Preliminary Results

RNS Number : 3403H

Oxford Biomedica PLC

13 March 2015

 

OXFORD BIOMEDICA: PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

Oxford, UK - 13 March 2015: Oxford BioMedica plc (LSE: OXB), ("OXB" or "the Group") a leading gene and cell therapy group, today announces its preliminary results for the twelve months ended 31 December 2014.

OPERATIONAL HIGHLIGHTS:

·      IP, technology and manufacturing capability is validated

-     Major new licensing and manufacturing contract with Novartis worth up to $90 million over the next three years signed in October

-     Licensing royalties when CTL019 is commercialised

·      Revenues increased

-    Licensing revenues increased to £5.1 million (2013: £1.0 million) including £4.8 million from Novartis upfront payments

-   Manufacturing revenue increased to £7.7 million (2013: £2.6 million) from the provision of manufacturing and process development services to third parties

-    R&D collaboration revenue of £0.8 million (2013: £1.7 million) representing residual revenue under the 2009 Sanofi agreement

·      Pipeline advanced

-   Four clinical programmes in active development and two other products being prepared for Phase I/II

-     RetinoStat^® recruitment completed in Phase I trial which will report in 2015

-    New CART-5T4 programme initiated in-house, combining both OXB's LentiVector^® and 5T4 technology platforms

-     £2.2 million grant from the Technology Strategy Board (now Innovate UK) to fund a Phase I/II clinical trial of OXB-102 in Parkinson's disease commencing in early 2016

-    Sanofi granted global rights to StarGen™ and UshStat^® across all ocular indications; Oxford BioMedica is entitled to development and commercialisation milestone payments and royalties

·      Balance sheet strengthened

-     Successful fundraising in June which contributed net proceeds of £20.1 million

FINANCIAL HIGHLIGHTS¹:

·      Total revenues of £13.6 million (excluding grants) in 2014 (2013: £5.4 million)

·      Total revenues include profit-generating revenues² of £7.7 million (2013: £2.6 million)

·      Cash used in operations, before capital expenditure of £7.4 million (2013: £13.0 million)

·      Cash burn of £11.6 million³ (2013: £11.9 million)

·      £14.2 million cash balance at end 2014 (£2.2 million at the start of the year)

_______________________________

¹ Audited financial results

² Revenues from the provision of manufacturing and process development services to third parties

³ Net cash used in/generated from operations plus sales and purchases of non-current assets and interest received

 

John Dawson, Chief Executive Officer at Oxford BioMedica, said: "Oxford BioMedica is now demonstrably a world-leading gene and cell therapy group with a valuable proprietary pipeline. 2014 was a transformational year for the Group due largely to the signature of our major contract with Novartis. This second contract with Novartis further validated the strength of our lentivector IP and our associated manufacturing expertise. The deal also gave us a significantly strengthened financial position and so now the group has a highly promising future. Our overall goal is to deliver significant value to both patients and shareholders in the near-term and we are excited and well positioned to do this."

Conference call for analysts

A briefing for analysts will be held at 9am GMT on 13 March 2015 at the offices of Consilium
Strategic Communications, 41 Lothbury, London, EC2R 7HG. There will be a simultaneous live conference call and the presentation will be available on the Group's website at www.oxfordbiomedica.co.uk.

Please visit the website approximately 10 minutes before the conference call, at 9am GMT, to download the presentation slides. Conference call details:

Participant dial-in: 08006940257
International dial-in: [phone]
Participant code: 2837070

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 plc (LSE: OXB) is a leading gene and cell therapy group with an unrivalled portfolio of gene therapy products in development, and a platform of exclusive and pioneering technologies with which it designs, develops and manufactures unique gene-based medicines for some of world's largest pharmaceutical companies. Leveraging its proprietary LentiVector^® IP and gene delivery system technology platform and unique tumour antigen (5T4), Oxford BioMedica is advancing its pipeline of seven gene therapy products addressing diseases for which there are currently no treatments or that are inadequately treated today, including ocular and central nervous system disorders. OXB Solutions, the Group's industry-leading manufacturing and development business, provides services to collaborators and partners working in gene and cell therapy, including Novartis and Immune Design Corp. In addition, the Group has licenced products and IP to Sanofi, Pfizer, MolMed, Sigma-Aldrich, Biogen Idec, Emergent BioSolutions and ImaginAb. Further information is available at www.oxfordbiomedica.co.uk and www.oxbsolutions.co.uk

CHAIRMAN'S STATEMENT

The main event in 2014 was undoubtedly the signing of a second agreement with Novartis following our initial agreement in 2013. The importance of this deal must not be underestimated for two main reasons. Firstly, the validation of our patent estate, know-how and capability to deliver firmly establishes us as the leader in the industry for lentiviral vector based gene and cell therapy products. Secondly, in addition to the upfront payment and equity investment we have already received, the contract promises significant potential revenues over the next three years and potentially a royalty stream on CTL019 after that. This provides us with an opportunity to deliver a balanced business model whereby revenues support the Group's overheads and help us to fund the development of our proprietary product pipeline.

Although the Novartis contract gives us financial strength, I was pleased to see encouraging progress in the development of our product pipeline in 2014 as I am convinced that this remains our single most valuable asset. With four programmes in active clinical development, and two more being readied for the clinic, our pipeline is full of potential value and we continue evaluating new pipeline opportunities.

Funding and share price performance

I was delighted with the support we received from our existing shareholders, and the investment of new shareholders, as part of our successful £21.6m (before expenses) fundraise completed in June. M&G Investments increased its stake to nearly 20% and Aviva Investors took a near 10% stake. We are particularly grateful to Vulpes, now our second largest shareholder, for its continued support in providing the £5.0 million loan facility in 2014. These timely funds gave us the platform to complete the Novartis negotiations on the best possible terms.

I would also like to praise the Government for its valuable support to the Group and to the UK biotech industry in general. I have no doubt that the Advanced Manufacturing Supply Chain Initiative (AMSCI) funding announced in 2013 helped to give us credibility in Novartis' eyes, while the award of a £2.2 million grant from Innovate UK (formerly the Technology Strategy Board) in 2014 will help us fund a Phase I/II clinical trial of OXB-102 in Parkinson's disease.

