomarker applications have become highly visible. These should generate
substantial sources of revenue for our business and allow us to exploit the
potential of both ProteoSHOP® and our proprietary biomarker programmes more
fully. We have the right technology at the right time and we intend to maximise
the commercial position for our shareholders.
The Company therefore views the future with confidence and looks forward to
reporting further developments over the next few months.
R.S. Harris
Chairman 28th September, 2007
Unaudited consolidated income statement (IFRS)
For the six months ended 30th June, 2007
Six months Six months Year ended
ended ended 31st
30th June 30th June December
2007 2006 2006
£ £ £
Continuing operations
Revenue 198,718 7,731 68,469
Cost of sales (109,295) (5,412) (47,928)
89,423 2,319 20,541
Gross profit
Administrative expenses (2,548,017) (2,975,149) (5,754,536)
Share of results of associates 62,742 (126,103) (282,002)
Operating Loss (2,395,852) (3,098,933) (6,015,997)
Investment revenues 4,021 40,304 44,835
Finance costs (104,045) (1,028) (36,637)
Loss before taxation (2,495,876) (3,059,657) (6,007,799)
Tax 175,000 227,179 370,109
Loss for the period from continuing (2,320,876) (2,832,478) (5,637,690)
operations
Attributed to shareholders of the (2,320,876) (2,832,478) (5,637,690)
company
Loss per share
Basic and diluted (1.76p) (2.15p) (4.29p)
Unaudited consolidated statement of recognised income and expense (IFRS)
For the six months ended 30th June, 2007
Six months Six months Year ended
ended ended 31st
30th June 30th June December
2007 2006 2006
£ £ £
Exchange differences on translation of 76,766 (13,881) (92,375)
foreign operations
Net income/(expense) recognised 76,766 (13,881) (92,375)
directly in equity
Loss for the period (2,320,876) (2,832,478) (5,637,690)
Total recognised income and expense (2,244,110) (2,846,359) (5,730,065)
for the period
Unaudited consolidated balance sheet (IFRS)
As at 30th June, 2007
Six months Six months Year ended
ended ended 31st
30th June 30th June December
2007 2006 2006
£ £ £
Non-current assets
Goodwill 4,218,241 4,218,241 4,218,241
Property, plant and equipment 468,187 668,271 546,509
Interest in associates 818,767 818,565 652,813
5,505,195 5,705,077 5,417,563
Current assets
Trade and other receivables 509,788 1,092,489 673,998
Cash and cash equivalents 598,173 875,011 304,225
1,107,961 1,967,500 978,223
Total assets 6,613,156 7,672,577 6,395,786
Current liabilities
Trade and other payables (2,178,678) (2,105,077) (1,900,891)
Current tax liabilities (13,254) (6,572) (34,762)
Short-term loans (3,738,644) - (1,634,637)
(5,930,576) (2,111,649) (3,570,290)
Net current liabilities (4,822,615) (144,149) (2,592,067)
Non-current liabilities
Deferred grant income (188,043) (188,043) (188,043)
Long-term provisions (19,460) (12,653) (49,282)
(207,503) (200,696) (237,325)
Total liabilities (6,138,079) (2,312,345) (3,807,615)
Net assets 475,077 5,360,232 2,588,171
Equity
Share capital 1,314,654 1,314,512 1,314,654
Share premium account 29,150,563 29,145,773 29,150,563
Equity reserve 1,926,987 1,689,258 1,795,971
Other reserve 10,755,000 10,755,000 10,755,000
Translation reserve (15,609) (13,881) (92,375)
Retained loss (42,656,518) (37,530,430) (40,335,642)
Total equity 475,077 5,360,232 2,588,171
Unaudited consolidated cash flow statement (IFRS)
For six months 30th June, 2007
Six months Six months Year ended
ended ended 31st
30th June 30th June December
2007 2006 2006
£ £ £
Cash flows from operating activities
Cash used in operations (2,015,909) (1,899,752) (4,460,913)
Interest paid (104,045) (1,028) (36,637)
Tax refunded 300,000 485,391 891,968
Net cash outflow from operating (1,819,954) (1,415,389) (3,605,582)
activities
Cash flows from investing activities
Purchases of property, plant and (4,813) (336,720) (357,411)
equipment
Interest received 4,021 40,304 44,835
Net cash outflow from investing (792) (296,416) (312,576)
activities
Financing activities
Proceeds on issue of shares - - 4,934
New loans raised 2,113,848 ________- 1,634,637
Net cash from financing activities 2,113,848 ________- 1,639,571
Net increase/(decrease) in cash and 293,102 (1,712,805) (2,278,587)
cash equivalents
Cash and cash equivalents at beginning 304,225 2,587,155 2,587,155
of period
Effect of foreign exchange rate 846 _____(339) ___(4,343)
changes
Cash and cash equivalents at end of 598,173 875,011 304,225
period
Accounting Policies
1. Basis of preparation of interim report
In the financial statements for the year ended 31 December, 2006, the directors
reported that the Company's anticipated commercial income should provide
