REG - Oxford Biomedica PLC - Preliminary results for the year ended 31 Dec 2022
25/04/2023 07:00
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RNS Number : 3573X Oxford Biomedica PLC 25 April 2023
OXFORD BIOMEDICA PLC
Preliminary results for the year ended 31 December 2022
ENHANCING OUR POSITION AS A GLOBAL
QUALITY AND INNOVATION-LED VIRAL VECTOR CDMO
Oxford, UK - 25 April 2023: Oxford Biomedica plc ("Oxford Biomedica" or "the
Company") (LSE: OXB), a quality and innovation-led viral vector CDMO,
announces its preliminary results for the year ended 31 December 2022.
Dr. Frank Mathias, Oxford Biomedica's Chief Executive Officer, said:
"I am honoured to present my inaugural set of financial results as CEO of
Oxford Biomedica. Under the leadership of Roch and the Senior Executive Team,
the Company has delivered another strong set of results from its growing
international platform.
"In 2022, we have successfully grown our core business by expanding our global
reach, establishing Oxford Biomedica Solutions in the US and broadening our
expertise in key viral vector types, including AAV. The expansion of our
development and manufacturing capabilities has enabled us to drive innovation
whilst both attracting new international biopharma clients and expanding
existing collaborations. We have also successfully right-sized our business
and we are now in a robust financial situation to strengthen our position as a
global quality and innovation-led viral vector CDMO.
"Our mission is centred on enabling our clients to deliver life-changing
therapies to patients worldwide and in my brief tenure to date, I have been
profoundly inspired by our team's unwavering commitment and exceptional
talent, which serve as the driving force behind our success.
"With a clearly defined vision for the future, I look forward to working
closely with our team, and our clients, and to making a lasting impact on the
lives of patients worldwide."
FINANCIAL HIGHLIGHTS
‒ Total revenues broadly in line with last year at £140.0 million (2021:
£142.8 million) due to strong performance by Oxford Biomedica Solutions
despite lower COVID-19 vaccine bioprocessing volumes. Double digit revenue
growth in the core business (excluding COVID-19 vaccine manufacturing)
compared to FY 2021.
‒ Revenues from bioprocessing and commercial development activities were
maintained at £128.1 million (2021: £128.4 million). This included aggregate
vaccine revenues in excess of £40.0 million.
‒ Revenues from milestones, licences and royalties, which, in the prior year,
included recognition of a £4.0 million license fee from Boehringher
Ingelheim, decreased by 17% to £11.9 million (2021: £14.4 million), this
decrease was driven by lower license fees from new client programmes.
‒ The launch of Oxford Biomedica Solutions, enabling entry into the fast-growing
AAV market whilst also establishing a key strategic presence in the US, drove
an increase in operating expenses to £123.0 million (2021: £62.5 million)
which included one-off acquisition-related costs. Active cost control
initiatives were initiated to reduce the Group's operating cost base as the
COVID-19 pandemic eased.
‒ Operating EBITDA and operating profit benefited from a profit on the sale and
leaseback of the Windrush Court facility for £21.4 million.
‒ Operating EBITDA profit of £1.6 million and operating loss of £30.2 million
(2021: operating EBITDA profit and operating profit of £35.9 million and
£20.8 million respectively) due to reduced AstraZeneca vaccine production,
consolidation of the investment in Oxford Biomedica Solutions investment and
one-off acquisition-related due diligence costs of £5.1 million.
‒ Entered into a US$85 million short-term loan facility with Oaktree Capital
Management, L.P. ("Oaktree") to finance a portion of the transaction with
Homology Medicines Inc. ("Homology Medicines") to establish Oxford Biomedica
Solutions. The loan was refinanced in October, partially repaid, and amended
to a US$50 million four-year term loan facility.
‒ Cash at 31 December 2022 was £141.3 million (2021: £108.9 million); Net cash
at 31 December 2022 was £101.5 million and £98.8 million at 31 March 2023.
OPERATIONAL HIGHLIGHTS DELIVERED IN 2022
‒ Established Oxford Biomedica Solutions, an innovative service provider and
adeno-associated virus (AAV) product developer with complete end-to-end
chemistry, manufacturing and controls capabilities and expertise, from
preclinical development through to clinical drug supply.
‒ Significantly increased client base with 13 new or expanded client
relationships across lentiviral vectors and AAV (including 3 post-period). The
Group's CDMO portfolio currently comprises more than 30 programmes for its
clients.
‒ Amended and expanded the original License and Clinical Supply Agreement signed
with Juno Therapeutics, Inc. (Juno) a wholly owned subsidiary of Bristol Myers
Squibb Company, to include two new viral vector programmes.
‒ Expanded capacity through innovation and advanced technologies, rolling out
Process C at 200L scale in GMP, with several clients adopting or evaluating
the next-generation lentiviral manufacturing platform due to the evident gains
in vector quantity and quality it affords.
‒ Oxbox, the Group's largest manufacturing facility, received MHRA approval for
its fill finish suite in August 2022. This high quality, state-of-the art
value-added capability is now being rolled out to clients.
‒ Reviewed strategic options and started exploring external funding
opportunities for the gene therapeutics portfolio to realise the potential of
its innovative and differentiated programmes that address unmet medical needs.
CORPORATE HIGHLIGHTS
‒ Continued to strengthen Board and leadership team with the appointment of Dr.
Frank Mathias as CEO (post-period) and the appointment of Namrata Patel as an
Independent Non-Executive Director. John Dawson stepped down as CEO in January
2022.
‒ New hires added to the leadership team in 2022 included Tim Kelly, CEO and
Chair of Oxford Biomedica Solutions, Dr. Ravi Rao, Chief Medical Officer and
Dr. Sebastien Ribault, Chief Commercial Officer.
OUTLOOK
‒ In 2023, targeting double-digit growth in lentiviral vector and AAV
manufacturing and commercial development revenues through existing client
relationships and new agreements.
