Full Year Results for the year ended 31 Dec 2016

RNS Number : 2777B

NetScientific PLC

03 April 2017

 

 3 April 2016

NetScientific plc

("NetScientific" or the "Group")

NetScientific Full Year Results for the year ended 31 December 2016

London, UK - 3 April 2017 - NetScientific plc (AIM: NSCI), the transatlantic healthcare IP commercialisation Group, announces its audited full year results for the year ended 31 December 2016.

Operational highlights:

Portfolio progress:

·      Vortex BioSciences

o  Gained CE Mark and FDA Class 1 Registration for its liquid biopsy VTX-1 system

o  Studies presented at the American Association for Cancer Research (AACR) support the application of Vortex's VTX-1 product

o  Leading advisors appointed to the Scientific Advisory Board led by Massimo Cristofanilli, M.D.

o  Appointment of Deborah Neff, ex Chief Operating Officer of Complete Genomics, as Non-Executive Director

o  Exclusive license of a series of four patents covering a novel cell electroporation technology from Harvard University

o  Co-founder and Chief Scientific Advisor, Professor Dino Di Carlo, received the US Presidential Early Career Award for Scientists and Engineers, for devising a first-of-its-kind technique

·      Glycotest

o  Medical Advisory Board formed, including leading experts in liver disease to advise on the development of diagnostic test for liver related diseases

o  Strengthened its intellectual property portfolio with Japanese Patent grant

o  HCC Panel clinical validation study plan developed, with investigators and sites identified

·      ProAxsis

o  Successfully registered a CE Mark to enable commercialisation in laboratories of its respiratory test, a novel ProteaseTag^® Active Neutrophil Elastase Immunoassay (NE), for chronic respiratory diseases including COPD and Cystic Fibrosis

o  Established a leading Scientific Advisory Board to support the development of its ProteaseTag^® activity-based immunoassays and point-of-care tests

o  NE immunoassay highlighted as highly predictive for future respiratory exacerbations in University of Dundee publication (American Journal of Respiratory and Critical Care Medicine, December 2016)

o  Company awarded research grants from BioMedical Catalyst, Invest Northern Ireland and Innovate UK

·      Wanda

o  Foad Dabiri was appointed Chief Executive Officer, taking over from Steve Curd, to refocus Wanda on its core strategy and progress the Company through its commercialisation phase

o  Formation of Scientific Advisory Board, including distinguished physicians, health economics scientists, and technologists

o  Signed contract with Health Resource Solutions, enabling the organisation to use WANDA's chronic condition digital management platform to provide improved at home care to its patients

o  Wanda selected by Los Angeles-based 24Hr HomeCare to provide its predictive analytics and behavioural guidance technology to improve outcomes for at risk-patients and reduce hospital readmissions

o  Collaborative deal with one of the US's biggest hospital groups, Dignity Health, to launch OncoVerse, the first ever digital health oncology care platform

·      PDS Biotechnology

o  Positive Phase I study results for its PDS0101 immunotherapy for HPV-related cancers and initiates planning for upcoming Phase II clinical trials in several HPV-related cancers

o  Signed a Co-operative Research and Development Agreement with the National Cancer Institute, a division of the US National Institutes of Health, to co-develop novel cancer immunotherapies through Phase II clinical trials

o  Appointed Dr Robert Shepard, M.D., F.A.C.P. as Chief Medical Officer and Dr Panna L. Dutta, Ph.D. as Vice President of Drug Development and Manufacturing

o  NetScientific converts warrants and loan to increase shareholding from 14.85% to 17.4%

Corporate highlights:

·      Appointment of Ian Postlethwaite as Chief Financial Officer

·      Professor Stephen Smith joined the Board as Non-Executive Director of NetScientific

Financial highlights:

·      Loss after tax of £13.1m (2015: loss £12.7m) reflecting the business model, where the portfolio companies are largely subsidiaries developing their technologies and are therefore currently loss making