significant cash inflows that would be appropriate to meet the cash
requirements of the business; however, the timing of the cash inflows was
considered important and therefore there could be no certainty regarding the
availability of funding for the 12 months following the signing of the 2006
financial statements.
Further progress has been made with respect to commercialisation and whilst the
directors remain confident that the anticipated commercial income will provide
sufficient cash inflows, the timing of these cash inflows remains important. On
this basis, the directors continue to adopt the going concern basis in
preparing these interim statements, and accordingly these statements do not
contain any adjustments that would result if sufficient commercial income were
not to be received on a timely basis.
Given the above, there is a material uncertainty which may cast significant
doubt as to the company's ability to continue as a going concern and therefore
it may be unable to realise its assets and discharge its liabilities in the
normal course of business.
The information for the period ended 30 June 2007 does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The information
in note 1 is derived from the statutory accounts for the year ended 31 December
2006 and adjusted for the adoption of IFRS. A copy of the statutory accounts
for that year has been delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified, with an emphasis of matter paragraph
relating to going concern.
2. Significant accounting policies
The interim financial report is unaudited and has been prepared using
accounting policies consistent with International Financial Reporting Standards
(IFRS) for the first time. The disclosures required by IFRS1 concerning the
transition from UK GAAP to IFRS are given in note 1.
The financial statements have been prepared on the historical cost basis,
except for the revaluation of financial instruments. The principal accounting
policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 30 June and 31 December each year. Control is achieved where the Company has
the power to govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group.
Investment in associates
An associate is an entity over which the group is in a position to exercise
significant influence, but no control or joint control, through participation
in the financial and operating policy decisions of the investee. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those
policies.
The result and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting. Investments in
associates are carried in the balance sheet at cost as adjusted by
post-acquisition changes in the group's share of the net assets of the
associate, less any impairment in the value of individual investments. Losses
of the associates in excess of the group's interests in those associates are
not recognised.
Any excess of the cost of acquisition over the group's share of the fair values
of the identifiable net assets of the associate at the date of acquisition is
recognised as goodwill. Any deficiency of the cost of acquisition below the
group's share of the fair values of the identifiable net assets of the
associate at the date of acquisition (ie. discount on acquisition) is credited
in profit or loss in the period of acquisition.
Where a group company transacts with an associate of the group, profits and
losses are eliminated to the extent of the group's interest in the relevant
associate. Losses may provide evidence of an impairment of the asset
transferred in which case appropriate provision is made for impairment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, associate or jointly controlled entity
at the date of acquisition. Goodwill is initially recognised as an asset at
cost and is subsequently measured at cost less any accumulated impairment
losses. Goodwill which is recognised as an asset is reviewed for impairment at
least annually. Any impairment is recognised immediately in profit or loss and
is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, associate or jointly controlled entity, the
attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
Goodwill arising on acquisition before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been reinstated and is not included in determining any subsequent profit or
loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales-related
taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Interest income is accrued on a time basis by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the same term.