‒ Continuously investing in new technologies to maintain a competitive edge in
lentiviral vectors and build a leading position in AAV.
‒ Aspiring to achieve market leadership in the viral vector outsourced supply
market across all key vector types, while exceeding long-term revenue growth
rates of the broader market.
Analyst briefing
Oxford Biomedica's management team, led by new CEO, Dr. Frank Mathias and
Stuart Paynter, CFO, will be hosting a briefing and Q&A session for
analysts at 13:00 BST / 8:00 EST today, 25 April, at Etc. Venues St Paul's,
200 Aldersgate, London, EC1A 4HD.
A live webcast of the presentation will be available via this link
(https://protect-eu.mimecast.com/s/s6m0CPjXwh48Op1f0YJCf) . The presentation
will be available on the Company's website at www.oxb.com (http://www.oxb.com)
If you would like to dial in to the call and ask a question during the live
Q&A, please email Oxfordbiomedica@consilium-comms.com
(mailto:Oxfordbiomedica@consilium-comms.com)
Notes
Unless otherwise defined, terms used in this announcement shall have the same
meaning as those used in the Annual report and accounts.
Enquiries:
Oxford Biomedica plc:
Taylor Boyd, VP, Head of IR T: +1 (984) 268 8488/ E: ir@oxb.com (mailto:ir@oxb.com)
Sophia Bolhassan, VP, Corporate Affairs and IR T: +44 (0)1865 783 000
Consilium Strategic Communications: T: +44 (0)20 3709 5700
Mary-Jane Elliott
Matthew Neal
Davide Salvi
Peel Hunt (Joint Corporate Brokers): T: +44 (0)20 7418 8900
James Steel
Dr. Christopher Golden
JP Morgan (Joint Corporate Brokers): T: +44 (0)20 7134 7329
James Mitford
Gautham Baliga
About Oxford Biomedica
Oxford Biomedica (LSE: OXB) is a quality and innovation-led viral vector CDMO
with a mission to enable its clients to deliver life changing therapies to
patients around the world.
One of the original pioneers in cell and gene therapy, the Company has more
than 25 years of experience in viral vectors; the driving force behind the
majority of gene therapies. The Company collaborates with some of the world's
most innovative pharmaceutical and biotechnology companies, providing viral
vector development and manufacturing expertise in lentivirus, adeno-associated
virus (AAV) and adenoviral vectors. Oxford Biomedica's world-class
capabilities span from early-stage development to commercialisation. These
capabilities are supported by robust quality-assurance systems, analytical
methods and depth of regulatory expertise.
Oxford Biomedica, a FTSE4Good constituent, is headquartered in Oxford, UK. It
has locations across Oxfordshire, UK and a US-based subsidiary, Oxford
Biomedica Solutions, based near Boston, MA, US. Learn more at www.oxb.com,
www.oxbsolutions.com, and follow us on LinkedIn, Twitter and YouTube.
CHAIR'S STATEMENT
Commitment to our purpose of transforming lives through cell and gene therapy
In 2022, Oxford Biomedica made significant progress towards establishing a
global leadership position in viral vector development and supply. We
broadened our viral vector CDMO offering and expanded our business into the
US, and into new viral vector types, building on our recognised expertise in
lentiviral vectors. Our transformational deal with Homology Medicines, Inc.
(Homology Medicines) allowed us to capitalise on our successful work
developing and producing the adenovirus-based Oxford AstraZeneca COVID-19
vaccine and immediately took us into the fast-growing AAV market with our
first US-based business, Oxford Biomedica Solutions. With this move we
expanded our innovative development and manufacturing expertise, enabling more
biotech and pharma clients to deliver life-saving therapies to patients.
Importantly, in November 2022, we announced that Dr. Frank Mathias would join
us as our new Chief Executive Officer. Frank's experience and track record of
success running both an innovative biopharma company and a high-performing
CDMO will be key to the Group as we build on our leading position and cell and
gene therapy continues on its rapid growth trajectory.
Enhancing our position as a global quality and innovation-led CDMO
Viral vectors are the most established and powerful delivery mechanism for
cell and gene therapies. As the driving force behind the majority of approved
gene therapy trials, viral vectors unlock the possibility of safe and targeted
one-time treatments.
Over the last year, Oxford Biomedica has expanded its viral vector
capabilities into all key viral vector types including lentivirus, adenovirus
and AAV. Our AAV business has grown from strength to strength already, with
five clients at the end of 2022, exceeding our initial expectations. In late
2022, we also significantly upgraded our commercial organisation with new key
hires. The momentum we are seeing in business development activities across
lentivirus, AAV and adenoviruses validates client confidence in the business,
team, and our capabilities. With the lentiviral vector and AAV manufacturing
markets poised for projected 27% and 28% CAGRs respectively from 2018-2026
(Source: Mordor Intelligence, 2021), our expansion into the US AAV market and
the growing lentivirus segment will enable our success in our aim for market
leadership in viral vector CDMO services. Despite the challenging
macroeconomic backdrop, we have a strong and diversified business development
pipeline, and our business has continued to thrive with new client agreements
and expanded remits from existing clients. Our annual revenues and number of
clients have more than doubled since 2017, with 18 clients (including three
added post-period) now across multiple viral vector types.
Looking to the future, we have positioned ourselves to capitalise on the
expected wave of cell and gene therapy approvals. It is estimated that there
could be up to 14 cell and gene therapy regulatory decisions in 2023 in the US
alone (Source: Alliance for Regenerative Medicine). Furthermore, favourable
regulatory tailwinds with regard to efficiencies in underlying manufacturing
processes lead us to believe there will be a step-up in appetite for cell and
gene therapy approvals and a need to make the manufacturing process for gene
therapies more efficient. To ensure that we are efficiently and properly
resourced for future growth, we have right-sized our business while
maintaining our financial strength. We are in a strong cash position, ending
2022 with our strongest ever year-end cash position, which allows us to
respond effectively to the external environment and position ourselves for
continued success, as we build our market share in anticipation of the
expected demand for quality, innovation-led viral vector manufacturing
capabilities.