It was especially pleasing to see that the strong year operationally was matched by the performance of our share price which is now starting to reflect the value in our business.

Gene and cell therapy

It is clear that industry and investors are increasingly excited and encouraged by developments in the gene and cell therapy field in general. 2014 saw a number of very successful gene and cell therapy IPOs in the US led by Juno Therapeutics Inc., which was the most highly valued biotech IPO of the year, raising $265m with a market capitalisation in excess of $3bn. We also saw some major, high-value industry collaborations in the space, including deals announced between GSK and Adaptimmune (up to $350m) and Pfizer and Cellectis (up to $2.8bn).

US valuations in the gene and cell therapy space, and in general in the sector, continue to exceed those in the EU, but we believe we can close this valuation gap by continuing to invest in our products and IP.
 

Investing for growth as industry momentum builds

The growing investment and activity in gene and cell therapy presents the Group with increasing opportunities for licensing and partnering across our business. We are starting a programme of investments in 2015 to substantially expand our manufacturing and analytical capacity, primarily to ensure that we meet our obligations under the Novartis contract. However, we will also be looking to generate further manufacturing related contracts with the wider industry.

As part of our planned expansion, we are in the process of relocating our offices and laboratories to a new facility directly opposite our manufacturing facility in Oxford, UK. In October 2014, we acquired the freehold of Windrush Court for a cash consideration of £3.2 million. The Board expects to recoup this purchase cost within four years through savings in rental costs and service charges once the current lease of the Medawar Centre expires in March 2016.

Summary

Oxford BioMedica is very well placed to capitalise on the positive change in sentiment towards gene and cell therapy. I believe approaches in this field have the potential to become the mainstay of currently unmet therapies in the future. We saw this with antibody based products and I believe we will now see this with gene and cell therapy products.

I would like to thank and congratulate our staff on their immense achievements during the year. We hope for further successes in 2015 as we progress our pipeline, expand our manufacturing business, and seek further technology licensing deals. Our future is very bright indeed.

Nick Rodgers

Chairman

CHIEF EXECUTIVE OFFICER'S STATEMENT

2014 was a transformational year for Oxford BioMedica. Negotiations with Novartis that were starting around this time last year were successfully completed. This resulted in the October 2014 announcement of a licensing and manufacturing agreement with a value of up to $90 million over the next three years, and with the prospect of further royalty revenues on any future product sales. The new contract with Novartis, together with the completion of a successful £21.6m (before expenses) fundraise, puts us in a strong financial position from which to leverage our technology platform.

I am pleased to report that we made good progress across our clinical development pipeline during the year, while also initiating an exciting CART-5T4 programme which combines both of our main technologies (LentiVector^® and 5T4 platforms), and takes us directly into the cell therapy space.

The Novartis deal

I am proud to say that it was our strong team performance under the initial contract signed in May 2013 with Novartis for CTL019 that led to the signing of the expanded agreement with Novartis in October 2014. The terms of this agreement include:

• A non-exclusive licence granted to Novartis covering Oxford BioMedica's LentiVector^® platform IP in oncology
• A process development collaboration under which any arising IP is owned by Oxford BioMedica and Novartis has an exclusive licence to such arising IP as it relates to CAR-T cell products
• An initial three-year manufacturing contract for clinical supply for Novartis' CTL019 programme with the potential for extension

Financial terms include:

• $4.3m equity investment that was paid on signing the agreement
• Consideration for the IP licence was a $9.7m non-refundable upfront payment and undisclosed royalties on CTL019 and other CAR-T products
• Potential payments of up to $76 million over three years for manufacturing and process development

Fundraising strengthened our negotiating position with Novartis

We were delighted to announce in June 2014 the completion of a successful £21.6 million (before expenses) fundraise from existing and new investors. Importantly, this provided us with the time and a robust financial position from which to complete our negotiations with Novartis and achieve the best possible terms. It has been pleasing to see the share price appreciate progressively following the fundraising and the Novartis announcement, which is a sign of market confidence in our expertise and a wider realisation that the field of gene and cell therapy now provides real treatment options. I would also like to thank Vulpes, who were our largest shareholder at the time, for the loan facility it agreed with us at the start of 2014 to help facilitate the fundraising.

Pipeline advances

We made strong progress across our development pipeline during the year:

LentiVector^® platform

In February 2014 we announced that we had granted Sanofi a development and commercialisation license for StarGen^™ and UshStat^®, while providing for the return to us of the full product rights for EncorStat^®. Under the new license agreement, we are eligible for development and commercialisation milestone payments and royalties on any future sales of StarGen^™ and UshStat^®. Sanofi are now fully responsible for the development of these products and have taken over management of the current clinical trials.

We announced in April 2014 the completion of patient recruitment and dosing in the Phase I study of RetinoStat^®. We also announced later that month that Sanofi had decided not to exercise the option to license RetinoStat^®, but had confirmed that this decision was not linked to unexpected results from the study. We now look forward to receiving the final clinical study report in mid-2015. We are beginning to evaluate the best way forward for RetinoStat^® and alternative ways of achieving this.

In January 2014, The Lancet published encouraging results from the previously reported Phase I/II study of ProSavin^® in patients with advanced Parkinson's disease. These included an excellent safety profile and a significant improvement in motor function relative to baseline at six and 12 months. We are fast-tracking OXB-102 as a second-generation, more potent version of ProSavin^®, as we believe OXB-102 could have even greater efficacy in this indication based on dose response observations. In April 2014 we were awarded a £2.2 million grant from Innovate UK (formerly the Technology Strategy Board) to fund a Phase I/II clinical trial of OXB-102 in Parkinson's disease patients, and we are currently preparing for the start of this study in 2016. I am pleased to report that our other CNS asset, MoNuDin, continues to progress well in preclinical development.

