Preliminary Results for the Year Ended 31 Dec 2015

RNS Number : 5824W

Oxford Biomedica PLC

28 April 2016

 

OXFORD BIOMEDICA: PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

Oxford, UK - 28 April 2016: Oxford BioMedica plc (LSE: OXB), ("OXB" or "the Group"), a leading gene and cell therapy group, today announces its preliminary financial results for the twelve months ended 31 December 2015.

OPERATIONAL HIGHLIGHTS (including post-period end):  

•     Strong progress from LentiVector^® delivery platform

•     Portfolio review in Q1 2016: focus on OXB-102, OXB-202 and OXB-302

•     OXB-102: On track for Phase I/II study in Parkinson's disease

•     OXB-202: Phase I/II study preparations continued; CTA filing planned for 2016 in corneal graft rejection

•     OXB-302: pre-clinical data demonstrates efficacy in tumour challenge model (CAR-T 5T4)

•     OXB-201 safety, tolerability, dose responsive protein expression in eye

•     Lentiviral vector production volumes increased by 71%

•     Investment in people, facilities and plant

•     Headcount increased from 134 to 231

•     New Yarnton facility operational

•     Harrow House extension and Windrush Court laboratories currently being validated

•     Partnerships broadened

•     Novartis extend beyond CTL019 with second CAR-T product

•     Immune Design LV305 collaboration extended and new IP licence

•     GSK acquired IP licence for two rare disease product candidates

•     Board strengthened

•     Dr Lorenzo Tallarigo joined as Chairman and Stuart Henderson joins as non-executive Director and Chair of Audit Committee in February 2016 and June 2016, respectively.

FINANCIAL HIGHLIGHTS⁽¹⁾:

•     28% growth in gross income ⁽²⁾ from £14.7 million to £18.8 million

•     72% growth in income from process development and bioprocessing from £7.2 million to £12.4 million

•     Loss and total comprehensive expense for the year £13.0 million (2014: £8.7 million)

•     £14.9 million cash used in operations (2014: £7.4 million)

•     £16.7 million capital expenditure (2014: £5.6 million)

•     £9.4 million cash at 31 December 2015 (2014: £14.2 million); £7.6 million net proceeds from placing in February 2016

⁽¹⁾       Audited financial results

⁽²⁾       Aggregate of Revenue and Other operating income

Commenting on the financial results, John Dawson, Chief Executive officer of Oxford BioMedica, said: "Oxford BioMedica is ideally placed to capitalise on the rapid progress that is ongoing across the gene and cell therapy sector. We have a unique lentiviral vector delivery platform, LentiVector^®, based on our intellectual property, expert staff, and state-of-the-art facilities and equipment.  This platform is at the core of our business, enabling us to build a leading gene and cell therapy presence with both our own proprietary product candidates and, as the partner-of-choice for other companies operating in the sector, a long term economic interest in an increasing number of partners' products.

"The outlook for the business is excellent and I look forward to further success in 2016 as we advance our focused in-house pipeline, look forward to progress with our partners' programmes, and secure further partnerships."

Conference call for analysts

A briefing for analysts will be held at 11am GMT on 28 April 2016 at the offices of Consilium
Strategic Communications, 41 Lothbury, London, EC2R 7HG. There will be a simultaneous live conference call with Q&A and the presentation will be available on the Group's website at www.oxfordbiomedica.co.uk.

Please visit the website approximately 10 minutes before the conference call, at 11am GMT, to download the presentation slides. Conference call details:

Participant dial-in: 08006940257
International dial-in: [phone]
Participant code: 61358755

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

For further information, please contact:

Oxford BioMedica plc:    Tel: [phone]

John Dawson, Chief Executive Officer
Tim Watts, Chief Financial Officer

Financial PR Enquiries:  Tel: [phone]

Mary-Jane Elliott / Matthew Neal / Chris Welsh / Laura Thornton   
Consilium Strategic Communications

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.

Notes for editors

About Oxford BioMedica^®

Oxford BioMedica (LSE:OXB) is a leading gene and cell therapy company focused on developing life changing treatments for serious diseases. Oxford BioMedica has built a sector leading lentiviral vector delivery platform (LentiVector^®) through which the Group develops in vivo and ex vivo products both in-house and with partners. The Group has created a valuable proprietary portfolio of gene and cell therapy product candidates in the areas of oncology, ophthalmology and CNS disorders. The Group has also entered into a number of partnerships, including with Novartis, Sanofi, GSK, and Immune Design, through which it has long-term economic interests in other potential gene and cell therapy products. Oxford BioMedica is based across several locations in Oxfordshire, UK and employs more than 230 people. Further information is available at www.oxfordbiomedica.co.uk.

CHAIRMAN'S STATEMENT

Having joined the Group as the new Chairman of Oxford BioMedica in February 2016, I am pleased to have the opportunity to report on the Group's significant achievements during the past year. The gene and cell therapy sector is continuing to advance at considerable pace and, as one of the pioneers in the field, Oxford BioMedica is well placed to capitalise on this growth and generate significant value across its integrated business. This is what attracted me to Oxford BioMedica.

Focusing our strategy

There have been very significant developments in the sector and at the Group over the past eighteen months and the management team and the Board has recently conducted a review to ensure that our business model and strategy are both clear and robust. Our conclusions from this review are that the Group has, over its 20 year existence, created and is continuing to develop a highly-valuable lentiviral vector gene delivery platform (LentiVector^®). The platform is based on our unique combination of patents and know-how, expert and experienced employees and state-of-the-art bioprocessing and laboratory facilities. We are using the LentiVector^® platform to develop our own focused portfolio of gene and cell therapy product candidates. We can also partner with other companies to help them develop better gene and cell therapy products more quickly than they could without our LentiVector^® platform, in return for which we can obtain short and long-term economic interest in their products. We are already partner-of-choice for leading companies in the gene and cell therapy sector including Novartis, Sanofi, GSK and ImmuneDesign. We are also in specific discussions with further potential partners. The gene and cell therapy sector is now set to grow rapidly and the LentiVector^® platform is our path to creating valuable products for patients and sustainable shareholder value.

During 2015 and early 2016 we also conducted a portfolio review of our in-house product candidates. Taking into consideration a full range of factors such as probability of technical success, time to market, and value to patients we have made the decision to prioritise our portfolio and focus our efforts in clinical development on three product candidates: OXB-102, for the treatment of advanced Parkinson's disease; OXB-202, for the prevention of patients becoming permanently blinded by recurrent corneal graft rejection;  and OXB-302, a novel CAR-T cell approach to targeting solid cancer tumours. During 2015 we made good progress with these product candidates as we completed pre-clinical and toxicological studies with OXB-102 and OXB-202 and started preparing for their clinical studies. In the next 12 months we expect both OXB-102 and OXB-202 to begin Phase I/II clinical studies and we will receive pre-clinical results for OXB-302.