Governance
Throughout the year, we made significant strides in strengthening and
diversifying our leadership team and Board, ensuring that we are
well-positioned to drive the Company through its next phase of growth. After
more than 13 years of dedicated service and leadership to Oxford Biomedica,
and following the announcement of our AAV acquisition in the US, John Dawson
stepped down as Chief Executive Officer and I assumed the role of Interim CEO,
in addition to my existing role as Chair, to ensure continuity.
Furthermore, we are proud of the progress we made to diversify the Board
during the year, which now comprises 40% women, collectively possess a diverse
range of skills and expertise, and come from a variety of ethnic and societal
backgrounds.
Growing a sustainable business for our employees, clients and patients
At Oxford Biomedica, we are committed to upholding our values of integrity,
inspiration, and innovation, embedded in everything we do. This includes a
responsible and sustainable approach to our business, managing people,
engaging with communities, protecting the environment and governing our
operations. We are proud of our inclusion in the FTSE4Good index in 2022, in
recognition of our commitment to responsible business practices.
We empower our diverse and inclusive workforce to find innovative solutions
that benefit our business and the patients we serve. We are dedicated to
continuously improving our processes to minimise our impact on the planet and
engage with our communities to create partnerships that benefit everyone.
The future: delivering on our mission of enabling our clients to deliver
life-changing therapies to patients
Having sharpened our strategic focus to be a quality and innovation-led CDMO,
we have decided to fund our therapeutics portfolio externally, to realise the
transformational potential of our gene therapeutics assets that have emanated
from our lentiviral platform.
I am looking forward to continuing to work with Dr. Frank Mathias, our new
CEO. Under Frank's leadership, we will make further investments in scalability
and leverage automation to deliver even more innovative services to our
biopharma clients enabling them to discover and deliver therapies that
transform patients' lives. Our focus will remain on client acquisition,
innovation, people, and most importantly, improving the lives of patients in
need.
We have a clear strategy and vision for a successful, sustainable, long-term
future at Oxford Biomedica as it continues to build as a world-leading quality
and innovation-led viral vector CDMO. As we look forward, we are more excited
than ever to continue delivering on our mission of enabling our clients to
deliver life-changing therapies to patients around the world.
Dr. Roch Doliveux
Chair
2022 PERFORMANCE REVIEW
Introduction
2022 was a significant year for Oxford Biomedica, as the Group expanded
internationally and made its first strategic acquisition, entering the larger
and fast-growing adjacent AAV market. The core business performed strongly,
validating the Group's position in the market as a leading quality and
innovation-led CDMO. This success is testament to the Group's world-class
capabilities spanning early-stage development through to commercialisation.
Oxford Biomedica Solutions: US-based AAV manufacturing and innovation business
In January 2022, Oxford Biomedica announced that it had entered into an
agreement with Homology Medicines to establish Oxford Biomedica Solutions, an
innovative service provider and AAV product developer with complete end-to-end
chemistry, manufacturing, and controls capabilities and expertise, from
pre-clinical development through to clinical drug supply. The 91,000 sq. ft.
facility is located near Boston, US. The transaction completed on 10 March
2022 and was immediately accretive to the Group's revenues.
Under the agreement, Oxford Biomedica US, Inc. acquired an 80% ownership
interest in the newly formed AAV-focused manufacturing and innovation business
for a US$130 million (£97 million) cash consideration, and a US$50 million
(£38.2 million) capital injection into Oxford Biomedica Solutions to fund the
entity to break even.
Following the transaction, the Group immediately benefited from a three-year
Manufacturing and Supply agreement with Homology Medicines as a preferred
partner, which provided for minimum contracted revenue of c.US$25 million
(£21 million) for Oxford Biomedica Solutions for the first twelve months
post-completion. Oxford Biomedica Solutions is targeting double-digit growth
in AAV manufacturing and clinical development revenues through services
provided to Homology Medicines, as well as existing and new clients during
2023.
Oxford Biomedica Solutions is led by Tim Kelly, Chief Executive Officer and
Chair of its Board of Directors. The business has a robust business
development pipeline and in 2022 signed agreements with four new, undisclosed,
U.S. based biotechnology companies, exceeding the previously stated target of
two by the end of 2022.
Post-period end, in 2023, Oxford Biomedica Solutions signed additional
agreements with three new clients.
Juno Therapeutics, Inc. (a wholly owned subsidiary of Bristol Myers Squibb
Company)
Oxford Biomedica has continued to build on its partnership with Juno
Therapeutics, Inc. (a wholly-owned subsidiary of Bristol Myers Squibb
Company), which started in 2020. In July 2022, the Group announced it had
amended and expanded the original License and Clinical Supply Agreement signed
with Juno to include two new viral vector programmes. This latest agreement
demonstrates the Group's ability to expand work with existing partners and
took the total number of programmes that it is working on with Bristol Myers
Squibb to six.
Novartis
The Group continues its strong and long-term relationship with Novartis as its
sole global supplier of lentiviral vector for Kymriah(®) (tisagenlecleucel,
formerly CTL019).
Kymriah(®), which is designed to be a one-time treatment, was the first ever
FDA-approved CAR-T cell therapy and in May 2022 expanded into a third
indication, after its approval from the FDA and European Commission for the
treatment of adult patients with relapsed or refractory follicular lymphoma ,
following two or more lines of systemic therapy. This is the third B-cell
malignancy indication for Kymriah(®), joining approvals in indications in
children and young adults with r/r paediatric and young adult acute
lymphoblastic leukaemia (ALL), and r/r adult diffuse large B-cell lymphoma. In
June 2022, Novartis announced five-year Kymriah(®) data showing durable
remission and long-term survival maintained in children and young adults with
advanced B-cell ALL.