5T4 platform

We initiated our own CAR-T programme in 2014, which leverages both our LentiVector^® and 5T4 technologies. While relatively early-stage, this moves us directly into the cell therapy space. Meanwhile, investigator-led Phase II studies of TroVax^® in colorectal cancer, ovarian cancer and mesothelioma remain on course to report over the next 12-18 months.

Manufacturing operations: OXB Solutions

Our delivery on the 2013 Novartis contract was a major determinant in the Group being awarded the expanded contract announced in October 2014. Oxford BioMedica has the potential to earn up to $76 million over the next three years from delivering on manufacturing and process development targets agreed with Novartis. We now need to invest further in our manufacturing facilities to ensure we have the necessary capacity to achieve these targets, and a series of investments are planned over the next 12-18 months.

New headquarters acquired

We announced in October 2014 that we had acquired the freehold of the Windrush Court office and laboratory facilities in Oxford, England, for a cash consideration of £3.2 million. This new facility, which is opposite our existing manufacturing facility, will enable us to consolidate all our activities in one location. This is expected to improve operational efficiency, providing additional capacity to accommodate our expansion and scale up, while also delivering significant cost savings in the medium term compared to our current premises.

Management updates

We further strengthened our management team with a number of senior management changes during the year. Oxford BioMedica's senior executive decision-making body is now the Senior Executive Team, comprising the four executive directors, John Dawson, Tim Watts, Paul Blake and Peter Nolan, together with Kyriacos Mitrophanous and James Miskin.

Outlook

It is an exciting time to be at Oxford BioMedica, and in the gene and cell therapy field in general. We remain focused on driving our product pipeline forward to deliver its considerable value, in parallel with delivering under the contract with Novartis to offset our cash burn and help fund our wider activities. We have four products in active clinical development and keenly anticipate the complete results of the RetinoStat^® Phase I study in mid-2015. We are busy preparing both EncorStat^® and OXB-102 for entry into the clinic in 2016 and also continuing to evaluate new product opportunities, such as our exciting CART-5T4 cell therapy programme.

We are actively seeking further revenue-generating opportunities from licensing our technology or winning further process development and manufacturing contracts from third parties. I anticipate that as more gene and cell therapy products enter clinical development, there will be demand from other companies for our manufacturing capabilities.

We will be expanding our physical capacity during 2015 and the first half of 2016 to ensure that we can meet our deliverables under the Novartis contract. This we believe could put us in a position that by the end of 2016, revenues from our OXB Solutions manufacturing business will largely offset our general business overheads (excluding any project funding requirements). Further licensing and royalty income beyond the Novartis contract could allow us to fund our own product pipeline going forwards.

We are working hard across the business to ensure that 2015 is another year of strong progress for the Group, our shareholders and ultimately the patients we hope will benefit from our business success.

John Dawson

Chief Executive Officer

OPERATIONAL REVIEW

2014 performance - progress against strategy

We believe that gene therapy will become a mainstay of patient therapy in the future. Our long term goal is to become a standalone, self-financing gene therapy medicines business with the capabilities and capacity to take our products through to market. We have made pleasing advances in executing our strategy over the last 12-24 months, and in particular, taken great strides towards delivering a balanced business model.

Delivering a balanced portfolio: Lentiviral vector ophthalmology products

RetinoStat^®

In April 2014, we announced the completion of the recruitment and dosing of 21 patients in the Phase I trial. This open-label study evaluated three dose levels, in four cohorts, to assess safety and aspects of biological activity in the eye following a single administration of RetinoStat^®. We announced in November 2014 that the study had met its primary end points of safety and tolerability based on a six-month follow up. However, the study protocol requires the patients to be followed up for 48 weeks after dosing, meaning that the last patient visit is scheduled for March 2015.

We have conducted interim analysis of patients' samples available to date, as permitted under the open-label study. As previously reported, we observed a substantial increase in both the target gene products in the eye: endostatin and angiostatin proteins. Encouragingly, protein expression has been sustained for more than 12 months, the longest time-point assessed to date in the first three cohorts, and a clear proportional dose response has been seen.

The final study report should be available in mid-2015 and we intend to publish the results in an appropriate forum.

We announced in April 2014 that we had regained the worldwide rights to RetinoStat^® after Sanofi elected not to exercise their option to licence the product for development and commercialisation, for reasons unrelated to the study. Once the final results have been analysed we will evaluate the best development pathway for the product and whether to continue the development internally or to partner with a third party. 

StarGen™

StarGen^™ is currently in a Phase I/II study as an intended treatment for Stargardt disease. We announced in February 2014, that Sanofi had licensed the product and taken over responsibility for the product's continued development and commercialisation. Management of the ongoing clinical study has been successfully transferred to Sanofi. We manufactured a new batch of StarGen^™ at our own expense to enable the current Phase I/II studies to be completed by Sanofi. A technology transfer process is underway which will enable Sanofi to manufacture clinical trial material in future. Under the license agreement, we are due to receive development and commercialisation milestone payments and royalties on any future sales of the product. Although Stargardt disease is quite rare, the market size for StarGen^™ is significant, at an estimated market opportunity of around $500 million.

UshStat®

UshStat^® is currently in a Phase I/II study as an intended treatment for Usher Syndrome type 1B. We announced in February 2014, that Sanofi had licensed the product and taken over responsibility for the product's continued development and commercialisation. Management of the ongoing clinical study has been successfully transferred to Sanofi and, as for StarGen^™, we were also required to manufacture a new batch of the product at our own expense to enable the current Phase I/II studies to be completed by Sanofi. Sanofi will manufacture the product in future once the ongoing technology transfer process is complete. Under the new license agreement, we are eligible to receive development and commercialisation milestone payments, and royalties on any future sales of the product. The market size for UshStat^® is estimated by Oxford BioMedica to be around $90 million globally per annum.

EncorStat®

We are currently working towards the start of a Phase I/II study for EncorStat^® for the prevention of corneal graft rejection. Clinical study material has been manufactured at our facility and study design discussions have been held with the MHRA. While good progress has generally been made in 2014, the completion of pre-clinical work has taken longer than expected and the study is now expected to start in 2016. The study will be partially funded by the Innovate UK grant we announced in 2013. The potential peak year sales for EncorStat^® are estimated by Oxford BioMedica to be $60-$80 million.