Foreign Currencies
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each group company are expressed in
pounds sterling which is the functional currency of the Company, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's function currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period except for
differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary
items, any exchange component of that gain or loss is also recognised directly
in equity.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated
at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the date
of transactions are used. Exchange differences arising, if any, are classified
as equity and transferred to the group's translation reserve. Such translation
differences are recognised as income or as expenses in the period in which the
operation is disposed of.
Borrowing costs
All borrowing costs are recognised in profit or loss in the period in which
they are incurred.
Government grants
Government grants relating to property, plant and equipment are treated as
deferred income and released to profit or loss over the expected useful lives
of the assets concerned.
Other grants are credited to the income statement as the related expenditure is
incurred.
Operating profit
Operating profit is stated after the share of results of associates but before
investment income and finance costs.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the
group's obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme.
As a result of the acquisition of Proteome Sciences R&D Verwaltungs GmbH and
Proteome Sciences R&D GmbH & Co KG from Aventis Research & Technologies GmbH &
Co. KG, the Group contributes to two defined benefit pension schemes in
Germany. Both schemes are multi-employer defined benefit schemes administered
by Pensions Kasse der Mitarbeiter der Hoechst-Gruppe. The schemes' assets are
held in separately administered funds. The other employers who contribute to
the schemes are not members of the Group. The Group has not been able to
identify its share of the underlying assets and liabilities of the schemes.
Accordingly the schemes have been accounted for as defined contributions
schemes. The Group's contributions to the schemes are included within the
amount charged to the profit and loss account in respect of pension
contributions.
No information is available about any surplus or deficit that exists in the
schemes.
Taxation
The tax credit represents the estimated Research and Development tax credit
receivable for the period.
Any tax payable is based on taxable profit for the year. Taxable profit differs
from net profit as reported in the income statement because it excludes items
of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The group's
liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the tax profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interest in joint
ventures, except where the group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives, using the straight-line method, on the following
bases:
Laboratory equipment, fixtures and fittings 20%
Motor vehicles 25%
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in income.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
Development expenditure, where it meets certain criteria (given below), is
capitalised and amortised on a straight-line basis over its useful life. Asset
lives are subject to regular review and an impairment exercise carried out at
least once a year. Where no internally-generated intangible asset can be
recognised, development expenditure is expensed in the period in which it is
incurred.
An asset is recognised only if all of the following conditions are met:
* the product is technically feasible and marketable;
* the company has adequate resources to complete the development of the
product;
* it is probable that the asset created will generate future economic
benefits; and
* the development cost of the asset can be measured reliably.
Patents
Patents are measured initially at purchase cost and are amortised on a
straight-line basis over their estimated useful lives if they meet the
measurement and recognition criteria of IAS 38 Intangible Assets. Otherwise,
patents are written off in the year of expenditure.
Impairment of tangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the relevant
asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
Financial instruments
Financial assets and financial liabilities are recognised in the group's
balance sheet when the group becomes a party to the contractual provisions of
the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective rate method.
Appropriate allowances for estimated irrecoverable amounts are recognised in
profit or loss when there is objective evidence that the asset is impaired. The
allowance recognised is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows discounted at the
effective rate computed at initial recognition.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the group
after deducting all of its liabilities.
Borrowings
Interest-banking loans and overdrafts are recorded at the proceeds received,
net of direct issue costs. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted for on an
accrual basis in profit or loss using the effective interest rate method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
that obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Share-based payments
The group has applied the requirements of IFRS2 Share-based Payment. In
accordance with the transitional provisions, IFRS2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested at 1
January 2006.
The group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the
group's estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.