Our LentiVector^® delivery technology also meets an important strategic need in the broader gene and cell therapy sector which, having expanded rapidly in recent years, has outgrown available development and bioprocessing resources. By providing partners with access to our expanded world-class facilities, expertise and industry-leading intellectual property, we have the opportunity to generate near and medium-term revenues as well as longer-term value-sharing through royalty payments. Consequently, we have the potential to support the ongoing development of our wholly-owned portfolio and to provide future income based on the success of partners' products. In 2015, we continued to perform strongly in our CTL-019 contract with Novartis and we expanded our work with this industry leader when they entrusted to us a second CAR-T product candidate. In addition, our expanded collaboration and new IP licence with Immune Design further validates the demand from partners to access our capabilities and IP, and we expect to be able to announce further collaborations during the course of 2016. We also made good progress with GSK who during the year exercised their option on two of the targets covered by Oxford BioMedica's IP license.

Financing the strategy

At the end of 2014 and during 2015 Oxford BioMedica embarked on a major capacity expansion programme which the Group financed by raising a $50 million loan facility from Oberland Capital. This expansion programme is now virtually complete and we are in a position to exploit our new state-of-the-art facilities to grow the business by supporting partners' product development and bioprocessing requirements.

During this important expansion phase we are grateful to our shareholders for their support for our strategy and we look forward to their continued support as we transition towards a self-sustaining business.

We estimate that we have sufficient cash to last well into the third quarter of 2016, without including any potential inflows from further contracts or licence agreements. We have confidence that we will be able to secure adequate further cash but, as this is not yet committed, these circumstances create a material uncertainty and I draw readers' attention to the going concern statement in the Financial Review and in Note 1 to the Preliminary Financial Information.

Encouraging outlook

After a significant period of development across the wider gene and cell therapy sector, I believe that the field is now truly coming of age, and the ex vivo cell therapy sector in particular is beginning to deliver on its promise. With our sector leading LentiVector^® platform, Oxford BioMedica is well placed to capitalise on this growth, and our significant investment in facilities, expertise and intellectual property is advancing us towards our goal of creating value for shareholders.

During 2016, we look forward to progress across all areas of our business. Our in-house pipeline will move forward with our prioritised programmes for Parkinson's disease, corneal graft rejection and oncology; we look forward to continuing our strong performance under our Novartis partnership, contributing to the filing of CTL-019 and progressing work on a second CAR-T product; we will advance our expanded collaboration with Immune Design on LV305; and with an increasing number of companies working in the field, we also anticipate additional opportunities to create value through our integrated business model.

Since joining Oxford BioMedica, I have been greatly impressed by the quality of the team, the level of expertise and world-class facilities and I believe that our LentiVector^® platform gives us a powerful tool to benefit from the growth of the sector. I am proud to chair a Group that is a world-leader in its field, with a clear strategy for success and commitment to achieve its goals. I have no doubt that Oxford BioMedica is in a strong position, and 2016 promises to be a year of important achievements.

Dr. Lorenzo Tallarigo

Chairman

CHIEF EXECUTIVE OFFICER'S STATEMENT

The past year has been an important period of investment and growth for Oxford BioMedica, building on the significant progress we made in 2014. Operationally, we have continued to make strong advances in each part of our integrated business, as we execute our strategy to build a world-class, self-sustaining gene and cell therapy group. In the past eighteen months our business has evolved significantly. Operationally, we have continued to make good progress with our in-house pipeline and licensing of our intellectual property, and our bioprocessing work with partners is now well established.

Pipeline advancements: priority programmes

OXB-101/OXB-102

In May 2015 we presented encouraging clinical results from one of our priority pipeline programmes, OXB-101, a gene-based treatment for late stage Parkinson's disease that utilises our LentiVector^® technology to carry three genes that encode the key enzymes for the synthesis of dopamine. The data showed long-term follow up demonstrating that the improvements seen in patients during the Phase I/II study had been sustained in the majority of patients for up to three years following treatment with a single dose despite the neurodegenerative nature of the disease. We are continuing to follow patients from this study and expect soon to be able to present further evidence of the long-lasting effect. These results form the foundations for the ongoing development of OXB-102, an enhanced OXB-101 construct that has demonstrated up to five times greater potency in preclinical testing. During 2015, the OXB-102 development programme made good progress and we expect to initiate clinical studies for a phase I/II study in mid-2016.

OXB-202

OXB-202, our lentiviral vector based treatment designed to prevent corneal graft rejection, is currently nearing completion of its pre-clinical and non-clinical development programme, and we are planning to initiate a phase I/II clinical study at the Moorfields Eye hospital at the end of 2016 or early 2017. Cornea grafts are one of the most successful tissue transplants but, over time, a significant number of grafts are rejected due to corneal neovascularisation. OXB-202 is designed to genetically modify human donor corneas to secrete two anti-angiogenesis proteins, endostatin and angiostatin, to inhibit neovascularisation and prevent rejection.

OXB-302

OXB-302 is a novel oncology product that combines our proprietary lentiviral vector and 5T4 technology platforms. This cell therapy uses our LentiVector^® system to engineer harvested T-cells to express an antibody against the 5T4 antigen, which is expressed on cancer cells in many common solid tumours. These T-cells are then infused, and subsequently recognise the 5T4 tumour antigen and initiate cell killing mechanisms. During pre-clinical testing the product has demonstrated efficacy in an industry standard model. If successful, this could open up the possibility of using CAR-T cells to treat solid tumours.

Other candidates

OXB-201

The results of the OXB-201 Phase I study were announced as a "Hot Topic" at the Association for Research in Vision and Ophthalmology (ARVO) conference on 4 May 2015. The 21 patient study met the primary endpoints of safety and tolerability. Patients also showed signs of clinical benefit, with visual acuity stabilisation and a reduction in vascular leakage consistent with the mechanism of endostatin and angiostatin function in vivo in this severe wet AMD population. The study also demonstrated stable dose-dependent gene expression over 12 months which is important supporting evidence for the strength of our LentiVector^® platform more broadly.