Kymriah(®) is available in more than 400 qualified treatment centres in 30
countries having coverage for at least one indication. The Group is currently
working with Novartis on four partner programmes, in addition to Kymriah(®).
Vaccine manufacturing
Oxford Biomedica continued to manufacture the Oxford AstraZeneca COVID-19
vaccine at the Group's Oxbox facility during 2022, with manufacture of
COVID-19 vaccines completing in the last quarter of 2022. In July 2022, the
Group announced the signing of a new three-year Master Services and
Development Agreement (MSDA) with AstraZeneca to facilitate potential future
vaccine manufacturing opportunities on an as needed basis beyond 2022.
Oxford Biomedica has signed a 10-year MSDA with Serum Life Sciences Ltd
(Serum, a subsidiary of Serum Institute of India), for the manufacture of a
variety of vaccine and protein-based therapeutic products. This agreement
follows on from the Memorandum of Understanding agreed with Serum in 2021. The
MSDA allows for Serum to access the Group's Oxbox facility to manufacture a
variety of vaccines at scales of up to 1,000L.
Serum is also able to secure exclusive access to one of the two new large
scale multi 2,000L facilities in the second phase of Oxbox facility expansion
for a period of 10 years from facility readiness. Serum will be required to
commit to a minimum order value over the relevant period in order to secure
exclusive access to the new large-scale suite.
Cabaletta
In January 2022, Oxford Biomedica announced a License and Supply Agreement
with Philadelphia, US-based Cabaletta Bio for their lead product candidate,
DSG3-CAART. DSG3-CAART is being evaluated in the DesCAARTes™ Phase I
clinical trial as a potential treatment for patients with Mucosal Pemphigus
Vulgaris and is designed to selectively target and kill the B cells that
produce DSG3 antibodies while preserving the healthy B cells critical to
immune function. In late 2022, Cabaletta released six-month clinical and
translation data from cohorts A1 through A4 and 28-day safety and persistence
data from cohorts A1 through A5.
Further client updates
In July 2022, Oxford Biomedica announced a new Licence and Supply Agreement
with an undisclosed US-based private biotechnology company advancing a new
generation of adoptive cell therapies. The Licence and Supply Agreement grants
the new client a non-exclusive licence to utilise Oxford Biomedica's
LentiVector(®) platform for its application in their lead CAR-T programme,
and puts in place a three-year Clinical Supply Agreement.
In September 2022, Oxford Biomedica announced a further Licence and Supply
Agreement with an undisclosed US-based late-stage cell and gene therapy
company. The Licence and Supply Agreement grants the new client a
non-exclusive licence to utilise Oxford Biomedica's LentiVector(®) platform
for its application in their lead programme, a cell-based therapy targeting a
rare indication, putting into place a five-year clinical supply arrangement.
The Group continues to actively progress its collaborations with Boehringer
Ingelheim, Immatics, Arcellx, Orchard and Beam Therapeutics with the combined
revenues from these client relationships expected to contribute meaningfully
towards the total bioprocessing and commercial development revenues in the
current financial year.
In December 2022, Arcellx announced a global strategic collaboration with Kite
Pharma to co-develop and co-commercialise CART-ddBCMA, Arcellx's lead
late-stage product candidate. CART-ddBCMA is currently being investigated in a
pivotal Phase 2 study and has been granted Fast Track, Orphan Drug, and
Regenerative Medicine Advanced Therapy Designations by the FDA.
Innovation and platform development
Innovation and the development of the platform are core to the Group's goal of
industrialising viral vector manufacturing, not just with lentiviral vectors
but across all viral vector classes. By industrialising viral vector
production, reducing costs and improving quality through innovation, the Group
seeks to broaden the therapeutic indications that are amenable to treatment
with cell and gene therapy. It is expected that the reduction in cost per dose
brought about through the Group's combined platform and process innovation
will help drive more projects successfully through clinical development and
ultimately adoption by payors into indications where there are a far greater
number of patients, by bringing down the overall cost per patient treated.
Multiple elements of IP and innovation are relevant across all viral vector
classes. Development of the Group's technologies such as TRiPSystem™,
SecNuc™, LentiStable™ and U1 and U2, along with the corresponding IP,
continue to move ahead. In addition, the Group is utilising automation and the
use of robotics, artificial intelligence and machine learning to further drive
productivity and capacity improvements. One example is the successful
development and implementation of automated methods for both the replication
competent lentivirus assay and the titre (TU/mL) assay, enhancing method
robustness, providing additional capabilities to meet future capacity needs
whilst ensuring continuous improvement of platform analytics. The Group is
expecting to launch a fourth generation of lentiviral vectors in the second
quarter of 2023 which will enable higher expression, have additional safety
features and a larger capacity to deliver greater amounts of DNA.
Process C, which utilises perfusion-mode production, as opposed to the more
typical batch-mode production, coupled with improvements in downstream
processing into the manufacturing process has been proven and rolled out at
200L scale in GMP during 2022. Process C works together with production
enhancers (such as U1, U2) and has resulted in process improvements by as much
as tenfold, without the need for an increase in bioreactor size, and yielding
significantly more lentiviral vector per batch. The Group has begun to offer
Process C commercially, with several clients adopting or evaluating the
next-generation lentiviral manufacturing platform due to the evident gains in
vector quantity and quality it affords.
In July 2022, the Group announced that it had initiated a new project with
Orchard utilising the Company's proprietary LentiStable™ technology. As part
of the project, Oxford Biomedica's LentiStable™ technology platform will be
used to develop a producer cell line capable of stably expressing lentiviral
vectors. Orchard is exploring the technology to increase the manufacturing
efficiency and scalability of their investigational haematopoietic stem cell
(HSC) gene therapy in development for the potential treatment of
mucopolysaccharidosis type I Hurler syndrome (MPS-IH).
The Group continues development work in the area of in vivo CAR-T, which the
Group believes would offer greater patient access and superior efficacy
compared to existing treatment options.