·      Available cash resources of £9.5m (at 31 December 2015: £23.2m). Cash used in operations, was £12.9 million (2015: £10.7 million)

Post year end highlights:

·      Vortex BioSciences

o  Liquid biopsy VTX-1 commercially launched in 2017

·      Glycotest

o  Peer review publication: "Changes in the glycosylation of kininogen and the development of a kininogen based algorithm for the early detection of HCC"

Commenting on the Group's 2016 full year results, Francois Martelet, CEO of NetScientific, said: "NetScientific is a strong healthcare IP commercialisation group with a world-class portfolio of disruptive technologies, led by experienced management teams.

"2016 was a year of execution, where we focused on delivering the individual development milestones within each of our portfolio companies, paving the way in 2017 for continued progress and maturation of our investments.

"We continue to believe that we have a world-class portfolio of companies, experienced and relevant management teams and the business and financing strategies to support their development and attract the necessary third-party validation capital."  

Meeting and conference call for analysts

Francois Martelet, Chief Executive Officer, and Ian Postlethwaite, Chief Financial Officer, will hold a presentation and simultaneous conference call with Q&A for analysts today at 09:30 at Stifel's offices, 150 Cheapside, London, EC2V 6ET. Gene Walther, Chief Executive Officer of Vortex BioSciences, and Foad Dabiri, Chief Executive Officer of WANDA, will join via the conference call to give updates on the progress of their respective businesses. The presentation will be available on NetScientific's website shortly before the call at http://netscientific.net/investors/presentations.

Participant dial-in: 08006940257

International dial-in: [phone]

Participant code: 67358107

For more information, please contact:

NetScientific François R. Martelet, M.D., CEO Ian Postlethwaite, CFO	Tel: [phone]
Stifel Nicolaus Europe Limited (NOMAD and broker) Jonathan Senior/ David Arch/ Ben Maddison	Tel: [phone]
Consilium Strategic Communications Mary-Jane Elliott / Jessica Hodgson / Chris Welsh / Laura Thornton	Tel: [phone] [e-mail]

About NetScientific

NetScientific is a transatlantic healthcare technology group with an investment strategy focused on sourcing, funding and commercialising technologies that significantly improve the health and well-being of people with chronic diseases. For more information, please visit the website at www.netscientific.net

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT

NetScientific is a transatlantic healthcare IP commercialisation Group focused on sourcing, funding and commercialising technologies and companies that have the potential to treat chronic diseases and significantly improve the health and well-being of people.

The UK is the global hub for IP commercialisation with transatlantic businesses selecting the UK as listing destination due to the strength of the peer group and understanding of the sector.  NetScientific is well placed amongst its peer group to benefit from the appreciation and understanding of this sector.  The Group is highly international in its approach and differentiated by its global network and majority shareholding positions in its portfolio assets.

During 2016, the Group has continued to significantly progress its breakthrough technologies towards commercialisation, with portfolio assets across the Diagnostics, Therapeutics and Digital Health sectors. 

Great progress has been achieved with the lead portfolio companies, which are either beginning, or poised for, commercialisation. Notably, Vortex Biosciences, which is developing a novel liquid biopsy technology that aims to revolutionise cancer diagnosis, monitoring and treatment by isolating and collecting intact circulating tumour cells, launched its first product, the VTX-1 instrument, at Tri-Conference on Molecular Medicine on 21 February 2017.  NetScientific also made a further investment in PDS Biotechnology to help support the development of its novel and highly promising broad-based cancer immunotherapy, the Versamune® platform, which is about to commence multiple Phase II clinical programmes.  ProAxsis, an early warning diagnostic test for infection in cystic fibrosis and COPD patients, gained a CE Mark for its ProteaseTag immunoassay, and is preparing to launch its point-of-care (POC) test, NEATstik®, this year. Glycotest, a liver diagnostics company, completed a head-to-head clinical evaluation of its liver cancer panel which demonstrated significantly better results versus the current industry standard, with further development of commercial grade kits for CLIA laboratory use underway. Another important milestone in 2016 was Wanda's collaboration with Dignity Health, Inc. on Oncoverse, a virtual care and treatment plan for cancer patients. Dignity Health manages one of the largest healthcare systems in the US.