OXB-301

OXB-301 is a cancer vaccine currently undergoing four investigator sponsored Phase I/II and Phase II clinical trials in mesothelioma, inoperable metastatic colorectal cancer, ovarian cancer and early prostate cancer. The patients are selected using a biomarker, and the product utilises a 5T4 tumour associated antigen-encoding gene delivered by a poxvirus vector to stimulate the immune system to destroy cancerous cells expressing the antigen. In May 2015, investigators presented encouraging interim data from the colorectal cancer study at The Cancer Vaccine Institute's Second International Symposium on Immunotherapy. The mesothelioma study completed recruitment during 2015, and the data analysis is underway. Results from these two studies are expected during 2016.

An outcome of our portfolio review is that we have decided to give OXB-102, OXB-202 and OXB-302 high and focused priority compared to OXB-201 and OXB-301 due to the risk/reward balance.  We will continue to explore ways of progressing OXB-201 and OXB-301 which could include partnering or out-licensing.

Novartis CTL-019 partnership

Throughout 2015, we made good progress in our partnership with Novartis, with much of the capacity in our existing GMP1 facility devoted to CTL-019 production.

CTL-019, which was awarded breakthrough therapy designation by the FDA in 2014, is a lentiviral vector based chimeric antigen receptor (CAR) T-cell therapy for the treatment of relapsed / refractory acute lymphoblastic leukaemia (r/r ALL). During 2015, the product made significant progress, with Novartis announcing highly positive data in paediatric r/r ALL patients, with 93% achieving complete remission. In October 2015, Novartis confirmed that the marketing application for CTL-019 in r/r ALL is on track for submission in late 2016 or early 2017, and as a key partner Oxford BioMedica will support the bioprocessing components of the filing. In addition, Novartis has announced encouraging new data showing the potential of CTL-019 to treat certain types of hard-to-treat non-Hodgkinson's lymphoma.

Under the terms of our partnering contract with Novartis, we have the potential to receive payments of up to $90 million over three years for process development, production and intellectual property licensing, plus royalties on future sales of CTL-019 and other CAR-T products.

Based on our strong performance on CTL-019, Novartis has recently extended our partnership to include a second CAR-T product. Under this further agreement, we will support the Novartis programme with process development, scale-up and production, mirroring our activities on CTL-019. This new partnership demonstrates Novartis' faith in our LentiVector^® platform, and work on this new Novartis product is now underway.

Partnership with Sanofi

In 2014, we announced that Sanofi had taken exclusive licenses to SAR422459 and SAR421869 for the treatment of Stargardt disease and Usher Syndrome type 1B respectively. As a result, Sanofi has taken over development and commercialisation activities, and we will receive milestone payments and royalties on future sales. Both lentiviral vector based products are currently in phase I/II studies, and during 2015 we completed the technology transfer for clinical trial material production to Sanofi, which now controls the development of these two promising treatments. We continue to support Sanofi by providing production advice and clinical analysis of patients' samples following treatment.

Expanded agreement with Immune Design

In addition, we have been working with Immune Design over the past few years, mainly in developing analytical assays for their LV305 programmes. As further validation of our capabilities and our IP, we have recently signed a licence agreement with Immune Design for access to our lentiviral vector intellectual property, and an expanded collaboration contract.

Further collaborations

The rapidly growing gene and cell therapy sector, much of which requires lentiviral vectors, has created a demand for the expertise which Oxford BioMedica has built up over many years. Our investment in expanding our manufacturing and laboratory capacity means that we now have the opportunity to offer our services to a wider range of customers. Our work with Novartis has enhanced our credibility in the sector and we are in discussions with a number of third parties working in a variety of cell therapy areas to provide such services and IP licences.

As an original pioneer of gene and cell therapy, we have built a dominant position in lentiviral vector intellectual property, with our LentiVector^® platform protected by over 100 granted and pending patents. These provide comprehensive coverage of gene-based delivery technologies and their therapeutic application, providing us and our partners with robust protection. This is complemented by our extensive world-class know-how associated with process development, scale-up and production, covering the route to commercialisation.

Capacity expansion

Throughout 2015 our existing Harrow House GMP1 clean room facility ran at full capacity and, to ensure availability for our in-house and partners' programmes, we made good progress expanding our facilities. As a result, we have now established a second facility (GMP4) at Yarnton, Oxford, and recently completed a second clean room (GMP2) in Harrow House, which is working towards MHRA licensure in 2016. Our new Yarnton facility has now completed validation and been approved by the UK's Medicines and Healthcare products Regulatory Agency (MHRA) for cGMP production, and this has now commenced. As a result, we now have dual sourcing, strengthening the robustness of our supply chain, and our cGMP clean room capacity has more than doubled to 950m². We are expanding this capacity further, and with the recent completion of GMP2 will have three independent production suites totalling 1,200m². In addition, we have significantly expanded and upgraded our process development, analytics and quality laboratories at our wholly-owned Windrush Court facility, which is adjacent to our Harrow House bioprocessing facility, and we anticipate completing our relocation to these new laboratories in the next six months. This significant growth in our capabilities is the result of approximately £19 million of investment between October 2014 and December 2015, which we anticipate will reach a final total of £26 million by the end of H1 2016. Oxford BioMedica now has the facilities to address further significant partnering demand for access to our process development and bioprocessing expert capabilities.

Strengthening our Board and operational capabilities 

Board changes

The past 12 months have been a period of significant growth for the Group. In February 2016 we strengthened our Board, welcoming new Chairman Dr Lorenzo Tallarigo. He brings significant international and commercial experience to Oxford BioMedica having held a number of senior roles in the industry. Until 2014, Dr Tallarigo was Chairman of Intercept Pharmaceuticals (NASDAQ: ICPT) and Chief Executive of Genextra, prior to which he was President of International Operations at Eli Lilly.

We are also delighted to have announced on 26 April 2016 that Mr Stuart Henderson is joining the board as a non-executive Director and Chair of the Audit Committee with effect from 1 June 2016. Mr Henderson was Head of European Healthcare and Life Sciences at Deloitte and was previously Head of Emerging Biotechnology at Arthur Andersen.  He has extensive experience in audit and transaction support in life sciences.

Team expansion

During 2015, we also strengthened our internal teams to support our rapidly expanding operations. As a result, we have recruited an additional 97 colleagues, expanding our workforce by over 70% compared with the end of 2014. In addition, we completed the move of our offices to our Windrush Court facilities in Cowley, Oxford which we acquired in 2014. We have also upgraded and renovated the laboratories at Windrush Court, and have now started relocating staff from our Medawar Centre facility. We plan to complete the transition to Windrush Court by the end of September. We expect that once complete, the consolidation of the bulk of our activities at one location will further increase the efficiency and operational advantages we have achieved to date.