Business development and CDMO pipeline
Oxford Biomedica continues to have strong new business momentum and demand for
its expertise and services, demonstrated by the addition of 11 new clients
(majority in AAV) since the end of 2021, taking the Group's total number of
clients to 18 (including three added post-period). This compares to six
clients at the end of 2017, when the Group was solely focused on lentiviral
vectors. The Group's CDMO portfolio currently comprises more than 30
programmes for its clients.
In November 2022, the Group welcomed a new Chief Commercial Officer, Dr.
Sebastien Ribault, to lead the Commercial and Business Development team with a
focus on the expansion of the Group's client base, complementing the nature of
the Group's CDMO business. Dr. Ribault has over 25 years of experience across
the biotechnology industry and CDMO space, and was previously at Merck Life
Sciences, where he was Vice President & Head of Biologics and Viral Vector
CDMO.
Under the leadership of Dr. Ribault, the Commercial team now consists of
Commercial Operations, Business Development and Licensing specialists in
multiple locations across the US, UK and Europe.
Gene therapeutics pipeline
Dr. Ravi Rao joined Oxford Biomedica as Chief Medical Officer in April 2022,
with responsibility for assessing and developing the Group's therapeutic
product strategy. The Group has reviewed strategic options and is now
exploring external funding opportunities for its therapeutics portfolio to
realise the potential of its innovative and differentiated programmes to
address unmet medical needs. It is anticipated that this will allow the Group
to maintain a long-term economic interest in a number of therapeutic products.
No costs associated with the therapeutics portfolio are expected to be carried
by the Group post 2023.
The global rights to AXO-Lenti-PD, which the Group had licensed to Sio Gene
Therapies (Sio) were returned to the Group in March 2022, following Sio's
decision to deprioritise the programme due to resourcing constraints. The
Group continues to explore out-licensing opportunities for this asset.
Facilities and capacity expansion
As part of the transaction to establish Oxford Biomedica Solutions, the Group
acquired the leasehold to a state-of-the-art AAV manufacturing facility based
near Boston. The facility covers approximately 91,000 sq. ft including GMP
space for drug substance, drug product, QC testing, quality and warehousing,
with three 500L single-use bioreactors with proven scalability to 2,000L for
commercial supply.
Oxbox, the Group's largest manufacturing facility spanning 84,000 sq. ft
received MHRA approval for its fill finish suite in August 2022, bringing this
previously outsourced function in-house. This high quality, state-of-the art
value-added capability is now being rolled out to clients.
The second phase of Oxbox development is expected to provide additional
flexible manufacturing capacity for a variety of viral vector-based products,
including cell and gene therapy products, vaccines, and other advanced
therapeutics up to 2,000L scale. Design work for this next phase of Oxbox
development is progressing, with the proceeds from the £50 million investment
from Serum funding the development.
With regard to the planned redevelopment of the Windrush Innovation Centre
into next generation laboratory facilities, the Group is currently conducting
a review of required capacity and alternative laboratory options.
In November 2022, the Group completed the sale and leaseback of its Windrush
Court facility in Oxford to Kadans for £60 million, exceeding the £55
million which the Group was initially seeking. Kadans has granted Oxford
Biomedica an occupational lease of the facility for 15 years.
To ensure the Group has sufficient warehouse capacity to meet expected
near-term commercial development from both current and future potential
clients, the Group has entered into a lease agreement in respect of a new
45,000 sq. ft warehouse in Wallingford, Oxfordshire to store ambient raw
materials. The first phase of fit-out is complete, with the site expected to
be ready for occupation in the second quarter of 2023.
Short-term loan facility
In March 2022, the Group entered into an US$85 million (£64.9 million)
secured short-term loan facility with Oaktree. The proceeds were used by the
Group, together with the Group's existing cash, to finance a portion of the
transaction with Homology Medicines to establish Oxford Biomedica Solutions.
The loan carried an interest rate of 8.5% with the principal amount due at the
facility's maturity date in March 2023.
In October 2022, the Group refinanced this US$85 million (£64.9 million) loan
facility and the Company partially repaid the outstanding amounts and amended
the facility into a new senior secured US$50 million (£42.9 million)
four-year term loan facility provided by Oaktree. The loan carries a variable
interest rate, which is capped at 10.25% per annum. The refinanced facility
also carries the option for Oxford Biomedica, subject to customary conditions
and available for a three-year period, to drawdown a further US$25 million
(£21.5 million) from Oaktree to fund certain permitted acquisitions.
Corporate and organisational development
During the period, new appointments were made across the Board and the Senior
Executive Team, adding further expertise to ensure that the Group's leadership
is well positioned to drive the next phase of growth.
In January 2022, John Dawson stepped down as CEO after 13 years and
simultaneously Dr. Roch Doliveux assumed the role of Interim CEO, in addition
to his existing role as Chair. John Dawson stepped down from the Board at the
AGM in May 2022 and remained an adviser to the Company throughout the year.
Post-period end, in March 2023, the Group welcomed Dr. Frank Mathias as CEO
and Dr. Roch Doliveux stepped down as Interim CEO and resumed as Chair. Dr.
Mathias brings world-class innovation and CDMO experience to Oxford Biomedica,
and joined the Group from Rentschler Biopharma SE, where he had served as CEO
since 2016.
In April 2022, Namrata Patel was appointed to the Board as an Independent
Non-Executive Director. Ms. Patel brings a wealth of international experience
in manufacturing and end-to-end supply chain management with experience in the
commercialised regulated industry as well as a wealth of sustainability
experience.
Post period-end, Dr. Siyamak (Sam) Rasty informed the Board that he will not
be standing for re-election at the Company's AGM in June 2023. Dr. Rasty
joined the Board in December 2020 and is a member of the Scientific and
Technology Advisory Committee and was a member of the Audit Committee until
December 2021.