Vortex Biosciences

Vortex Biosciences gained a CE Mark approval for its VTX-1 instrument during the period, and VTX-1 was registered as a Class I medical Device with the FDA. Vortex published key results in the November 2016's edition of the journal, Oncotarget, showing that its next-generation circulating tumour cells (CTC) capture system helped enhance the clinical assessment of a cancer's mutation profile and metastatic status. Combining CTC capture and analysis, with separate and complementary evaluation of cfDNA (circulating free DNA), offers a better understanding of dynamic tumour profiles and a patient's disease. Both of these were significant milestones on the path towards making the VTX-1 instrument commercially available in early 2017 and generating sales into the clinical market in the US.

Wanda

Wanda, our lead digital health company, has developed an artificial intelligence (AI) platform for remote patient monitoring that enables care teams to help patients live longer, with more efficient and lower cost care. In 2016, significant efforts were made to establish contracts and patient user plans in the home care, nursing, direct-to-consumer and B2B segments. Initial client base results have demonstrated the power of Wanda's in-line predictive analytic capabilities in managing patients with chronic disease conditions. 

Wanda has been able to agree a number of deals with clients across a broad cross-section of home healthcare providers, but has faced a number of commercial headwinds in determining the best route forward for optimal revenue and profit generation. During the previous 12 months, despite an upgraded product suite, the company has achieved only limited business traction and revenues in the market have been below expectations. This, in combination with the competitive, complex and fast-changing digital health commercial environment has made gaining momentum difficult.  Based on a strategic review, we took the decision to restructure the Company to focus on its core capabilities. Foad Dabiri, Wanda's Chief Technology Officer, was recently promoted to Chief Executive Officer to lead Wanda based on his strong expertise in the digital health sector.

Also as a result of an in-house impairment review, we have taken a provision in these results on the debt provided to Wanda, reducing the outstanding debt from £8.8 million to £3.8 million.  This has no impact at Group level, but is nevertheless significant at Company level.

OncoVerse is a digital health platform designed to enable cancer patients' care teams to collaborate in real-time to allow clinicians across all disciplines to work together to determine the most effective treatment plan for cancer patients. OncoVerse was initially conceived by a Dignity Health physician who wanted a tool to improve team collaboration, especially when evaluating a complex cancer case and determining the appropriate patient treatment plan. Dignity Health engaged Wanda to develop the software due to the Company's proven track record supporting informed treatment decisions and reducing administrative costs. The collaboration with Dignity Health is now well advanced and the concept attracts interest from major corporations.

PDS Biotechnology

PDS Biotechnology continued to see strong progress with its T-cell activating technology platform, Versamune®, which combines three critical attributes for an effective immunotherapy: T-cell induction, reduced tumour suppression and priming of a potent anti-tumour response without the conventional associated toxicities. PDS's oncology pipeline includes compounds for prostate, ovarian, breast and colorectal cancers, in addition to its lead PDS0101 programme for several HPV-related cancers. PDS made some important advances through the year in progressing its lead Versamune® T-cell Activating platform, and presented results at a number of conferences (most recently PDS0101 Phase I/IIa data from a number of HPV-induced cancers at the Society for Immunotherapy of Cancer meeting in November 2016). A key event for the company was the meeting with the FDA in August 2016 regarding the design of the Phase II clinical studies in several HPV related cancers. 

Glucosense

Glucosense, our smallest portfolio company and the focus of minimal investment in the period was dissolved after it had reached a go/no-go point and failed to replicate its initial in vitro results. The investment in Glucosense totalled only £0.7m in equity and loans.