Encouraging outlook

During the past year Oxford BioMedica, and the wider gene and cell therapy sector, has continued to make significant progress, demonstrating the major potential the field offers for patients, physicians and shareholders. We expect that in 2016 this trend will continue, and we plan to advance our integrated business through a number of inflection points.

We are working hard to advance OXB-102 and OXB-202 into clinical development in the coming year and complete the OXB-302 pre-clinical programme by the end of 2016.

We also await follow-up data from patients who received OXB-101 four years previously, as well as results from OXB-301 oncology studies, following an encouraging interim analysis presented in 2015 in colorectal cancer.

In addition, we expect to complete our capacity expansion in the first half of the year, which will ideally position us to capture further value through strategic partnering, as well as supporting the development of our in-house pipeline. During 2016, we plan to continue our important partnership with Novartis on CTL-019 supporting the product filing, and progressing our work on the second CAR-T therapy. We also intend to provide access to our world-class IP and process development and bioprocessing capabilities to an expanding number of players in the gene and cell therapy sector.

Overall, we expect that 2016 will be year of significant progress for the Group as we strengthen our position as a leader in the increasingly exciting field of gene and cell therapy.

John Dawson

Chef Executive Officer

FINANCIAL REVIEW

2015 has been a year of significant progress for Oxford BioMedica. We have continued to make steady progress with the development of our in-house pipeline of gene and cell therapy products with Phase I/II clinical studies expected to start for OXB-102 in mid-2016 and for OXB-202 by the end of 2016/early 2017. In the past 15 months we have also invested significantly in our LentiVector^® platform and partnering capabilities.

Our commitments to Novartis have required us to increase our capacity for viral vector bioprocessing and the associated analytical testing, and also to expand our process development capabilities. We have seen this as a unique opportunity to develop our capabilities to partner with the increasing number of companies working with lentiviral vectors, particularly in the ex vivo cell therapy arena. We have therefore brought into use a completely new bioprocessing clean room facility at Yarnton ("GMP4"), near Oxford; are nearing completion of the expansion of our existing Harrow House site, creating a new "GMP2" clean room and Quality Control (QC) laboratory to add to the existing "GMP1" clean room; and also nearing completion of the laboratories in the Windrush Court complex we acquired in October 2014. During 2015, in parallel, we have been recruiting the staff that we will need to operate the new facilities and support the increased activity levels. At the same time, the original GMP1 clean room in Harrow House has been operated at full capacity throughout the period, except for planned maintenance shut down periods, producing batches mainly for Novartis and for our own needs.

As a result of these activities, our gross income (the aggregate of revenues and other operating income) and our operating costs have grown significantly in 2015, and we have also incurred substantial capital expenditure.

Key financial indicators	2015 (£m)	2014 (£m)
Gross income (1)	18.8	14.7
Bioprocessing and process development income (2)	12.4	7.2
License, milestone and grant income	6.4	7.5
Operating Loss	14.1	10.6
Cash used in operations	14.9	7.4
Capital Expenditure	16.7	5.6
Cash burn (3)	29.8	11.6
Year End
Cash balance	9.4	14.2
Loan balance	27.3	1.0
Headcount at year end	231	134

⁽¹⁾ Aggregate of revenues and other operating income

⁽²⁾ Income from providing bioprocessing and process development expertise to partners

⁽³⁾ Net cash used in operations plus purchases of non-current assets and interest received

Gross income

Gross income - the aggregate of revenue and other operating income - amounted to £18.8 million in 2015, an increase of 28% in 2015 over £14.7 million in 2014.

-  £12.4 million of this (2014: £7.2 million) was derived from bioprocessing and process development with partners, mainly Novartis. This type of income is of a recurring nature and has the potential to be more sustainable than licence up front receipts, performance-based milestones and grant income. Bioprocessing and process development income therefore grew by 72% in 2015 over 2014.

-   Income from licences, milestones and grants was £6.4 million in 2015, slightly lower than the £7.5 million in 2014. In 2015 this income came largely from performance-related milestones from Novartis and GlaxoSmithKline's exercise of options to licence our intellectual property, whereas in 2014 the source was mainly the upfront receipts from Novartis on signing the October 2014 contracts.

Note that process development income in 2015 arising from the October 2014 Novartis collaboration is included in Other operating income whereas process development income in 2014, which arose under the May 2013 contract, is included in Revenue. This difference in accounting treatment is due to the differing nature of the two contracts with process development income under the 2014 contract essentially being the reimbursement of R&D costs incurred in developing IP which Oxford BioMedica will own.

Operating loss

Operating loss	2015 (£m)	2014 (£m)
Gross income	18.8	14.7
Cost of sales	(5.8)	(4.4)
R&D + Bioprocessing costs	(20.3)	(17.0)
Administrative expenses	(6.7)	(4.0)
Operating loss	(14.1)	(10.6)

Despite the increase in gross income the operating loss for 2015 was £14.1 million, compared with £10.6 million in 2014.

Cost of sales represents the cost of producing lentiviral vector batches which are sold to partners and includes raw materials, direct labour, indirect labour (including facility support staff and the significant effort required for quality control and analytical testing), as well as facility costs and overheads. Cost of sales also includes royalties payable on any licence income recognised as revenue by the Group. Excluding such royalties payable, the cost of sales increase in 2015 was around 45% and is broadly in line with the increased number of batches sold compared with 2014.

R&D and Bioprocessing costs

R&D and Bioprocessing costs increased from £17.0 million in 2014 to £20.3 million in 2015. The 2014 costs included certain one-off R&D items, without which the underlying costs in 2014 would have been £14.7 million. The underlying increase in R&D and Bioprocessing costs has therefore been £5.6 million.

The main components of these costs are:

-   Payroll and other manpower-related costs such as recruitment, training, and travel. These costs account for just over half of the £20.3 million in 2015 compared with just under half of the underlying £14.7 million in 2014. The growth in these costs accounts for £4.1 million of the overall £5.6 million increase and has been caused by the increase in R&D and Bioprocessing employees from an average of 97 in 2014 to 176 in 2015.

-   Facility costs including depreciation account for just over 10% of the costs in both years. The growth, which accounts for around £1.0 million of the increase, has been caused by the expansion in the facilities and because we have been incurring costs at both Windrush Court and the Medawar Centre during 2015 while we prepare the Windrush Court laboratories. We are planning to vacate the Medawar Centre during 2016 so the facility costs on that site will fall in 2016.

-   External expenditure on clinical and pre-clinical costs, including regulatory and pharmacovigilance costs, was around £3 million in both 2015 and 2014.