FINANCIAL REVIEW
Setting firm foundations for growth
In 2022, the Group expanded its capabilities beyond lentiviral vectors and
evolved into a multi-vector, quality and innovation-led CDMO. Oxford Biomedica
is incredibly proud of its work in producing the Oxford AstraZeneca COVID-19
vaccine and the lives that were saved in this effort, which afforded the Group
the opportunity to broaden its viral vector CDMO offering and expand the
business into the US. During 2022, the Group continued to focus on growing the
underlying business by attracting new clients, expanding offerings with
existing clients and expansion through acquisition of technologies,
capabilities and clients.
In March 2022, the Group acquired an 80% ownership interest in Oxford
Biomedica Solutions, an AAV-focused manufacturing and innovation business for
US$180 million (£137.4 million), with Homology Medicines retaining a 20%
ownership stake. Concurrently with the Oxford Biomedica Solutions transaction,
the Group entered into a manufacturing and supply agreement with Homology
Medicines. Subsequently four new AAV client agreements were signed in 2022,
exceeding the previously stated target of two for the year, which are expected
to generate further revenues in the future. Oxford Biomedica Solutions
generated revenues of £23.7 million in the year since completion of the
transaction in March 2022.
Throughout 2022 the Group continued to form new client relationships whilst
also expanding existing client agreements. The Group is currently working
with 18 clients (including three added post-period) compared to 10 clients at
the end of 2021. Lentiviral vector manufacturing volumes have continued their
post-pandemic upward trajectory, with revenues from the core LentiVector(®)
business achieving strong double-digit revenue growth compared to 2021. As
expected, COVID-19 vaccine bioprocessing volumes were lower reflecting the
exceptional results achieved in 2021 when vaccine manufacturing was at full
pace during the pandemic.
During the period, the Group announced new or expanded licence and supply
agreements with Cabaletta, Juno, two undisclosed US-based private
biotechnology companies and four new AAV clients, in addition to Homology
Medicines. These agreements are expected to bolster the Group's development
and manufacturing pipeline over the coming years. In June, the Group also
expanded its original supply and development agreement with AstraZeneca to
facilitate potential future manufacturing opportunities for the AstraZeneca
COVID-19 vaccine on an as-needed basis beyond 2022.
The Group achieved total revenues of £140.0 million and an Operating EBITDA
profit of £1.6 million in 2022 compared to revenues of £142.8 million and an
Operating EBITDA profit of £35.9 million in the prior year. Total revenues
were broadly flat compared to the prior year despite lower COVID-19 vaccine
bioprocessing volumes, due to revenues achieved by Oxford Biomedica Solutions
in 2022. At a cost level, there was an increase in operating expenditure as a
result of increased personnel and other operational expenditure incurred due
to the consolidation of Oxford Biomedica Solutions, acquisition-related due
diligence costs of £5.1 million and inflationary operational cost increases
including employee salary increases to help ensure the Group continues to
attract and retain high quality employees. Oxford Biomedica Solutions'
operating expenditure continues to be fully funded from the US$50.0 million
(£38.2 million) capital injection into the new business.
In order to fund the Oxford Biomedica Solutions transaction, the Group raised
gross proceeds of £80.0 million through a placing of shares, and secured a
short-term loan facility of US$85.0 million (£64.9 million) which was
repayable 12 months after the closing date. In October, the Group repaid US$35
million of the US$85 million short term loan facility as part of extending the
relationship with Oaktree via a new four-year term loan facility of US$50
million. Interest is payable quarterly and the principal outstanding amount is
repayable at the end of the four-year term. The Group also secured the option
to draw down a further US$25 million from Oaktree to fund certain permitted
acquisitions.
The Group ended the year with its strongest-ever year end-cash position.
Throughout the year, the Group has been strategically investing in the future
growth of the business while also taking proactive steps to manage operating
costs, particularly given the easing of the COVID-19 pandemic, which had
required the Group to increase employee numbers significantly to help meet
demand. This included right-sizing its employee base, which was successfully
completed without the need for compulsory redundancies, as well as a headcount
freeze for non-critical hires, further supporting the Group's cost management
efforts.
In November, the Group completed a sale and leaseback of its Windrush Court
facility for £60 million to Kadans Science Partner. The sale proceeds of £60
million exceeded the target offer figure of £55 million that the Group
previously announced it was seeking. Under the agreement, Kadans have granted
the Group an occupational lease of the property for 15 years at a rent of
£3.5 million per annum rising to £4.7 million per annum after five years,
with a market rent review at 10 years. In the year, the Group has recognised a
profit on the sale of £21.4 million, a right of use asset of £5.9 million
and a lease liability of £35.6 million.
The Group's balance sheet expanded with the establishment of Oxford Biomedica
Solutions through the recognition of identifiable net assets of £133.2
million. The transaction was funded through a combination of £77.0 million of
net equity raised in two tranches, and drawing down the Oaktree loan of
US$85.0 million (£64.9 million). The transaction also involved the
recognition of a put option liability of US$51.1 million (£39.0 million)
that, if exercised, requires the Group to acquire the remaining 20% of Oxford
Biomedica Solutions from Homology Medicines. Further, as a result of the sale
and leaseback of the Windrush Court facility, the Group's cash position
strengthened to £141.3 million at the end of December 2022.
Key Financial and Non-Financial Performance Indicators
The Group evaluates its performance by making use of alternative performance
measures as part of its Key Financial Performance Indicators (refer to the
table below). The Group believes that these Non-GAAP measures, together with
the relevant GAAP measures, provide a comprehensive, accurate reflection of
the Group's performance over time. The Board has taken the decision that the
Key Financial Performance Indicators against which the business will be
assessed are Revenue, Operating EBITDA and Operating profit/(loss). The
figures presented within this section for prior years are those reported in
the Annual report and accounts for those years and have not been restated
where a change in accounting standards may have required this.