Glaucoma-GT: pre-clinical

In November 2013, we announced encouraging results from pre-clinical studies conducted in conjunction with the Mayo Clinic in the US. We have demonstrated that the product is well-tolerated, reaches the intended target cells at the back of the eye following transcorneal injection, and resulted in long-term gene expression for five months, the furthest time point evaluated. A pre-clinical study is now underway to demonstrate proof of concept by lowering of intraocular pressure, and is likely to complete in 2016.

Delivering a balanced portfolio: Lentiviral vector CNS products
 

OXB-102/ProSavin^®

OXB-102 is a new, more potent, form of ProSavin^® for the treatment of Parkinson's disease. ProSavin^® completed a Phase I/II clinical trial in 2012, and in January 2014 the results were published in The Lancet. It was reported that ProSavin^® demonstrated excellent safety and tolerability, and also showed a statistically significant improvement in motor function at both six and 12 months post-treatment relative to baseline. Patients receiving the 5x dose appeared to respond the most, suggesting that even higher doses may be more efficacious. We therefore decided in April 2012 to evaluate OXB-102, a more potent construct of ProSavin^® before progressing further clinical development. Pre-clinical efficacy studies carried out in 2013 using behavioural and movement analysis indicate that OXB-102 is at least five times more potent than ProSavin^®. OXB-102 also provides the additional benefits of extended patent protection and a reduction in cost of goods over ProSavin^®.

As a result, we are now moving OXB-102 into clinical studies. In April 2014, we announced that we had been awarded a £2.2 million grant from Innovate UK (formerly the Technology Strategy Board), under the Biomedical Catalyst funding programme, to fund a Phase I/II clinical trial of OXB-102 in Parkinson's disease. We have manufactured the clinical trial material in our Cowley facility and are preparing for the planned start of the study in 2016. We believe that OXB-102 could present a major opportunity, given the high unmet need and an anticipated 2.8 million patients forecasted by 2021 in the USA, Japan and five largest European markets alone (source: Datamonitor Epidemiology April 2012).

MoNuDin^®: pre-clinical

MoNuDin^® is a gene therapy product designed to deliver a VEGF gene to the neuronal cells affected by motor neurone disease via direct administration into the cerebrospinal fluid. An early version of MoNuDin^® has shown promising results in initial pre-clinical studies and we are now optimising the product for clinical trials. A pre-clinical programme involving two forms of VEGF is underway in collaboration with VIB/University of Leuven, and supported by funding from the UK Motor Neurone Disease Association (MNDA).

5T4 Tumour Antigen platform

The Group has exclusive rights to intellectual property regarding the 5T4 antigen. This unique protein (onco-foetal tumour antigen) is expressed on the surface of tumours and appears to be involved in the metastatic spread of cancers. It is found in abundance on most common types of solid tumours but is present only in very low levels in some healthy tissues, making it a potentially valuable target for novel anti-cancer therapies.

TroVax^®

TroVax^® is a therapeutic cancer vaccine designed to stimulate the immune system to destroy cancerous cells expressing the 5T4 antigen. The product comprises a 5T4 tumour associated antigen-encoding sequence delivered by a poxvirus (MVA) vector. 

One Phase I/II and two Phase II investigator-sponsored studies are currently underway in the UK to assess the safety and immunological activity of the product in patients with inoperable metastatic colorectal cancer, mesothelioma and ovarian cancer. All of these studies are using a biomarker to select patients for the studies. To support these studies, Oxford BioMedica is contributing clinical trial material and retains full product rights to TroVax^®. These studies should report towards the end of 2015 and in 2016, providing a potential value-driver and out-licensing opportunity should these studies demonstrate efficacy in these biomarker-selected patients.

PF-06263507

In 2001, Oxford BioMedica licensed a 5T4-antibody to Wyeth (acquired by Pfizer in 2009). Pfizer's product contains the 5TA targeting antibody connected to a cytotoxic drug capable of killing the target cancer cells. In August 2013, Pfizer paid a contractual US$1 million milestone payment upon the start of clinical development of the drug, and a Phase I study remains ongoing. We have the potential to earn up to US$28 million from Pfizer in upfront, option fees and milestone payments relating to the development of the product.

5T4 cancer imaging agent

In 2012, ImaginAB acquired an exclusive worldwide license for commercialisation of an in vivo 5T4-based imaging diagnostic that was being developed in collaboration with Oxford BioMedica. Under the terms of this license, Oxford BioMedica could receive up to US$4 million in future development milestone payments, with an additional royalty on potential product sales.

CART-5T4 programme

The Group is developing a product which combines both its LentiVector^® and 5T4 technology platforms. The product is based on a gene modified autologous T cell which is engineered using a lentiviral vector to express an antibody against 5T4. The T-cell is then infused into the patient where it recognises the 5T4 tumour antigen and triggers the "normal" T cell killing mechanisms which kill the cancer cell. This innovative approach directly primes the immune system against the 5T4 antigen, by presenting the antigen on T-cells which are responsible for detecting foreign antigens. This new product is currently in pre-clinical stage development.

Intellectual property and technology licensing

We actively manage our intellectual property estate to provide robust protection for its products and platform technologies and to identify and protect new inventions. Granting third parties licenses to our IP also has the potential to be an increasingly important revenue stream for the Group through upfront, milestone and royalty payments. To date, we have granted LentiVector^® and other platform licenses to a number of third party companies.

In October 2014, we signed a non-exclusive worldwide development and commercialisation licence in oncology under the Group's existing LentiVector^® platform with Novartis.

In December 2013, we signed an option agreement with GlaxoSmithKline (GSK) that grants GSK an option to a non-exclusive licence to our LentiVector^® platform for six orphan indications.

Bavarian Nordic have a license for the Group's heterologous PrimeBoost technology patents and poxvirus patents for PROSTVAC^™ which is now in Phase III for advanced prostate cancer. Emergent BioSolutions, have a license to our heterologous PrimeBoost technology patents and poxvirus patents for the development of a tuberculosis vaccine which is now in Phase II.