Administrative expenses

Administrative expenses were £6.7 million in 2015 compared with £4.0 million in 2014, an increase of £2.7 million. The growth in costs has been caused by payroll and other manpower-related costs due to the increase in administrative staff from an average of 16 in 2014 to 20 in 2015, additional facility costs, depreciation, IT and insurance caused by the growth in the business, and advisor fees in respect of new business development opportunities arising as a consequence of the business's higher profile caused by our relationship with Novartis.

Segmental analysis

Given the growth of the partnering revenue-generating business the Senior Executive Team has recently started to monitor the business performance split between a) strategic partnering and b) the proprietary research and development activities ("R&D") which cover clinical and pre-clinical product development and also the development of technical intellectual property. We have therefore for the first time presented a segmental analysis in the Notes to the Financial Statements, summarised below:

	Partnering £m	R&D £m	Total £m
Gross income	16.3	2.5	18.8
Operating loss	(3.9)	(10.2)	(14.1)

Most of the Group's gross income is attributed to Partnering except for some corporate licence income and the grant income received from Innovate UK for the OXB-102 and OXB-202 development projects which are included in R&D. Each segment is then charged with the direct and indirect costs which are readily attributable to the segments. The remaining support and corporate costs which cannot be easily attributed are then allocated to each segment, primarily based on levels of activity and direct cost. Broadly the allocation process results in approximately two-thirds of the support and corporate costs being allocated to Partnering and one-third to R&D.

The purpose of this analysis is to monitor the net costs of each segment and ensure that they are being operated efficiently.

The operating loss of the Partnering activities was £3.9 million after allocation of support and corporate costs. During 2015 we built up the cost base in anticipation of the activity expected in 2016. With the anticipated higher bioprocessing volumes, and therefore revenues, the Partnering segment revenues should cover all of its costs in 2016, thereby being at least cash neutral.

The net investment in R&D in 2015 was £10.1 million after deduction of its share of support and corporate overheads. Approximately 60% of this was incurred on our product development programmes and the remaining 40% on investment in lentiviral vector technology which in due course should generate value through enabling future IP licences and catalysing Partnering deals with third parties.

Employee numbers

To enable us to fulfil the anticipated 2016 partnering demand we have built up during 2015 we have recruited the employees needed to service this demand. To this end our headcount has risen from 134 at the end of 2014 to 231 at the end of 2015.

Employee numbers	31 Dec 2015	31 Dec 2014
Bioprocessing, including QA, QC and analytical	116	58
Product and technology development	95	57
Administrative and corporate	20	19
Total	231	134

Although the most rapid period of growth is now over, headcount will continue to grow in 2016 as we complete the recruitment needed to underpin the expected activities.

Cash used in operations

Cash used in operations increased from £7.4 million in 2014 to £14.9 million in 2015, an increase of £7.5 million.

-   £3.5 million of this increase is due to the higher operating loss explained above although, when non-cash items included in net loss are eliminated (e.g. depreciation, amortisation and employee share scheme charges), the increase in cash outflow due to the operating loss is reduced to £11.8 million, £2.7 million more than the 2014 equivalent of £9.1 million.

-   2015 working capital increased by £3.1 million compared with a reduction in 2014 of £1.7 million which explains a further £4.8 million of the increased cash outflow. The increase in working capital in 2015 is driven mainly by the increase in trade and other receivables and inventory, caused by the growth in commercial activity.

Cash used in operations	2015 £m	2014 £m
Operating loss	(14.1)	(10.6)
Non-cash items included in operating loss (1)	2.3	1.5
Operating loss excluding non-cash items	(11.8)	(9.1)
Working capital movement	(3.1)	1.7
Cash used in operations	(14.9)	(7.4)

⁽¹⁾Depreciation, amortisation, charge in relation to share schemes

Cash burn

Cash burn is the aggregate of the cash used in operations, interest payments, R&D tax credit receipts, and the purchase of property, plant and equipment.

Cash burn	31 Dec 2015 £m	31 Dec 2014 £m
Cash used in operations	(14.9)	(7.4)
Purchases of property, plant and equipment	(16.7)	(5.6)
Interest paid, less received	(1.5)	(0.2)
R&D tax credit recieved	3.2	1.6
	(29.8)	(11.6)

Capital expenditure

Most of the capital expenditure in 2014 and 2015 is due to the capacity expansion programme in our manufacturing and laboratory facilities.

Purchase of property, plant and equipment	2015 £m	2014 £m
Freehold property (1)	-	3.7
Short-leasehold improvements (2)	0.9	-
Office equipment and computers	0.6	0.2
Manufacturing and laboratory equipment	2.2	1.1
Assets under construction (3)	13.0	0.6
Total	16.7	5.6

⁽¹⁾ Freehold property includes the purchase cost of the Windrush Court facility.

⁽²⁾ Expenditure on short-leasehold improvements relates to our Yarnton site over which we have a 10 year lease.

⁽³⁾ Assets under construction is the expenditure to date on the fabric and enabling services at our facilities, such as power, water and air handling, which has not yet been completed.

The £5.6 million in 2014 largely comprised capacity expansion with the £3.5 million acquisition of Windrush Court being the largest item.

Purchases of property, plant and equipment in 2015 were £16.7 million. £15.2 million of this was spent on the capacity expansion work at Harrow House, Yarnton and Windrush Court. During 2015 we successfully brought on line a new clean room manufacturing facility at Yarnton, Oxford, which, from the beginning of 2016, doubles our manufacturing capacity compared with 2015. We have also been developing our Harrow House facility to include a new Quality Control (QC) laboratory and a further clean room facility which we intend to use for manufacturing lentiviral vectors using a new bioreactor process. Viral vector GMP manufacture requires very substantial amounts of QC and Quality Assurance (QA) testing before the product can be released and we would not have been able to handle the volume of testing required in 2016 and 2017 in our Medawar centre facility. We are therefore in the process of installing a completely new suite of biological laboratories in the North Wing of Windrush Court.

Including the purchase of Windrush Court, in the 15 months from October 2014 to the end of 2015 we have incurred £19.6 million of capital expenditure on these expansion projects and will spend a further approximately £6 million in the first few months of 2016 to complete the work. This will bring the aggregate expenditure on the expansion programme since October 2014 to around £26 million.

The capital expenditure on capacity expansion is being financed by the Oberland loan facility. $40 million has been drawn down to date, approximately £26 million, which broadly matches the expenditure to date plus the further amount of approximately £6 million which will be spent in the first few months of 2016.