£m 2022 2021 2020 2019 2018
Revenue
Bioprocessing/commercial development 128.1 128.4 68.5 47.3 40.5
Licences, milestones and royalties 11.9 14.4 19.2 16.8 26.3
140.0 142.8 87.7 64.1 66.8
Operations
Operating EBITDA(1)
1.6 35.9 7.3 (5.2) 13.4
Operating (loss)/profit (30.2) 20.8 (5.7) (14.5) 13.9
Cash flow
Cash (used in)/generated from/ operations (13.2) 24.5 (3.9) (6.6) 9.2
Capex(2) 16.3 9.5 13.4 25.8 10.1
Cash (burn)/inflow(3) (33.0) 16.0 (7.8) (26.3) (1.9)
Financing Cash
141.3 108.9 46.7 16.2 32.2
Loan 39.8 - - - 41.2
Non-Financial Key Indicators
Headcount
Year-end 904 815 673 554 432
Average 929 759 609 500 377
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit and loss, and Share Based Payments) is a non-GAAP measure often used as
a surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share based payments.
However, deferred bonus share option charges are not added back to operating
profits in the determination of Operating EBITDA as they may be paid in cash
upon the instruction of the Remuneration Committee.A reconciliation to GAAP
measures is provided on page 14.
2 This is Purchases of property, plant and equipment as per the cash
flow statement which excludes additions to Right-of-use assets. A
reconciliation to GAAP measures is provided on page 16.
3 Cash burn/(inflow) is net cash generated from operations plus net
interest paid plus capital expenditure. A reconciliation to GAAP measures is
provided on page 16.
Revenue
The Group's revenues decreased by 2% to £140.0 million (2021 £142.8
million). Revenues generated from bioprocessing/commercial development were
maintained at £128.1 million (2021: £128.4 million) despite a decrease in
the volume of vaccine batches manufactured for AstraZeneca. This was partially
offset by an increase in revenues from lentiviral vector and AAV commercial
development and manufacturing activities. Bioprocessing and commercial
development activities performed on behalf of the Group's other clients have
increased due to increased development and manufacturing activities performed
on behalf of Boehringer Ingelheim, Juno, Arcellx, Homology Medicines and other
new clients.
Revenues from licence fees, milestones and royalties of £11.9 million (2021:
£14.4 million), decreased by 17% when compared to the prior year. In 2021 a
licence fee from Boehringer Ingelheim of £4.0 million was recognised.
£m 2022 2021 2020 2019 2018
Revenue 140.0 142.8 87.7 64.1 66.8
Operating EBITDA
2022 2021 2020 2019 2018
Revenue 140.0 142.8 87.7 64.1 66.8
Other income 2.3 0.9 0.8 0.9 1.1
Gain on sale of property 21.4 - - - -
Total expenses(3) (162.0) (107.8) (81.2) (70.2) (54.5)
Operating EBITDA(1) 1.6 35.9 7.3 (5.2) 13.4
Non cash items(2) (31.8) (15.1) (13.0) (9.3) 0.5
Operating loss/(profit) (30.2) 20.8 (5.7) (14.5) 13.9
1. Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit and loss, and Share Based Payments) is a non-GAAP measure often used as
a surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share based payments.
However, deferred bonus share option charges are not added back to operating
profits in the determination of Operating EBITDA as they may be paid in cash
upon the instruction of the Remuneration Committee.A reconciliation to GAAP
measures is provided on page 14.
2. Non-cash items include depreciation, amortisation, revaluation of
investments, fair value adjustments of available-for-sale assets and the share
based payment charge. A reconciliation to GAAP measures is provided on page
13.
3. Total expenses are operational expenses including cost of goods
incurred by the Group. A reconciliation to GAAP measures is provided on page
13.
Revenue decreased by 2% in 2022 whilst the Group's cost base grew by 50% to
£162.0 million due to an increase in operational spend due to the
consolidation of the results of Oxford Biomedica Solutions, as well as
inflationary increases and acquisition-related due diligence costs of £5.1
million. The Group benefited from a profit on the sale of its Windrush Court
facility of £21.4 million in a sale and lease back transaction. The Operating
EBITDA profit of £1.6 million is therefore £34.3 million lower than the
£35.9 million Operating EBITDA profit generated in 2021 as a result of the
decrease in revenues, profit on sale of building and an increased cost base.
Total Expenses
In order to provide the users of the accounts with a more detailed explanation
of the reasons for the year on year movements of the Group's operational
expenses included within Operating EBITDA, the Group has added together
research and development, bioprocessing and administrative costs and has
removed depreciation, amortisation and the share option charge as these are
non-cash items which do not form part of the Operating EBITDA alternative
performance measure. As Operating profit/(loss) is assessed separately as a
key financial performance measure, the year on year movement in these non-cash
items is then individually analysed and explained specifically in the
Operating and Net profit/(loss) section. Expense items included within Total
Expenses are then categorised according to their relevant nature with the year
on year movement explained in the second table below.
£m
2022 2021 2020 2019 2018
Research and development(1.4) 60.9 40.2 29.7 22.6 18.0
Bioprocessing costs(4) 33.9 7.2 10.7 7.4 1.2
Administrative expenses(4,5) 28.2 15.1 11.3 11.9 7.4
Operating expenses 123.0 62.5 51.7 41.9 26.6
Depreciation (20.3) (12.4) (9.8) (5.8) (4.3)
Amortisation (6.1) - - - -
Share option charge (5.4) (2.5) (2.4) (1.6) (1.1)
Adjusted Operating Expenses2 91.2 47.6 39.5 34.5 21.2
Cost of sales 70.8 60.2 41.7 35.7 33.3
Total Expenses3 162.0 107.8 81.2 70.2 54.5
1 Includes the RDEC tax credit.
2 Research, development, bioprocessing and administrative expenses
excluding depreciation, amortisation and the share option charge.
3 Cost of goods plus research, development, bioprocessing and
administrative expenses excluding depreciation, amortisation and the share
option charge.
4 Includes operational expenditure for Oxford Biomedica Solutions
from March 2022 onwards.
5 Included £5.1 million in one-off acquisition-related due
diligence costs relating to the transaction to acquire Oxford Biomedica
Solutions.