OXB solutions

We identified a gap in the industry and recognised that a lack of gene and cell therapy manufacturing expertise in the industry was a potential bottleneck to bringing these types of products to market. As a result, we decided to expand our manufacturing capability to enable the production of clinical trial material for patient studies and the market. In 2013 we were able to secure a mix of grant (£1.8 million) and loan (£5.3 million) funding under the UK Government's Advanced Manufacturing Supply Chain Initiative (AMSCI) which was of significant assistance. Expanding our capacity and resources allows us to seek further process development and manufacturing contracts with additional industry partners.

This was confirmed in 2014 when we were able to announce that, building on an initial contract in 2013, Novartis had commissioned us for manufacture of batches of CTL019 lentiviral vector for clinical study, and to carry out further process development work. The Novartis requirements exceed our current capacity and even the capacity we will have once the AMSCI project is completed in 2016. As a result, we decided to expand our current Cowley facilities still further by establishing a new manufacturing facility at Yarnton, Oxford, and to move into larger laboratory and office facilities at Windrush Court.

Management and other operational updates

To support our growing operations we made a number of senior management changes during the year. Paul Blake was appointed Chief Development Officer from 1 September 2014, with responsibility for the clinical development of the Group's pipeline of gene and cell therapies. Paul was previously a non-Executive Director and remains a Director of the Group.

Peter Nolan's role has broadened to become Chief Business Officer, covering Business Development, IP, Quality Control & Assurance, Health & Safety and Facility Management. Peter joined Oxford BioMedica in 1997 and has been a Board member since 2002.

Kyriacos Mitrophanous was promoted to Chief Scientific Officer, covering identification/evaluation of new scientific opportunities, cell & vector engineering, analytical development, and pre-clinical product development. Kyriacos joined the Group in 1997.

James Miskin was promoted to Chief Technical Officer, covering manufacturing operations and manufacturing process development, including the capacity expansion projects. James joined the Group in 2000.

Oxford BioMedica's senior executive decision making body is now the Senior Executive Team, comprising the four Executive Directors, John Dawson, Tim Watts, Paul Blake and Peter Nolan, together with Kyriacos Mitrophanous and James Miskin.

We announced in October 2014 that we had acquired the freehold of the Windrush Court office and laboratory facilities in Oxford, England, for a total cash consideration of £3.2 million. This 6,684 sq m facility is located directly opposite our manufacturing facility and we intend to relocate our Cowley laboratories and office activities there in stages before the current lease of the Medawar Centre, Oxford, expires in March 2016. We anticipate significant operational advantages from consolidating our activities on one site, while providing more room for expansion as we continue to scale our operations.

CHIEF FINANCIAL OFFICER'S REVIEW

In my 2013 review I said that we had started to see the emergence of new and profitable revenues that could potentially develop over the next two to three years into a significant and sustainable cash contributor, offsetting our cash burn. As evidenced by the signing of our second agreement with Novartis - this is now being achieved. The agreements with Novartis provide us with the opportunity to earn significant revenues over the next three years, potentially allowing the Group to become cash flow positive by the end of 2016 based on our current plans.

To that end, we saw a substantial step up in manufacturing and process development revenues in 2014, and these will recur and grow through 2015 and beyond. After the allocation of relevant and appropriate costs, these revenues are profitable and are starting to offset the Group's overall cost base - thereby reducing the cash burn from R&D expenditure whilst we advance our product pipeline. We also benefited in 2014 from the receipt of upfront payments from Novartis worth $9.7 million (£6.1 million) for a licence to use our lentiviral vector IP.

We are now actively increasing our manufacturing capacity to ensure we are able to meet our delivery targets. We started expanding our cost base in 2014 with additional employees hired to support the expansion of manufacturing activities as the Group scales up work with Novartis. This is set to continue in 2015, and beyond, particularly as we seek to win further manufacturing contracts from Novartis and other third parties.

Capital expenditure also increased in 2014. The largest single item was the £3.2 million acquisition of Windrush Court, our new laboratory and office complex. As well as being operationally more suitable for our needs, the new site will, over the long term, reduce our cash burn as we will avoid the significant rental costs previously incurred at the Medawar Centre. Our capital expenditure programme will also continue over the next two years as we increase our manufacturing capacity.

Key performance indicators

• Profit-generating revenues* £7.7 million (2013: £2.6 million)
• Cash used in operations £7.4 million (2013: £13.0 million)
• Cash burn** £11.6 million (2013: £11.9 million)
• Cash balance £14.2 million (£2.2 million at the start of the year)
• Headcount 134 employees at year end (106 at the start of the year)

* Revenues from the provision of manufacturing and process development services to 3^rd parties

** Net cash used in/generated from operations plus sales and purchases of non-current assets and interest received

Revenues (excluding grants) £13.6 million (2013: £5.4 million)

Revenues grew substantially in 2014 to £13.6 million from £5.4 million in 2013. The three main components of revenues were:

• £7.7 million (2013: £2.6 million) from provision of manufacturing and process development services to third parties. The majority of this came from Novartis for process development activities including optimisation of the CTL019 lentiviral vector manufacturing process
• £5.1 million (2013: £1.0 million) from licence deals. The majority (£4.8 million) of the 2014 licence revenue is from the Novartis upfront payments announced in October
• £0.8 million (2013: £1.7 million) residual revenue from the 2009 Sanofi collaboration

Building towards a sustainable revenue-generating business

Importantly, apart from short-term recognition timing differences, all of our 2014 revenues represent current cash generation. This differs significantly from recent years when a very substantial part of our revenues comprised the deferred recognition of the $26m upfront received from Sanofi in 2009, and was therefore not current cash generation. The 2014 revenues and the new Novartis contracts show that we are now building a sustainable revenue-generating business.

Cost of sales £4.4 million (2013: £1.1 million)

The bulk of our cost of sales arose from Novartis-related manufacturing activities. However, small amounts were incurred in both years relating to royalties payable on licence payments received from Novartis in 2014, and Pfizer in 2013. The manufacturing-related cost of sales arose from the fully-over headed cost of manufacturing viral vectors. This includes raw materials, direct manufacturing labour, and indirect labour (including facility support staff and the significant effort required for quality control and analytical testing), as well as facility costs and overheads.

