REG - hVIVO plc - 2015 Audited Preliminary Results <Origin Href="QuoteRef">HVO.L</Origin> - Part 2

hVIVOAnnouncement

20/04/2016 07:06

- Part 2: For the preceding part double click  ID:nRST7115Va 

flu and asthma under
licencing arrangements and also to conduct a Phase II durability study for a
total consideration of £10.0 million.  The hVIVO contracts with PrEP Biopharm
are priced on an arms-length basis and with normal terms. 
 
hVIVO has concluded that despite having significant influence, the terms of
the ISHA mean that it does not have the power to direct the relevant
activities of PrEP Biopharm. Accordingly, hVIVO's investment in PrEP Biopharm
has been accounted for as an investment in an associate. 
 
Summarised consolidated financial information in respect of PrEP Biopharm
Limited and its 100% owned US based subsidiary, PrEP Biopharm Inc, is set out
below and has been prepared in accordance with IFRS. 
 
                                                             2015    
                                                             £'000   
 Current assets                                              15,298  
 Non-current assets                                          5,076   
 Current liabilities                                         (123)   
 Net assets                                                  20,251  
                                                                     
 Interest in the associate                                   12,681  
 Goodwill                                                    1,573   
 Carrying amount of the Group's interest in the associate    14,254  
 
 
PrEP Biopharm Limited and its subsidiary generated no revenues during the
period as the activity was that of product development. 
 
9.       Inventories 
 
                                      31 December  31 December  
                                      2015         2014         
                                      £'000        £'000        
 Laboratory and clinical consumables  33           67           
 Virus - finished goods               2,108        2,212        
 Virus - work in progress             -            1,452        
                                      2,141        3,731        
 
 
Inventories expensed in the consolidated statement of comprehensive income are
shown within cost of sales or research and development expense. All
inventories are carried at the lower of cost or net realisable value in the
consolidated statement of financial position. 
 
During 2015 a provision of £1,614,000 (2014: £nil) was recognised against the
carrying value of "Virus - finished goods". During 2013-14 management
developed two separate strains of H3N2 flu virus for use in both client and
internal studies. Two strains were developed in order to mitigate the
scientific and manufacturing risk of one strain failing development and to
ensure that at least one strain was successful in the timeframe. As it is
likely that only one of these strains will be used in client studies going
forward, the second strain has been fully provided against. 
 
As at 31 December 2014, a provision in full of £1.3 million against the
carrying value of "Virus - work in progress" was recognised relating to a
virus to be used commercially, where the new human disease models have not yet
demonstrated technical feasibility. As at 31 December 2015, the provision has
increased by £3,000 as further costs were incurred developing the virus strain
during the year. 
 
10.     Current intangible asset 
 
                    2015   2014   
                    £'000  £'000  
 At 1 January       -      -      
 Additions at cost  2,935  -      
 At 31 December     2,935  -      
 
 
During 2015 hVIVO commenced a clinical trial programme with a view to the
study data generating future economic benefit through licencing arrangements.
Accordingly, the costs of performing these studies have been capitalised. On 1
November 2015, PrEP Biopharm Limited contracted to licence the study data for
the flu and asthma studies. The study data is forecast to complete and be
provided to PrEP Biopharm Limited during 2016, at which point these costs will
be amortised through cost of sales. 
 
11.     Trade and other receivables 
 
                    31 December  31 December  
                    2015         2014         
                    £'000        £'000        
 Trade receivables  551          446          
 VAT recoverable    -            295          
 Other receivables  405          667          
 Prepayments        1,274        1,334        
 Accrued income     412          162          
                    2,642        2,904        
 
 
12.     Short-term deposits 
 
                      31 December  31 December  
                      2015         2014         
                      £'000        £'000        
 Short-term deposits  37,031       28,007       
 
 
Balances held on short-term deposits have maturity dates between three and
twelve months at the time of investment. 
 