Interest and R&D tax credit

Interest paid in 2015 was £1.5 million, principally due on the Oberland loan facility. $25 million was drawn down in May 2015 and a further $15m in September 2015. In 2014 the interest was incurred on the loan from Vulpes Life Sciences Fund and the AMSCI loan, both of which have been fully repaid.

The R&D tax credit in respect of 2014 which was received in 2015 was £3.2 million, double that received in 2014 in respect of 2013. This increase is partly due to the increase in activity in 2014 compared to 2013, and partly due to changes to the underlying tax credit rates which were implemented from April 2014.

Cash balance

The Group began the year with £14.2 million cash balances. £29.8 million has been spent in the year, offset by net loan receipts of £24.8 million and £0.1 million proceeds from issuing shares related to employee share options exercised during the year, leading to a closing cash balance of £9.4 million.

In February 2016 the Group raised a further £7.6 million net of expenses from the placing of 128,383,528 shares in the Company.

Loan balance

We began the year with a loan balance of £1 million which was the first tranche drawn down under the £5.3 million AMSCI loan facility established in 2013. In the first quarter of 2015 we drew down a further £2 million but the entire £3 million was subsequently repaid when we established the $50 million Oberland loan facility in May 2015. $25 million (£16.3 million) of this facility was drawn down in May 2015, with a further $15 million (£9.8 million) drawn down in September.

The £27.3 million loan balance at the end of 2015 includes £1.0 million of currency revaluation losses on the $40 million Oberland loan balance.

Balance sheet

The most significant changes to the balance sheet have been

-   the increase in property, plant and equipment from £8.9 million at 31 December 2014 to £24.4 million at 31 December 2015. This increase is explained by the £16.7 million purchases offset by £1.3 million of depreciation

-   the increase in the loans balance from £1.0 million to £27.3 million. The balance at the end of 2014 was the £1.0 million which had been drawn down from the AMSCI facility; at the end of 2015 the balance is the $40 million loan drawn down valued at the exchange rate at 31 December 2015.

-   Trade and other receivables have increased from £5.2 million to £10.9 million. The 2015 balance includes amounts receivable from Novartis in respect of performance milestones.

-   Inventories have risen from £1.4 million to £2.7 million because of the higher levels of production in the past few months of 2015 compared with the same period in 2014, and also the anticipated step up in production volumes expected in 2016 with the new Yarnton facility coming on line from early 2016.

Comparison with profit estimate

On 23 February 2016 the Group announced a proposed Placing to raise £8.1 million. included in the announcement was an unaudited estimate of the financial results for the year ended 31 December 2015. The table below compares the estimates with the actual audited results for the same period:

	Estimate £m	Actual £m
Gross income	18-19	18.8
Operating loss	(15.5) - (16.5)	(14.1)
Loss for the period	(13) - (14)	(13.0)
Cash	9.4	9.4
Debt	27.3	27.3

The primary reason for the lower Operating loss is that the portion of the R&D tax credit which is claimed under the large company scheme has been offset against the Operating Loss in the Actual results whereas it was included in Taxation in the Estimate. There is no net impact on the Loss for the Period. 

Financial outlook

Partnering revenues should continue to grow strongly in 2016 as our bioprocessing capacity will more than double with the addition of the GMP4 (Yarnton) and GMP2 (Harrow House) clean room facilities. We also have reasonable expectations of further process development and bioprocessing contracts which will add to the requirements from Novartis and Immune Design.

Investment will continue in our three key products and technology development in 2016, broadly at the same level as in 2015, as we take OXB-102 and OXB-202 into their respective Phase I/II clinical studies and complete the OXB-302 pre-clinical programme. We will also continue to invest in our lentiviral vector technology.

The capacity expansion programme will be largely completed during the second quarter of 2016. Capital expenditure in 2016 required to complete the expansion is anticipated at approximately £6 million.

Going concern

The Directors estimate that the cash held by the Group together with known and probable receivables will be sufficient to support the current level of activities into the third quarter of 2016. This estimate does not include the potential benefit of any upfront receipts from further contracts for process development and bioprocessing services or from licencing-out the Group's intellectual property, and the Directors are therefore continuing to explore other sources of finance available to the Group.

The Directors have confidence that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date of approval of these financial statements, and have therefore prepared the financial statements on a going concern basis. However, because the additional finance is not committed at the date of approval of these financial statements, these circumstances 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 finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required including 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.

Tim Watts

Chief Financial Officer

Consolidated statement of comprehensive income

for the year ended 31 December 2015

		Group
		2015	2014
Continuing operations	Notes	Total £'000	Total £'000
Revenue		15,909	13,618
Cost of sales		(5,839)	(4,416)
Gross profit		10,070	9,202
Research, development and bioprocessing costs		(20,274)	(16,986)
Administrative expenses		(6,741)	(3,957)
Other operating income		2,862	1,128
Operating loss		(14,083)	(10,613)
Finance income		26	53
Finance costs		(2,925)	(238)
Loss before tax		(16,982)	(10,798)
Taxation		3,963	2,137
Loss and total comprehensive expense for the year		(13,019)	(8,661)
Basic loss and diluted loss per ordinary share	4	(0.51p)	(0.43p)

The notes on pages 19 to 24 form part of this preliminary information.

Balance sheet

as at 31 December 2015

		Group
	Notes	2015 £'000	2014 £'000
Assets
Non-current assets
Intangible assets	5	1,743	2,106
Property, plant and equipment	6	24,396	8,944
		26,139	11,050
Current assets
Inventories	7	2,706	1,407
Trade and other receivables	8	10,930	5,153
Current tax assets		2,721	2,000
Cash and cash equivalents		9,355	14,195
		25,712	22,755
Current liabilities
Trade and other payables	9	9,286	6,304
Deferred income	10	3,045	2,927
Provisions	12	838	-
		13,169	9,231
Net current assets		12,543	13,524
Non-current liabilities
Loans	11	27,255	1,000
Provisions	12	533	535
		27,788	1,535
Net assets		10,894	23,039
Equity attributable to owners of the parent
Ordinary shares		25,741	25,659
Share premium account		141,677	141,615
Merger reserve		2,291	2,291
Treasury reserve		(102)	(226)
Other reserves		-	(682)
Accumulated losses		(158,713)	(145,618)
Total equity		10,894	23,039

The notes on pages 19 to 24 form part of this preliminary information.