Seed Portfolio

During the year, the company reviewed its portfolio of five seed stage investments (the 'Seed Portfolio'). The review concluded that there were no plans to invest additional funds in the Seed Portfolio because it was unlikely that NetScientific's investment criteria of gaining initial majority control would be achieved. Limited investment has been made to date, mostly in the form of convertible loans. Nevertheless, these investments are reviewed periodically in tandem with the companies' business plans and progress.

Conclusion

In summary, 2016 saw continued progress across most of the portfolio as the companies strengthen their individual positions working toward raising new funds. Additionally, NetScientific continues to evaluate new opportunities for investment, as it moves new technologies towards an eventual valuable exit in line with business strategy.

Finance

For the year, the Group made a loss of £13.1 million (2015: loss £12.7 million) which is split between continuing and discontinued operations as follows:

-               Continuing operations       £12.4 million (2015: £10.4 million)

-               Discontinued operations   £0.7 million (2015: £2.3 million)

The loss reflects the business model, where the portfolio companies are largely subsidiaries developing their technologies and are therefore currently loss making.

Cash

Cash on the balance sheet as at 31 December 2016 was £9.5 million (2015: £23.2 million). Cash used in operations, was £12.9 million (2015: £10.7 million).

Going concern

The Directors have prepared and reviewed budget forecasts which were approved by the board of directors in the board meeting of March 2017. The budget considered amongst other things the timing of the Series A funding rounds of the subsidiary companies and the cash position of the Group at the beginning of 2017.  After due consideration of these forecasts and current cash resources, the Directors consider that the Company and Group have adequate financial resources to continue in operational existence for the foreseeable future (being at least twelve months from the date of this report), and for this reason the financial statements have been prepared on a going concern basis.

Board changes

Peter Thoms stepped down as NetScientific Chief Financial Officer on 26th January 2016, and we thank him for his contribution to the Group.

On 17 February 2016, the Group was pleased to announce the appointment of Professor Stephen Smith as Non-Executive Director. Stephen has held senior leadership roles in the NHS and academia. He has had a long and distinguished career as a clinician scientist, Head of Department, Dean and CEO with the Medical Research Council, University of Cambridge, Imperial College, London and Imperial College Healthcare NHS Trust. During his career, Stephen has also spun out two companies from Cambridge University - Metris Therapeutics Ltd and GNI Group Ltd. GNI was established as a start up in Japan in 2001 and successfully achieved an Initial Public Offering (IPO) on the Tokyo Stock Exchange six years later.

 On 15 June 2016, Ian Postlethwaite was appointed Chief Financial Officer of the Group. Ian had been the Finance Director of Allergy Therapeutics plc for 14 years and was a significant contributor to the success of the company. During that time, Allergy Therapeutics listed on AIM, achieved a number of financial goals, including two fund raisings in 2015 to support the Company's clinical and other development plans, and grew revenues from products on sale in Europe.

Summary and Outlook

In 2016, the NetScientific Group delivered on a number of development milestones critical to enhance the competitiveness and value of the individual portfolio companies. Whilst new pipeline opportunities will continue to be reviewed, the aim in 2017 is to focus on the growth of the Company on a number of levels, including further maturation of each lead portfolio Company's platform, including striking corporate deals in order to underline a coherent strategy and progression towards translation of technology success into commercial success. We continue to believe that we have a world-class portfolio of companies, experienced and relevant management teams and the business and financing strategies to support their development and attract the necessary third-party validation capital.