Gross profit £9.2 million (2013: £4.2 million)

Gross profit increased by £5.0 million. Of this around £3.8 million is due to the higher licence receipts, net of upstream royalty payments, and around £2.1 million from greater manufacturing and process development activities. These were offset by a decline in the revenues from Sanofi relating to the 2009 collaboration.

Research & development costs £17.0 million (2013: £13.8 million)

R&D costs include all costs of manufacturing and R&D activities excluding the amounts which have been transferred to cost of sales. Included in R&D are two one-off items:

One-off R&D costs in 2014 of £2.3 million

One-off R&D costs in 2014 were associated with two items 1) the manufacture of new batches of StarGen^™ and UshStat^® required to complete the ongoing Phase I/II clinical studies under the terms of the agreement with Sanofi. Although these studies have now been transferred to Sanofi, Oxford BioMedica was responsible under the 2009 collaboration agreement for the supply of all the clinical material; and 2) the manufacture of a viral vector in respect of an unnamed pilot project which may translate to fees in due course. In aggregate these items amounted to £2.3 million.

Without the one-off items in 2014, R&D costs would have been £14.7 million, only 7% above 2013. This increase was partly due to the need to build up headcount in anticipation of the new Novartis contracts. There was also expenditure on the previously announced manufacturing project partially funded by the grant from the UK Government's Advanced Manufacturing Supply Chain Initiative (AMSCI). These higher costs are offset by the grants receivable which are disclosed separately in the financial statements.

Administration expenses £4.0 million (2013: £3.4 million)

Administration costs of £4.0 million were £0.6 million higher than in 2013 mainly due to inflation and slightly higher manpower costs required to provide support to our rapidly growing business.

Grants receivable £1.1 million (2013: £0.1 million)

The increase in grants receivable during 2014 was from the Advanced Manufacturing Supply Chain Initiative and the Innovate UK (formerly Technology Strategy Board) grant for EncorStat^®, both of which were announced in 2013 but for which the activities started in 2014.

Loss for the year £10.6 million (2013: £12.8 million)

The operating loss for the year of £10.6 million was £2.2 million lower than in 2013. This is explained by the £5.0 million increase in gross profit offset by £2.8 million of higher costs, net of the grants received which offset AMSCI and EncorStat^® project costs. If the one-off R&D costs described above were to be excluded, the loss for the year would have been reduced to £8.3 million.

Finance costs of £0.2 million arose primarily from the loan facility provided by Vulpes Life Sciences Partners in the first half of 2014. The tax credit at £2.1 million is £0.5 million greater than in 2013 due to an increase in the tax credit percentages which took effect in 2014. The overall after-tax loss for the year was £8.7 million, being £2.4 million lower than in 2013.

Balance sheet

• Property, plant and equipment have increased by £4.9 million in 2014, with £5.6 million of additions reduced by £0.7 million depreciation. The main additions were the acquisition of Windrush Court, our new office and laboratory facility in Oxford, which cost £3.5 million (£3.2 million plus stamp duty and acquisition costs), £1.1 million for the purchase of manufacturing and laboratory equipment, with the bulk of the remainder comprising expenditure on manufacturing capacity expansion

• Inventory has increased to £1.4 million (2013: £0.7 million) as we have built up raw materials to meet the manufacturing volumes required under the Novartis contract

• Trade and other receivables at £5.2 million are £2.6 million greater than 2013, primarily due to Novartis receivables being higher 

• Cash and cash equivalents are £14.2 million, £12.0 million above the balance at the end of 2013. The increase is explained in the cash flow section below 

• Trade and other payables of £6.3 million are higher than 2013 (£2.9 million), due to a combination of different timing of payments to suppliers over the year end, accruals for fixed asset purchases, and higher bonuses in 2014 

• The £1.0 million loan is the first drawdown of the £5.3 million AMSCI loan facility which was announced in 2013. This loan is being used to finance the capacity expansion programme originally envisaged in early 2013. However, this programme has now been significantly expanded as a result of the need to meet Novartis' production needs. Therefore, our total capital expenditure over the next two years will be substantially greater than the loan facility 

• Deferred income of £2.9 million principally arises because, under the manufacturing payment terms agreed with Novartis, a portion of the price of each batch is invoiced on confirmation of order, and at the start of the manufacturing process. At the end of the financial year, to the extent that a batch remains as work-in-progress, a proportion of these invoices have not yet been recognised as revenue

Cash flow

Cash used in operations in 2014 was £7.4 million, compared with £13.0 million in 2013. The operating loss was £10.6 million (2013: £12.8 million) but the cash impact of this was reduced by £1.5 million of non-cash items (depreciation, amortisation, impairment and share option charges) (2013: £1.4 million) and also benefited by a £1.7 million favourable movement in working capital (2013: £1.6 million adverse movement).

The R&D tax credit receipt added £1.6 million to cash used (2013: £2.0 million), while interest paid of £0.2 million (2013: £nil) and, importantly, capital expenditure of £5.6 million (2013: £0.8 million) increased the cash burn to £11.6 million (2013: £11.9 million).

Headcount

The increase in headcount during 2014 is explained by the need to fully staff the manufacturing operations to support the Novartis contract including manufacturing, quality control and analytical staff.

Financial outlook

Our key financial objectives for 2015 require that we deliver the targets under the Novartis contracts - the fulfilment of which requires recruitment of more staff and significant capital expenditure on manufacturing capacity.

The Novartis contracts will generate further significant manufacturing and process development revenues in 2015 and 2016 which will lead to the further reduction of our underlying operational cash burn, at the same time as we continue to advance our exciting pipeline in gene and cell therapy. We will also be seeking similar contracts with other third parties. In conclusion, Oxford BioMedica's business has been transformed, and is en-route to becoming potentially cash positive by end 2016.