Notes to the unaudited interim results
For six months 30th June, 2007
1. Explanation of Transition to IFRS
The Group has applied IFRS 1 "First Time Adoption of International Financial
Reporting Standards" as a starting point for reporting under IFRS. The Group's
date of transition is 1st January, 2006 and comparative information has been
restated to reflect the Group's adoption of IFRS except where otherwise
required or permitted by IFRS 1.
IFRS 1 requires an entity to comply with each IFRS and IAS effective at the
reporting date for its first financial statements prepared under IFRS. As a
general rule, IFRS 1 requires such standards to be applied retrospectively.
However, the standard allows several optional exemptions from full
retrospective application. The Group has elected to take advantage of the
following exemptions:
* business combinations made prior to 1st January, 2006 will not be accounted
for under IFRS 3 "Business Combinations" and as such the value of goodwill
in the balance sheet at that date will be the same amount under IFRS as
that recorded in the UK GAAP financial statements, subject to the
completion of an annual impairment review; and
* on the basis that the optional exemption for business combinations under
IFRS 3 is applied, the value of goodwill relating to the investment in
associate will also be recorded at the same amount under IFRS as that
recorded in the UK GAAP financial statements as at 1st January 2006,
subject to the completion of an annual impairment review;
* the group will elect to apply the exemptions in IAS 32 `Financial
Instruments: Presentation' and IAS 39 `Financial Instruments: Recognition
and Measurement' to apply these standards from 1 January, 2006 only;
* the provisions of IFRS 2 "Share-based Payment" will be applied to share
options issued after 7th November, 2002 and unvested at 1 January 2006; and
* the group will elect to take advantage of the exemption of IFRS 1 regarding
translation differences. Accordingly the cumulative translation differences
for its overseas operations are deemed to be nil at the date of transition.
The reconciliations of equity at 1st January 2006 (date of transition to IFRS)
and at 31st December, 2006 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2006, as required by IFRS 1, including the
significant accounting policies are set out below. The reconciliation of equity
at 30th June, 2006 and the reconciliation of profit for the six months ended
30th June, 2006 are also included below to enable a comparison of the 2007
published interim figures with those published in the corresponding period of
the previous financial year.
Reconciliation of equity at 1st January, 2006
Note UK GAAP Effect of IFRS
£000 transition £000
To IFRS
£000
Net-current assets
Goodwill (a) 4,218,241 - 4,218,241
Property, plant and 489,058 - 489,058
equipment
Interests in associates (a) 954,837 - 954,837
5,662,136 - 5,662,136
Current assets
Trade and other 1,326,592 - 1,326,592
receivables
Cash and cash 2,587,155 - 2,587,155
equivalents
3,913,747 - 3,913,747
Total assets 9,575,883 - 9,575,883
Current liabilities
Trade and other payables (1,268,400) - (1,268,400)
Current tax liabilities (164,860) - (164,860)
(1,433,260) - (1,433,260)
Net current assets 2,480,487 - 2,480,487
Non-current liabilities
Deferred grant income (188,043) - (188,043)
Long term provisions (103,937) - (103,937)
(291,980) - (291,980)
Total liabilities (1,725,240) - (1,725,240)
Net assets 7,850,643 - 7,850,643
Equity
Share capital 1,314,512 - 1,314,512
Share premium account 29,145,773 - 29,145,773
Equity reserve 1,333,310 - 1,333,310
Other reserve 10,755,000 - 10,755,000
Retained loss (34,697,952) - (34,697,952)
Total equity 7,850,643 - 7,850,643
Reconciliation of equity as at 30th June, 2006
Note UK GAAP Effect of IFRS
£000 transition £000
To IFRS
£000
Net-current assets
Goodwill (a) 3,893,761 324,480 4,218,241
Property, plant and 668,271 - 668,271