13.     Cash and cash equivalents 
 
                           31 December  31 December  
                           2015         2014         
                           £'000        £'000        
 Cash at bank and in hand  14,205       22,826       
 
 
14.     Trade and other payables 
 
                                  31 December  31 December  
                                  2015         2014         
                                  £'000        £'000        
 Trade payables                   2,265        2,754        
 Other taxes and social security  382          414          
 VAT Payable                      984          -            
 Other payables                   5,134        177          
 Accruals                         1,303        903          
 Deferred income                  7,434        370          
                                  17,502       4,618        
 
 
15.     Other payables 
 
                                        31 December  31 December  
                                        2015         2014         
                                        £'000        £'000        
 Amounts to be settled beyond one year  475          550          
 
 
On 11 March 2013, the Group signed an Agreement for Lease with Queen Mary
BioEnterprises Limited to develop the 3rd floor of the QMB Innovation Centre
with a five-year term and an option to extend for another five years. As part
of the agreement, QMB advanced the Group a repayable interest-free lease
incentive of £750,000 to develop the 3rd floor, with £75,000 per annum
repayable over a ten-year period. The lease incentive is recognised as a
liability. In the event the Group does not exercise its option to extend the
lease agreement for another five years, the remaining unpaid principal of the
advance (£375,000) must be repaid at the end of the five-year contractual
lease term. 
 
16.     Provisions 
 
                                   Onerous lease  Dilapidations         
                                   provision      provision      Total  
                                   £'000          £'000          £'000  
 At 1 January 2015                 3,000          130            3,130  
 Additional provision in the year  993            10             1,003  
 Used during the year              (993)          -              (993)  
 At 31 December 2015               3,000          140            3,140  
 
 
Onerous lease provision of £3.0 million (31 December 2014: £3.0 million)
represents management's best estimate of the costs to be incurred for the exit
of premises leased by the Group after considering the likely outcomes. There
is reasonable uncertainty around the likelihood and timing of the exit of the
lease as negotiations will involve third parties. The provision is expected to
be used between 2016 and 2018. Total expected costs to be incurred are £3.0
million. 
 
Buildings dilapidations of £140,000 (31 December 2014: £130,000) represent the
present value of costs to be incurred for the restoration of premises occupied
by the Group. The provision is expected to be used during 2018. Total expected
costs to be incurred are £140,000. 
 
17.     Note to the consolidated statement of cash flows 
 
                                                            2015      2014      
                                                            £'000     £'000     
 Cash flow from operating activities                                            
 Loss before income tax                                     (21,625)  (22,705)  
 Adjustments for:                                                               
 Share of loss of associate                                 146       -         
 Depreciation of property, plant and equipment              1,342     1,221     
 Impairment of property, plant and equipment                -         672       
 Amortisation of intangible assets                          318       435       
 Payment of Non-Executive Director fees by issue of shares  68        15        
 Share-based payment expense                                78        10        
 Finance costs                                              17        15        
 Finance income                                             (387)     (358)     
 (Gain)/loss on foreign exchange                            (8)       8         
 Increase in provisions                                     10        3,020     
 Changes in working capital:                                                    
 Decrease/(increase) in inventories                         1,590     (615)     
 Increase in current intangible asset                       (2,935)   -         
 Increase in R&D Expenditure Credit asset                   (352)     -         
 Decrease in trade and other receivables                    249       2,965     
 Increase/(decrease) in trade and other payables            7,885     (3,835)   
 Cash used in operations                                    (13,604)  (19,152)  
 Finance costs                                              (17)      (15)      
 Income tax refund                                          3,775     2,568     
 Net cash used in operating activities                      (9,846)   (16,599)  
 
 
Trade and other payables include deferred consideration of £5.0 million in
respect of the equity investment in PrEP Biopharm Limited which was paid in
January 2016. This amount has not been included as a change in working capital
as it relates to investing activities. 
 
As at 31 December 2015, a £352,000 asset has been recognised in respect of an
R&D Expenditure Credit (RDEC). This amount is presented within Research and
development tax credit receivable in the consolidated statement of financial
position. The remaining tax credit is presented below loss from operations in
the consolidated statement of comprehensive income. 
 
This information is provided by RNS
The company news service from the London Stock Exchange