REG - Oxford Biomedica PLC - Preliminary Results for the Year Ended 31 Dec 2015 <Origin Href="QuoteRef">OXB.L</Origin> - Part 2
28/04/2016 07:06
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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 Shortleasehold 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 Shortleasehold 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.
This information is provided by RNS
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