Sir Richard Sykes	Francois R. Martelet, M.D.
Non-Executive Director and Chairman	Chief Executive Officer
31 March 2017	31 March 2017

Consolidated Income Statement

For the year ended 31 December 2016

	Notes		2016 £000's		2015 restated £000's
Continuing Operations
Revenue			518		21
Cost of sales			(255)		(6)
Gross profit			263		15
Other operating income			68		44
Research and development costs			(7,443)		(6,838)
General and administrative costs			(5,001)		(2,843)
Other costs			(316)		(887)
Loss from operations			(12,429)		(10,509)
Finance income			94		77
Finance expense			(8)		-
Share of loss of associates			(49)		-
Loss before taxation			(12,392)		(10,432)
Income tax (charge)/credit			(18)		12
Loss for the year from continuing operations			(12,410)		(10,420)
Discontinued Operations
Loss for the year from discontinued operations			(666)		(2,326)
Total loss for the year			(13,076)		(12,746)
Owners of the parent			(11,195)		(10,842)
Non-controlling interests			(1,881)		(1,904)
			(13,076)		(12,746)
Basic and diluted loss per share from continuing and discontinued operations attributable to owners of the parent during the year:	4
Continuing operations			(20.8p)		(24.4p)
Discontinued operations			(1.1p)		(4.0p)
From loss for the year			(21.9p)		(28.4p)

Consolidated Income Statement and Other Comprehensive Income

For the year ended 31 December 2016

			2016           £000's		2015           £000's
Loss for the year			(13,076)		(12,746)
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations			634		134
Total comprehensive loss for the year			(12,442)		(12,612)

Attributable to:
Owners of the parent			(10,084)		(10,596)
Non-controlling interests			(2,358)		(2,016)
			(12,442)		(12,612)

All other comprehensive income will be reclassified to retained earnings on the ultimate sale of any relevant subsidiary or investment company.

Consolidated Statement of Financial Position

As at 31 December 2016

	Notes		2016 £000's		2015 £000's
Assets
Non-current assets
Property, plant and equipment			779		285
Investments in equity accounted associates			357		-
Available for sale investments	6		2,863		1,807
Derivative financial assets			18		100
Other receivables			37		754
Total non-current assets			4,054		2,946
Current assets
Trade and other receivables			1,578		560
Cash and cash equivalents			9,456		23,239
Total current assets			11,034		23,799
Total assets			15,088		26,745
Liabilities Current liabilities
Trade and other payables			(2,044)		(2,156)
Loans and borrowings			(128)		(50)
Total current liabilities			(2,172)		(2,206)
Non-current liabilities
Loans and borrowings			(80)		-
Total non-current liabilities			(80)		-
Total liabilities			(2,252)		(2,206)
Net assets			12,836		24,539
Issued capital and reserves Attributable to the parent
Called up share capital			2,554		2,554
Share premium account			47,233		47,233
Capital reserve account			237		237
Foreign exchange reserve			1,802		691
Retained earnings			(35,115)		(24,371)
Equity attributable to the owners of the parent			16,711		26,344
Non-controlling interests			(3,875)		(1,805)
Total equity			12,836		24,539

Consolidated Statement of Changes in Equity

As at 31 December 2016

							Shareholders' equity
	Share capital £000's	Share premium £000's		Capital reserve £000's		Retained earnings £000's	Foreign exchange reserve £000's	Total £000's	Non- controlling interests £000's		Total equity £000's
1 January 2015	1,795	30,845		237		(13,529)	446	19,794	(1,098)		18,696
Loss for the year	-	-		-		(10,842)	-	(10,842)	(1,904)		(12,746)
Other comprehensive income
Foreign exchange differences	-	-		-		-	245	245	(111)		134
Total comprehensive income	-	-		-		(10,842)	245	(10,597)	(2,015)		(12,612)
Increase in subsidiary shareholding	-	-		-		(171)	-	(171)	220		49
Disposal of subsidiaries	-	-		-		-	-	-	1,088		1,088
Issue of share capital	759	17,450		-		-	-	18,209	-		18,209
Costs of share issue	-	(1,062)		-		-	-	(1,062)	-		(1,062)
Share-based payments	-	-		-		171	-	171	-		171
31 December 2015	2,554	47,233		237		(24,371)	691	26,344	(1,805)		24,539
Loss for the year	-		-	-	(11,195)		-	(11,195)	(1,881)	(13,076)
Other comprehensive income
Foreign exchange differences	-		-	-	-		1,111	1,111	(477)	634
Total comprehensive income	-		-	-	(11,195)		1,111	(10,084)	(2,358)	(12,442)
Decrease in subsidiary shareholding	-		-	-	39		-	39	(20)	19
Disposal of subsidiaries	-		-	-	171		-	171	308	479
Share-based payments	-		-	-	241		-	241	-	241
31 December 2016	2,554		47,233	237	(35,115)		1,802	16,711	(3,875)	12,836