Statement of cash flows

for the year ended 31 December 2015

		Group
		2015	2014
	Notes	£'000	£'000
Cash flows from operating activities
Cash used in operations	13	(14,866)	(7,431)
Interest paid		(1,494)	(238)
Tax credit received		3,247	1,637
Overseas tax paid		(5)	-
Net cash used in operating activities		(13,118)	(6,032)
Cash flows from investing activities
Purchases of property, plant and equipment		(16,716)	(5,577)
Interest received		38	53
Net cash used in investing activities		(16,678)	(5,524)
Cash flows from financing activities
Proceeds from issue of ordinary share capital		144	24,268
Costs of share issues		-	(1,460)
Purchase of treasury shares		-	(226)
Loans received		27,812	2,500
Loans repaid		(3,000)	(1,500)
Net cash generated from financing activities		24,956	23,582
Net (decrease)/increase in cash and cash equivalents		(4,840)	12,026
Cash and cash equivalents at 1 January		14,195	2,169
Cash and cash equivalents at 31 December		9,355	14,195

The notes on pages 19 to 24 form part of this preliminary information.

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

for the year ended 31 December 2015

		Ordinary shares	Share premium account	Merger reserve	Treasury reserve	Other reserves	Accumulated losses	Total equity
Group	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2014		14,162	130,304	14,310	-	(682)	(149,196)	8,898
Year ended 31 December 2014:
Loss for the year		-	-	-	-	-	(8,661)	(8,661)
Total comprehensive expense for the year		-	-	-	-	-	(8,661)	(8,661)
Transactions with owners: Share options
Value of employee services		-	-	-	-	-	220	220
Issue of shares excluding options		11,497	12,771	-	-	-	-	24,268
Cost of share issues		-	(1,460)	-	-	-	-	(1,460)
Realisation of merger reserve		-	-	(12,019)	-	-	12,019	-
Deferred Share Award		-	-	-	(226)	-	-	(226)
At 31 December 2014		25,659	141,615	2,291	(226)	(682)	(145,618)	23,039
Year ended 31 December 2015:
Loss for the year		-	-	-	-	-	(13,019)	(13,019)
Total comprehensive expense for the year		-	-	-	-	-	(13,019)	(13,019)
Transactions with owners: Share options
Proceeds from shares issued		82	62	-	-	-	-	144
Value of employee services		-	-	-	-	-	730	730
Vesting of deferred share award		-	-	-	124	-	(124)	-
Liquidation of BioMedica inc.		-	-	-	-	682	(682)	-
At 31 December 2015		25,741	141,677	2,291	(102)	-	(158,713)	10,894

The notes on pages 19 to 24 form part of this preliminary information.

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

for the year ended 31 December 2015

1   Basis of preparation

This financial information, for the years ended 31 December 2015 and 31 December 2014, 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 2015 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 2014 have been delivered to the Registrar of Companies. The auditors' reports on the financial statements for the years ended 31 December 2015 and 31 December 2014 were unqualified and did not contain statements under section 498 of the Companies Act 2006. While the auditors' opinion for the year ended 31 December 2015 is unmodified, their report contains reference to the material uncertainty disclosed below. The financial information in this report does not constitute a statutory financial statement within the meaning of sections 434-436 of the Companies Act 2006.

The financial statements have been prepared in accordance with IFRIC interpretations, as applicable to companies using International Financial Reporting Standards ('IFRS') as adopted by the European Union and with the Companies Act 2006 under the historic 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 2015 are available from the Company Secretary, and are on the Group's website. The audited statutory financial statements for the year ended 31 December 2015 are expected to be distributed to shareholders by 5 May 2016 and will be available at the registered office of the Company, Windrush Court, Transport Way, Oxford, OX4 6LT. Details can also be found on the Group's website at: www.oxfordbiomedica.co.uk.

This announcement was approved by the Board of Oxford BioMedica plc on 27 April 2016.

Going concern

The Directors estimate that the cash held by the Group together with known and probable receivables will be sufficient to support the current level of activities into the third quarter of 2016. This estimate does not include the potential benefit of any upfront receipts from further contracts for process development and bioprocessing services or from licencing-out the Group's intellectual property, and the Directors are therefore continuing to explore other sources of finance available to the Group. The Directors have confidence that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date of approval of these financial statements, and have therefore prepared the financial statements on a going concern basis. However, because the additional finance is not committed at the date of approval of these financial statements, these circumstances 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 finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required including 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.

2   Critical accounting judgements and estimates

In applying the Group's accounting policies, management is required to make judgements and assumptions concerning the future in a number of areas. Actual results may be different from those estimated using these judgements and assumptions. The key sources of estimation uncertainty and critical accounting judgements 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 October 2014, the Group entered into a series of contractual arrangements with Novartis, including a licence over the Group's existing Lentivector^® platform, a production and clinical supply agreement and an agreement covering process development. Total amounts of up to $90m, plus further potential royalties, are receivable under these arrangements. These amounts include $4.3m of shares subscribed for by Novartis on completion of the arrangements.

Under these arrangements, the Group received $9.7m (£6.1m) in upfront payments of which $7.7m (£4.8m) was received in respect of a non-exclusive worldwide development and commericalisation licence in oncology under the Group's existing Lentivector^® intellectual property gene delivery platform.

Management has judged that this amount should be recognised as a separate deliverable in 2014 discrete from amounts to be recognised over the period of the three year production contract. This judgement is based on management being satisfied that the customer is able and intends to realise value from this licence independently from any further intellectual property generated in the collaboration and that its fair value is sufficiently reliable. In reaching this judgement management had regard to several considerations including:

-     The existing intellectual property covered by the licence is sufficient to allow CTL-019 to be bioprocessed for commercial use, and any intellectual property that might arise from the process development under the contract is not a pre-requisite for its commercial manufacture

-     The licence allows Novartis to use the existing intellectual property for other oncology products apart from CTL-019

-     The other elements of the arrangements have an appropriate price and fair value (the residual elements)

-     The $7.7m rate is comparable with similar transactions with third parties that the Group has previously contracted, taking into account the stage of development and the market potential of the product

This judgement reflects both the separability of the licence for the existing intellectual property and the assessment of the fair values of each of the components of the Novartis agreements.

The remaining $2.0m of the $9.7m upfront payments are dependent on certain events and activities over the 3 year period. As at 31 December 2015, $0.4m had been recognised as revenue (2014: nil)

Intangible asset impairment

The Group has 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 judgement. 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 2015 the book value of intangible assets was £1.7 million of which £1.3 million related to PrimeBoost technology.

Going concern

Management and the Directors have had to make estimates and important judgements when assessing the going concern status of the Group.  Going concern is as stated in several places in this report including in note 1 and the Financial review.

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 2015 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 2015 have not yet been agreed with the relevant tax authorities.