equipment
Investments in (a) 773,322 45,243 818,565
associates
5,335,354 369,723 5,705,077
Current assets
Trade and other 1,092,489 - 1,092,489
receivables
Cash and cash 875,011 - 875,011
equivalents
1,967,500 - 1,967,500
Total assets (a) 7,302,854 369,723 7,672,577
Current liabilities
Trade and other (2,105,077) - (2,105,077)
payables
Current tax liabilities (6,572) - (6,572)
Short-term loans - - -
(2,111,649) - (2,111,649)
Net current liabilities (144,149) - (144,149)
Non-current liabilities
Deferred grant income (188,043) - (188,043)
Long term provisions (12,653) - (12,653)
(200,696) - (200,696)
Total liabilities (2,312,345) - (2,312,345)
Net assets (a) 4,990,509 369,723 5,360,232
Equity
Share capital 1,314,512 - 1,314,512
Share premium account 29,145,773 - 29,145,773
Equity reserve 1,689,258 - 1,689,258
Other reserve 10,755,000 - 10,755,000
Translation reserve (b) - (13,881) (13,881)
Retained loss (a)(b) (37,914,034) 383,604 (37,530,430)
Total equity (a) 4,990,509 369,723 5,360,232
Reconciliation of equity as at 31st December, 2006
Note UK GAAP Effect of IFRS
£000 transition £000
To IFRS
£000
Net-current assets
Goodwill (a) 3,569,281 648,960 4,218,241
Property, plant and 546,509 - 546,509
equipment
Investments in (a) 562,328 90,485 652,813
associates
4,678,118 739,445 5,417,563
Current assets
Trade and other 673,998 - 673,998
receivables
Cash and cash 304,225 - 304,225
equivalents
978,223 - 978,223
Total assets (a) 5,656,341 739,445 6,395,786
Current liabilities
Trade and other (1,900,891) - (1,900,891)
payables
Tax liabilities (34,762) - (34,762)
Short-term loans (1,634,637) - (1,634,637)
(3,570,290) - (3,570,290)
Net current liabilities (2,592,067) - (2,592,067)
Non-current liabilities
Deferred grant income (188,943) - (188,943)
Long term provisions (49,282) - (49,282)
(237,325) - (237,325)
Total liabilities (3,807,615) - (3,807,615)
Net assets (a) 1,848,726 739,445 2,588,171
Equity
Share capital 1,314,654 - 1,314,654
Share premium account 29,150,563 - 29,150,563
Equity reserve 1,795,971 - 1,795,971
Other reserve 10,755,000 - 10,755,000
Translation reserve (b) - (92,375) (92,375)
Retained loss (a)(b) (41,167,462) 831,820 (40,335,642)
Total equity (a) 1,848,726 739,445 2,588,171
Reconciliation of profit for the six months ended 30th June, 2006
Note UK GAAP Effect of IFRS
£000 transition £000
To IFRS
£000
Continuing operations
Revenue 7,731 - 7,731
Cost of sales (5,412) - (5,412)
Gross profit 2,319 - 2,319
Administrative expenses (a) (3,299,629) 324,480 (2,975,149)
Share of results of (a) (171,346) 45,243 (126,103)
associates
Operating loss (a) (3,468,656) 369,723 (3,098,933)
Investment revenues 40,304 - 40,304
Finance costs (1,028) - (1,028)
Loss before taxation (a) (3,429,380) 369,723 (3,059,657)
Tax 227,179 - 227,179
Loss for the period (a) (3,202,201) 369,723 (2,832,478)
Reconciliation of profit for the year ended 31st December, 2006
Note UK GAAP Effect of IFRS
£000 transition £000
To IFRS
£000
Continuing operations
Revenue 68,469 - 68,469
Cost of sales (47,928) - (47,928)
20,541 - 20,541
Gross profit
Administrative expenses (a) (6,403,496) 648,960 (5,754,536)
Share of results of (a) (372,487) 90,485 (282,002)
associates
Operating loss (a) (6,755,442) 739,445 (6,015,997)
Investment revenues 44,835 - 44,835
Finance costs (36,637) - (36,637)
Loss before taxation (a) (6,747,244) 739,445 (6,007,799)
Tax 370,109 - 370,109
Loss for the period (a) (6,377,135) 739,445 (5,637,690)
a. IAS 38 - Goodwill
IAS 38 requires goodwill to be frozen as at the date of transition to IFRS, 1st
January, 2006, and to be subject to review for impairment rather than regular
amortisation. Previously amortised amounts for the period ended 30th June, 2006
and the year ended 31st December, 2006 of £324,480 and £648,960 respectively
have been reversed in the transition to IFRS in the income statement. The
effect of the transition on the balance sheets is £324,480 and £648,960
respectively.