Consolidated Statement of Cash Flows

As at 31 December 2016

			2016 £000's		2015 £000's
Cash flows from operating activities
Loss after income tax including discontinued operations			(13,076)		(12,746)
Adjustments for:
Depreciation of property, plant and equipment			141		130
Amortisation of intangible assets			-		55
Loss on disposal of property, plant and equipment			(1)		3
Share of loss of associates and joint venture			49		400
Gain on sale of associates and joint venture			-		(214)
Loss on disposal of subsidiaries			483		508
Impairment of intangible assets			-		191
Provision against recoverability of loan			75		177
Share-based payments			241		171
Bad debt written off			-		4
Foreign exchange gains			(121)		(85)
Finance income			(94)		(77)
Finance costs			8		50
Tax charge			18		(108)
			(12,277)		(11,541)
Changes in working capital
Increase in trade and other receivables			(237)		(55)
(Decrease)/Increase in trade and other payables			(364)		882
Cash used in operations			(12,878)		(10,714)
Income tax received			94		83
Net cash used in operating activities			(12,784)		(10,631)
Cash flows from investing activities
Investment in joint venture			-		(35)
Investment in associate			(363)		(25)
Proceeds from sale of associate			-		25
Disposal of discontinued subsidiaries, net of cash disposed of			-		(108)
Purchase of property, plant and equipment			(470)		(137)
Proceeds from sale of property, plant and equipment			13		1
Purchase of intangible assets			-		(164)
Interest received			46		38
Purchase of available for sale investments			(898)		-
Net cash used in investing activities			(1,672)		(405)

Cash flows from financing activities
Proceeds from borrowings			50		50
Proceeds on change in subsidiary shareholding			20		1
Proceeds from share issue			-		18,208
Share issue cost			-		(1,062)
Net cash from financing activities			70		17,197
(Decrease) / increase in cash and cash equivalents			(14,386)		6,161
Cash and cash equivalents at beginning of year			23,239		16,866
Exchange gains on cash and cash equivalents			603		212
Cash and cash equivalents at end of year			9,456		23,239

Notes to the Financial Information for the Year Ended 31 December 2016

1.             GENERAL INFORMATION

The Company is a public limited company incorporated on 12 April 2012 and domiciled in England with registered number 08026888 and its shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

2.             BASIS OF PREPARATION

The preliminary results of the year ended 31 December 2016 have been extracted from audited accounts which have not yet been delivered to the Registrar of Companies.

The Financial Information set out in this announcement do not constitute statutory accounts for the year ended 31 December 2016.

The report of the auditors on the statutory accounts for the year ended 31 December 2016 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The Financial Statements for the year ended 31 December 2016 included in this announcement were authorised for issue in accordance with a resolution of the Board of Directors on 31 March 2017.

3.             SIGNIFICANT ACCOUNTING POLICIES

The Group financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union that are effective for accounting periods beginning on or after 1 January 2016.

While the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement does not in itself contain sufficient information to comply with IFRS.

4.             LOSS PER SHARE

The basic and diluted loss per share is calculated by dividing the loss for the financial year by the weighted average number of ordinary shares in issue during the year. Potential ordinary shares from outstanding options at 31 December 2016 of 3,412,324 (see note 26) are not treated as dilutive as the entity is loss making.