Going concern

The Group had £14.2m of cash at the end of 2014 and is now generating profitable revenues from its manufacturing activities. However, it will incur substantial capital expenditure over the next 15 months as it expands manufacturing and analytical testing capacity to enable it to meet the volumes expected under the Novartis contracts. In the absence of any further upfront receipts from potential product or IP licence deals, the Directors estimate that the cash held by the Group including known cash inflows will be sufficient to support the current level of activities into the first quarter of 2016. Known cash inflows include a proportion of the contractual milestone payments from Novartis which are based on process development progress continuing at its current rate.

The Directors have also considered the range of potential sources of cash to the Group and expect to be able to secure adequate resources should they be required. Whilst the Directors have confidence that such resources could be obtained, no such additional resources are committed at the date of these financial statements. In the absence of securing such funds or other sources of cash, the Group would choose to curtail or suspend part of its capital expenditure programme until such funds were secured. 

After due consideration, the Directors are of the view that the Group will have access to adequate resources to allow the Group to continue for the foreseeable future and have therefore prepared the financial statements on a going concern basis.

Tim Watts

Chief Financial Officer

-Ends-

Consolidated statement of comprehensive income

for the year ended 31 December 2014

					Group
				2014		2013
Continuing operations	Notes			Total £'000		Total £'000
Revenue				13,618		5,375
Cost of sales				(4,416)		(1,140)
Gross profit				9,202		4,235
Research and development costs				(16,986)		(13,750)
Administrative expenses				(3,957)		(3,422)
Other operating income: grants receivable				1,128		114
Operating loss				(10,613)		(12,823)
Finance income				53		64
Finance costs				(238)		(4)
Loss before tax				(10,798)		(12,763)
Taxation	3			2,137		1,667
Loss for the year				(8,661)		(11,096)
Basic loss and diluted loss per ordinary share	4			(0.43p)		(0.79p)

The notes on pages 18 to 24 form part of this preliminary information.

Balance sheet

as at 31 December 2014

		Group
	Notes	2014 £'000	2013 £'000
Assets
Non-current assets
Intangible assets	5	2,106	2,633
Property, plant and equipment	6	8,944	4,070
		11,050	6,703
Current assets
Inventories	7	1,407	680
Trade and other receivables	8	5,153	2,592
Current tax assets		2,000	1,500
Cash and cash equivalents		14,195	2,169
		22,755	6,941
Current liabilities
Trade and other payables	9	6,304	2,934
Deferred income	10	2,927	1,280
		9,231	4,214
Net current assets		13,524	2,727
Non-current liabilities
Loans	11	1,000	-
Provisions	12	535	532
		1,535	532
Net assets		23,039	8,898
Equity attributable to owners of the parent
Ordinary shares		25,659	14,162
Share premium account		141,615	130,304
Merger reserve		2,291	14,310
Treasury reserve		(226)	-
Other reserves		(682)	(682)
Accumulated losses		(145,618)	(149,196)
Total equity		23,039	8,898

The notes on pages 18 to 24 form part of this preliminary information.

Statement of cash flows

for the year ended 31 December 2014

		Group
		2014	2013
	Notes	£'000	£'000
Cash flows from operating activities
Cash used in operations	13	(7,431)	(13,005)
Interest paid		(238)	(4)
Tax credit received		1,637	1,990
Net cash used in operating activities		(6,032)	(11,019)
Cash flows from investing activities
Purchases of property, plant and equipment		(5,577)	(839)
Purchases of intangible assets		-	(98)
Net maturity of available for sale investments		-	5,105
Interest received		53	64
Net cash (used in)/generated from investing activities		(5,524)	4,232
Cash flows from financing activities
Proceeds from issue of ordinary share capital		24,268	-
Costs of share issues		(1,460)	-
Net payments related to share award		(226)	-
Loans received		1,000	-
Net cash generated from financing activities		23,582	-
Net increase/(decrease) in cash and cash equivalents		12,026	(6,787)
Cash and cash equivalents at 1 January		2,169	8,956
Cash and cash equivalents at 31 December		14,195	2,169

The notes on pages 18 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 2014

		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 2013		14,162	130,304	14,310	-	(682)	(138,451)	19,643
Year ended 31 December 2013:
Loss for the year		-	-	-	-	-	(11,096)	(11,096)
Total comprehensive expense for the year		-	-	-	-	-	(11,096)	(11,096)
Transactions with owners: Share options
Value of employee services		-	-	-	-	-	351	351
At 31 December 2013		14,162	130,304	14,310	-	(682)	(149,196)	8,898
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
Costs 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

The notes on pages 18 to 24 form part of this preliminary information.

 

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

for the year ended 31 December 2014

1   Basis of preparation

This financial information, for the years ended 31 December 2014 and 31 December 2013, 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 2014 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 2013 have been delivered to the Registrar of Companies. The auditors' reports on the financial statements for the years ended 31 December 2014 and 31 December 2013 were unqualified and did not contain statements under section 498 of the Companies Act 2006.  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 2014 are available from the Company Secretary, and are on the Group's website. The audited statutory financial statements for the year ended 31 December 2014 are expected to be distributed to shareholders by 30 April 2015 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 12 March 2015.

Going concern

The Group had £14.2m of cash at the end of 2014 and is now generating profitable revenues from its manufacturing activities. However, it will incur substantial capital expenditure over the next 15 months as it expands manufacturing and analytical testing capacity to enable it to meet the volumes expected under the Novartis contracts. In the absence of any further upfront receipts from potential product or IP licence deals, the Directors estimate that the cash held by the Group including known cash inflows will be sufficient to support the current level of activities into the first quarter of 2016. Known cash inflows include a proportion of the contractual milestone payments from Novartis which are based on process development progress continuing at its current rate.

The Directors have also considered the range of potential sources of cash to the Group and expect to be able to secure adequate resources should they be required. Whilst the Directors have confidence that such resources could be obtained, no such additional resources are committed at the date of these financial statements. In the absence of securing such funds or other sources of cash, the Group would choose to curtail or suspend part of its capital expenditure programme until such funds were secured.  