	2015	2014
	£'000	£'000
Current tax
United Kingdom corporation tax research and development credit	(2,721)	(2,000)
Overseas taxation	5	(51)
	(2,716)	(2,051)
Adjustments in respect of prior periods
United Kingdom corporation tax research and development credit	(1,247)	(86)
Taxation credit	(3,963)	(2,137)

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 2015 (2,570,202,150; 2014: 2,019,291,808). 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

		2015	2014
Intellectual property rights		£'000	£'000
Cost
At 1 January		5,591	5,591
Additions		-	-
At 31 December		5,591	5,591
Accumulated amortisation and impairment
At 1 January		3,485	2,958
Amortisation charge for the year		363	396
Impairment charge for the year		-	131
At 31 December		3,848	3,485
Net book amount at 31 December		1,743	2,106

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 £363,000 (2014: £396,000) is included in 'Research and development costs' in the statement of comprehensive income.

6   Property, plant and equipment

	Freehold property	Short leasehold   improve-ments	Office  equipment and computers	Manufac-turing and Laboratory equipment	Assets under constru- ction1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2015	6,887	2,623	820	5,335	646	16,311
Additions at cost	51	863	554	2,239	13,009	16,716
Reclassifications	-	3,911	-	-	(3,911)	-
At 31 December 2015	6,938	7,397	1,374	7,574	9,744	33,027
Accumulated depreciation
At 1 January 2015	698	2,579	595	3,495	-	7,367
Charge for the year	223	330	158	553	-	1,264
At 31 December 2015	921	2,909	753	4,048	-	8,631
Net book amount at 31 December 2015	6,017	4,488	621	3,526	9,744	24,396

	Freehold property	Short leasehold   improve-ments	Office  equipment and computers	Manufac-turing and Laboratory equipment	Assets under constru- ction1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2014	3,225	2,623	621	4,265	-	10,734
Additions at cost	3,662	-	199	1,070	646	5,577
At 31 December 2014	6,887	2,623	820	5,335	646	16,311
Accumulated depreciation
At 1 January 2014	476	2,515	543	3,130	-	6,664
Charge for the year	222	64	52	365	-	703
At 31 December 2014	698	2,579	595	3,495	-	7,367
Net book amount at 31 December 2014	6,189	44	225	1,840	646	8,944

¹   Assets under construction represents the capitalisation of ongoing construction works at Harrow House and Yarnton bioprocessing facilities and the Windrush Court laboratories. The opening balance within Assets under construction was included in Freehold property and Short leasehold improvements in the 2014 year-end financial statements.

7   Inventories

	2015	2014
	£'000	£'000
Raw Materials	2,217	1,214
Work in progress	489	193
Total inventory	2,706	1,407

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

8   Trade and other receivables

			2015	2014
			£'000	£'000
Current
Trade receivables			7,374	3,621
Accrued income			1,155	340
Other receivables			31	16
Other tax receivable			1,522	397
Prepayments			848	779
Total trade and other receivables			10,930	5,153

The fair value of trade and other receivables are the current book values.

Included in the Group's trade receivable balance are debtors with a carrying amount of £826,000 (2014: £66,000) which are past due at the reporting date, all of which have since been received.

9   Trade and other payables

			2015	2014
			£'000	£'000
Trade payables			3,588	2,787
Other taxation and social security			384	270
Accruals			5,314	3,247
Total trade and other payables			9,286	6,304

10 Deferred income

Group	2015 £'000	2014 £'000
Current	3,045	2,927
Total deferred income	3,045	2,927

Deferred income arises from contractual agreements with customers.

11 Loans

On 1 May 2015, an agreement was entered into with Oberland Capital for a $50 million loan facility of which $25 million (£16.3m) was drawn down immediately, and a further $15m (£9.8m) was drawn down in September 2015.

The Oberland Facility is a loan facility agreement provided by Oberland Capital Management LLC, to provide funds to invest in the Group's capacity expansion and for pipeline advancements and product acquisitions. The loan is repayable not later than 1 May 2022 and may be prepaid at any time. Over the course of the loan term, interest is payable quarterly at an annual interest rate of 9.5% plus the greater of 1% and three month LIBOR. In addition to interest, an exit fee is payable upon any repayment of the loan or part thereof. The Group is also required to pay an additional amount of 0.35% of annual worldwide net revenues for eight years commencing 1 April 2017 for each $5 million of loan drawn down over $30 million. This revenue participation may be retired at any time upon payment of the exit fee. In the event that the loan is repaid after the second anniversary of the facility, there may be a true-up payment  payable to Oberland  in the event that the aggregate of the interest payments, revenue participation  payments and exit fee do not in aggregate provide a return of 15% p.a. to Oberland.

The Group is required under the Oberland Facility to maintain cash and cash equivalents of not less than $10 million (£7.1 million) while the Oberland Facility is outstanding. The loan facility is secured on the Group's assets.

During May 2015 the £5.3m loan facility provided by the UK Government's Advanced Manufacturing Supply Chain Initiative was terminated and the outstanding balance of £3 million repaid.

12 Provisions

Group			Dilapidations £'000
At 1 January 2015			535
Unwinding of discount			3
Recognised for Yarnton/Medawar leasehold properties			833
At 31 December 2015			1,371
At 1 January 2014			532
Unwinding of discount			3
At 31 December 2014			535

The dilapidations provision relates to anticipated costs of restoring the leasehold Medawar and Yarnton properties in Oxford, UK to their original condition at the end of the present leases in 2016 and 2024 respectively, discounted using the rate per the Bank of England nominal yield curve. The equivalent rate was used in 2014. The provision will be utilised at the end of the leases if they are not renewed.

13 Cash flows from operating activities

Reconciliation of operating loss to net cash used in operations:

			2015	2014
			£'000	£'000
Continuing operations
Operating loss			(14,083)	(10,613)
Adjustment for:
Depreciation			1,264	703
Amortisation of intangible assets			363	396
Charge for impairment			-	131
Charge in relation to employee share schemes			730	220
Changes in working capital:
Increase in trade and other receivables			(5,777)	(2,561)
Increase in trade and other payables			2,982	3,370
Increase in deferred income			118	1,647
Increase in provisions			836	3
Increase in inventory			(1,299)	(727)
Net cash used in operations			(14,866)	(7,431)

14 Subsequent events

On 23 February 2016, the Group announced that it had placed 128,383,528 new ordinary shares in the Company at a price of 6.3 pence per share with both new and existing investors and Directors.  The price of 6.3 pence per share represented a 10% discount to the closing price of 7.0 pence per share on 22 February 2016.  Gross proceeds from the placing were £8.1 million, net proceeds were £7.6 million.

 

END

 

 

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