		2016 £000's		2015 £000's
Loss attributable to equity holders of the Company
Continuing operations		10,623		9,310
Discontinued operations		572		1,532
Total		11,195		10,842
Number of shares
Weighted average number of ordinary shares in issue		51,075,695		38,228,552

5.             INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

                The Group had the following subsidiaries at 31 December 2016:

Name	Primary trading address	Country of incorporation or registration	Proportion of ownership interest at 31 December 2016	Proportion of ownership interest at 31 December 2015	Proportion of ownership interest held by non-controlling interests at 31 December 2016	Proportion of ownership interest held by non-controlling Interests at 31 December 2015
NetScientific UK Limited	(a)	UK	100%	100%	-	-
ProAxsis Ltd	(b)	UK	56.5%	56.5%	43.5%	43.5%
Glucosense Diagnostics Limited* (iv)	(a)	UK	60.7%	60.7%	39.3%	39.3%
Healthbox Israel LLP (ii)	(a)	UK	50%	50%	50%	50%
IsraelScientific Ltd	(a)	UK	100%	100%	-	-
NetScientific America, Inc.	(c)	USA	100%	100%	-	-
Vortex BioSciences, Inc. (i)	(d)	USA	95%	95%	5%	5%
Wanda, Inc. (i)(iii)	(e)	USA	70.9%	71.3%	29.1%	28.7%
Glycotest, Inc. (i)	(f)	USA	87.5%	87.5%	12.5%	12.5%

For all undertakings listed above, the country of operation is the same as its country of incorporation or registration.

All of the ownerships shown above relate to ordinary shareholdings.

(i)         Options have been issued by Vortex BioSciences, Inc., Wanda, Inc. and Glycotest, Inc. which if exercised would dilute the Company's shareholding by 30%, 11% and 21% respectively.

(ii)        The Group holds 50% of the voting shares and has the casting vote. The Group is entitled to 80% of profits subsequent to repayments of capital and member operational expenses.

(iii)       Following issue of further shares during the year the Group's interest was reduced to 70.9% on 31 July 2016.

(iv)       An application to strike-off Glucosense Diagnostics Limited was filed shortly after the year end.

6.             AVAILABLE FOR SALE INVESTMENTS

Represent unquoted equity securities
		2016 £000's		2015 £000's
At 1 January		1,807		1,807
Warrant exercised		100		-
Additions		956		-
At 31 December		2,863		1,807

Name	Country of incorporation	% of issued share capital	Currency denomination	£000's
PDS Biotechnology Corporation	USA	17.4%	US$	2,713
CytoVale, Inc.	USA	2.15%	US$	150
Other				-
				2,863

Valuation of unquoted equity investments

The fair value of unlisted securities is established using International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG). Given the nature of the Group's investments in seed, start-up and early-stage companies, where there are often no current and no short-term future earnings or positive cash flows, it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts.

The Group considers that fair value estimates that are based entirely on observable market data will be of greater reliability than those based on assumptions and accordingly where there has been any recent investment by third parties, the price of that investment will generally provide a basis of the valuation. Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment.

The length of period for which it remains appropriate to use the price of recent investment depends on the specific circumstances of the investment and the stability of the external environment. Where the Group considers that the price of recent investment, unadjusted, is no longer relevant and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment based on milestone analysis and/or industry and sector analysis. In applying the milestone analysis approach to investments in companies in early or development stages the Group seeks to determine whether there is an indication of change in fair value based on a consideration of performance against any milestones that were set at the time of the original investment decision, as well as taking into consideration the key market drivers of the investee company and the overall economic environment.

If there is no readily ascertainable value from following the 'price of recent investment' methodology, the Group considers alternative methodologies in the IPEVCVG guidelines, being principally discounted cash flows and price-earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value. Factors which the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and market introduction.

Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired.

At present, there is a significant range of possible fair value estimates and the probabilities of the various estimates cannot be reliably measured.

The investment includes a warrant with an identified fair value of £18k. This has been separately recognised.

 

END

 

 

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