After due consideration, the Directors are of the view that the Group will have access to adequate resources to allow the Group to continue for the foreseeable future and have therefore prepared the financial statements on a going concern basis. 

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 manufacturing 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 the non-exclusive worldwide development and commercialisation licence in oncology under the Group's existing Lentivector intellectual property 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 3-year manufacturing 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 CTL019 to be manufactured 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 CTL019,

- 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.

Intangible asset impairment

The Group has significant intangible assets arising from purchases of intellectual property rights and in-process R&D. Amortisation is charged over the assets' patent life on a straight line basis from the date that the asset becomes available for use. When there is an indicator of a significant and permanent reduction in the value of intangible assets, an impairment review is carried out. The impairment analysis is principally based on estimated discounted future cash flows. Actual outcomes could vary significantly from such estimates of discounted future cash flows due to the sensitivity of the assessment to the assumptions used. The determination of the assumptions is subjective and requires the exercise of considerable 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 2014 the book value of intangible assets was £2.1 million of which £1.5 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 (page 18) and the Financial review (page 10).

2    Segmental analysis

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

3    Taxation

The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure. The amount included in the statement of comprehensive income for the year ended 31 December 2014 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 2014 have not yet been agreed with the relevant tax authorities.

	Group
	2014	2013
	£'000	£'000
Current tax
United Kingdom corporation tax research and development credit	(2,000)	(1,500)
Overseas taxation	(51)	(3)
	(2,051)	(1,503)
Adjustments in respect of prior periods
United Kingdom corporation tax research and development credit	(86)	(142)
Overseas taxation	-	(22)
Taxation credit	(2,137)	(1,667)

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 2014 (2,019,291,808; 2013: 1,416,149,005). As the Group is loss-making, there were no potentially dilutive options in either year. There is therefore no difference between the basic loss per ordinary share and the diluted loss per ordinary share.

5   Intangible assets

			Intellectual property rights
Group			£'000
Cost
At 1 January 2014			5,591
Additions			-
At 31 December 2014			5,591
Accumulated amortisation and impairment
At 1 January 2014			2,958
Amortisation charge for the year			396
Impairment charge for the year			131
At 31 December 2014			3,485
Net book amount at 31 December 2014			2,106
Cost
At 1 January 2013			5,493
Additions			98
At 31 December 2013			5,591
Accumulated amortisation and impairment
At 1 January 2013			2,562
Amortisation charge for the year			396
At 31 December 2013			2,958
Net book amount at 31 December 2013			2,633

For intangible assets regarded as having a finite useful life, amortisation commences when products underpinned by the intellectual property rights become available for use. Amortisation is calculated on a straight line basis over the remaining patent life of the asset. Amortisation of £396,000 (2013: £396,000) is included in 'Research and development costs' in the statement of comprehensive income.

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

Following the cancellation of the Fire and Mello RNai licenses the related intangible asset was fully impaired resulting in an impairment charge of £131,000.

6   Property, plant and equipment

	Freehold property	Short leasehold   improvements	Office  equipment & computers	Manufacturing & Laboratory equipment	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2014	3,225	2,623	621	4,265	10,734
Additions at cost	4,142	166	199	1,070	5,577
At 31 December 2014	7,367	2,789	820	5,335	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	6,669	210	225	1,840	8,944

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

On 13 October 2014, the Group announced that it had acquired the freehold of the Windrush Court office and laboratory facilities for a cash consideration of £3.2 million.  This, together with stamp duty and other related legal costs constitutes a significant part of the Freehold property additions for 2014.

7   Inventories

		Group
	2014	2013
	£'000	£'000
Raw Materials	1,214	558
Work in progress	193	122
Total inventory	1,407	680

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

8   Trade and other receivables

			Group
			2014	2013
			£'000	£'000
Current
Trade receivables			3,621	1,040
Accrued income			340	637
Other receivables			16	28
Other tax receivable			397	285
Prepayments			779	602
Total trade and other receivables			5,153	2,592

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 £66,000 (2013: £142,000) which are past due at the reporting date. The Group does not hold any collateral over these balances. No provision for impairment of receivables has been recognised as the Directors do not believe there has been a significant change in credit quality and consider the remaining amounts to be recoverable in full.

9   Trade and other payables

			2014	2013
			£'000	£'000
Trade payables			2,787	1,218
Other taxation and social security			270	201
Accruals			3,247	1,515
Total trade and other payables			6,304	2,934

10 Deferred income

Group	2014 £'000	2013 £'000
Current	2,927	1,280
Total deferred income	2,927	1,280

Deferred income arises from contractual agreements with customers.

11 Loans

During April 2014 the Group drew down a tranche of £1.0 million of the £5.3 million facility made available under the UK Government's Advanced Manufacturing Supply Chain Initiative. The loan carries interest at 6% per annum and is repayable in equal quarterly instalments between 30 June 2016 and 31 March 2017.

12   Provisions

Group			Dilapidations £'000
At 1 January 2014			532
Unwinding of discount			3
At 31 December 2014			535
At 1 January 2013			510
Unwinding of discount			4
Change of discount rate - adjustment to recognised property, plant and equipment			18
At 31 December 2013			532

The dilapidations provision relates to anticipated costs of restoring the leasehold property in Oxford, UK to its original condition at the end of the present leases in 2016, discounted using the rate per the Bank of England nominal yield curve. The equivalent rate was used in 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 loss before tax to net cash used in operations

			Group
			2014	2013
			£'000	£'000
Continuing operations
Loss before tax			(10,798)	(12,763)
Adjustment for:
Depreciation			703	671
Amortisation of intangible assets			396	396
Charge for impairment			131	-
Finance income			(53)	(64)
Finance expense			238	4
Charge in relation to employee share schemes			220	351
Changes in working capital:
Increase in trade and other receivables			(2,561)	(886)
Increase in trade and other payables			3,370	232
Increase/(decrease) in deferred income			1,647	(288)
Increase in provisions			3	22
Increase in inventory			(727)	(680)
Net cash used in operations			(7,431)	(13,005)

 

END

 

 

FR EANDAFELSEFF