In addition, the company has treated goodwill in respect of its investment in
Intronn Inc. in a similar manner. Previously amortised amounts for the period
ended 30th June, 2006 and the year ended 31st December, 2006 of £45,243 and £
90,485 respectively have been reversed in the transition to IFRS in the income
statement. The effect of the transition on the balance sheet is £45,243 and £
90,485 respectively.
b. IAS 21 - Foreign exchange
In addition the group discloses from 1 January 2006 onwards the cumulative
currency translation adjustment as part of the `translation reserve'. The
cumulative currency translation adjustments for 30 June 2006, 31 December 2006
and 30 June 2007 are £13,881 (loss), £92,375(loss) and £76,766 (gain)
respectively. These adjustments have been transferred to the translation
reserve from the retained loss.
Adjustments to cash flow statement
Apart from changes in format, the main change in presentation is (a) the
reversal of previously amortised goodwill which has a net impact of nil on cash
from operations.
Copies of this report are being sent to all shareholders and copies are
available from the Company's registered office at Coveham House, Downside
Bridge Road, Cobham, Surrey KT11 3EP.
2. Loss per share from continuing operations
The calculation of the basic and diluted loss per share is based on the
following data:
Unaudited Unaudited Unaudited
first half first half full year
2007 2006 2006
£000 £000 £000
Loss
Loss for the purpose of basic loss per (2,320,876) (2,832,478) (5,637,667)
share being net loss attributable to
equity holders of the parent
Number of shares No. No. No.
Weighted average number of ordinary 131,465,447 131,451,147 131,467,466
shares for the purpose of basic loss
per share
Share options - - -
Weighted average number of ordinary 131,465,447 131,451,147 131,467,466
shares for the purposes of diluted
loss per share
IAS 33 requires presentation of diluted EPS when a company could be called upon
to issue shares that would decrease net profit or increase net loss per share.
For a loss making company with outstanding share options, net loss would only
be increased by the exercise of out-of-the-money options. Since it seems
inappropriate to assume that the option holders would act irrationally, no
adjustment has been made to diluted EPS for out-of-the-money share options.
3. Note to the consolidated cash flow statement
Unaudited Unaudited Unaudited
first half first half full year
2007 2006 2006
£000 £000 £000
Operating loss (2,395,852) (3,098,933) (6,015,997)
Adjustments for:
Depreciation of property, plant and 83,132 157,923 291,682
equipment
Share of (profit)/loss of associates (62,742) 126,103 282,002
Share-based payment expense 131,016 355,948 462,661
Operating cash flows before movements (2,244,446) (2,458,959) (4,979,652)
in working capital
Decrease/(increase) in receivables 39,211 (9,298) (924)
Increase/(decrease) in payables 219,147 659,789 574,318
Decrease in provisions (29,821) (91,284) (54,655)
Cash used in operations (2,015,909) (1,899,752) (4,460,913)
4. Consolidated statement of changes in equity
Six months Six months Year ended
ended ended 31st
30th June 30th June December
2007 2006 2006
£ £ £
Total recognised income and expense (2,244,110) (2,846,359) (5,730,065)
for the period
Effect of share-based payment 131,016 355,948 462,661
adjustment
New share capital subscribed - - 4,932
Equity shareholders' funds brought 2,588,171 7,850,643 7,850,643
forward
Equity shareholders' funds carried 475,077 5,360,232 2,588,171
forward
Friday, 10th January 2025
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