£m 2022 2021 2020 2019 2018
Raw materials, consumables and other external bioprocessing costs 45.6 34.2 22.0 22.8 18.3
Manpower-related 84.4 55.0 45.3 35.2 26.7
External R&D expenditure 3.6 2.5 1.4 1.4 1.9
Due diligence costs 5.1 1.2 - - -
Other costs 27.8 20.0 17.1 12.0 7.6
RDEC tax credit (4.5) (5.1) (4.6) (1.2) -
Total expenses1 162.0 107.8 81.2 70.2 54.5
1 Total expenses are operational expenses including cost of goods
incurred by the Group. A reconciliation to GAAP measures is provided on page
13.
• Raw materials, consumables and other external bioprocessing costs have
increased as a result of increased LentiVector(®) batch manufacturing and
also materials used by Oxford Biomedica Solutions during 2022, as compared to
2021.
• The increase in manpower-related costs is due to the increase in the average
headcount from 759 in 2021 to 929 in 2022 primarily as a result of 124
employees gained as part of the transaction to establish Oxford Biomedica
Solutions but also reflecting employee salary increases.
• External R&D expenditure remained increased as a result of additional
research and development project spend incurred in both the platform and
product divisions.
• Due diligence costs in both years relate to the establishment of Oxford
Biomedica Solutions.
• Other costs were higher as a result of the inclusion of the administrative
expenditure of Oxford Biomedica Solutions, and inflationary increases.
• The RDEC credit has decreased to £4.5 million (2021: £5.1 million) due to a
decrease in the level of eligible research and development expenditure, mainly
employee costs and raw materials.
Operating and Net profit/(loss)
£m 2022 2021 2020 2019 2018
Operating EBITDA(1) 1.6 35.9 7.3 (5.2) 13.4
Depreciation, Amortisation and share option charge (31.8) (14.9) (12.2) (7.4) (5.5)
Change in fair value of assets at fair value through profit and loss - (0.2) (0.8) (1.9) 6.0
Operating (loss)/ profit (30.2) 20.8 (5.7) (14.5) 13.9
Interest (7.8) (0.9) (0.8) (5.4) (6.2)
Forex (8.0) - - (1.0) (2.7)
Taxation 0.8 (0.9) 0.3 4.8 2.5
Net (loss)/profit (45.2) 19.0 (6.2) (16.1) 7.5
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit and loss, and Share Based Payments) is a non-GAAP measure often used as
a surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share based payments.
However, deferred bonus share option charges are not added back to operating
profits in the determination of Operating EBITDA as they may be paid in cash
upon the instruction of the Remuneration Committee.A reconciliation to GAAP
measures is provided on page 14 .
In arriving at Operating (loss)/profit it is necessary to deduct from
Operating EBITDA the non-cash items referred to above. The depreciation
(£20.3 million) and amortisation (£6.1 million) charge was higher in 2022
due to the acquisition of the fixed assets of Oxford Biomedica Solutions, as
well as amortisation of intangible assets recognised as a result of the
acquisition of Oxford Biomedica Solutions in March 2022. The share option
charge increased by £2.9 million due to the increased employee headcount of
the Group, mainly as a result of the Oxford Biomedica Solutions acquisition.
The impact of these charges resulted in an operating loss of £30.2 million in
2022 compared to a profit of £20.8 million in the prior year.
The interest charge increased by £6.9 million largely due to interest charges
on the Oaktree loan, as well as IFRS 16 interest on the lease liability
related to the Oxford Biomedica Solutions Boston facility. Forex increased by
£8.0 million due to foreign exchange movements on the Oaktree loan. The
corporation tax expense in 2022 decreased as the corporation tax charge in
2022 is limited to the notional tax charge on the RDEC tax credit included
within research and development costs and the release of the deferred tax on
the Oxford Biomedica Solutions intangible assets arising on acquisition.
Other Comprehensive Income
The Group recognised other comprehensive income in 2022 of £10.6 million
(2021: nil) in relation to movements on the foreign currency translation
reserve.
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations,
including gains arising from monetary items that, in substance, form part of
the net investment in foreign operations.
Segmental analysis
The Group reports its results within two segments, namely:
I. the 'Platform' segment which includes the revenue generating bioprocessing and
process development activities for third parties (i.e. the Partner programmes
CDMO business), and internal technology projects to develop new potentially
saleable technology, improve the Group's current processes, and bring
development and manufacturing costs down within the LentiVector(®) and AAV
platforms.
II. the 'Product' segment, which includes the costs of research and development of
new gene therapeutic product candidates.
£m Platform Product Total
2022
Revenue 139.9 0.1 140.0
Operating EBITDA(1) 11.7 (10.0) 1.6
Operating (loss)/profit (17.9) (12.3) (30.2)
2021
Revenue 142.7 0.1 142.8
Operating EBITDA(1) 45.3 (9.4) 35.9
Operating profit/(loss) 31.4 (10.6) 20.8
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit and loss, and Share Based Payments) is a non-GAAP measure often used as
a surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share based payments.
However, deferred bonus share option charges are not added back to operating
profits in the determination of Operating EBITDA as they may be paid in cash
upon the instruction of the Remuneration Committee.A reconciliation to GAAP
measures is provided on page 14..
In 2022 the Platform segment experienced a decrease in revenue of 2% from
£142.7 million to £139.9 million due to the lower volumes of vaccine batches
manufactured for AstraZeneca partly offset by increased manufacturing volumes
for lentiviral vector and AAV clients. Commercial development revenues
increased due to activities performed on behalf of existing clients Arcellx,
Boehringer Ingelheim, Homology Medicines and other clients. Operating results
were negatively impacted by the lower revenues as well as Oxford Biomedica
Solutions' operational expenditure in the period since they were acquired, but
positively impacted by a gain of £21.4 million on the sale and lease back of
the Windrush Court facility.
The Product segment has generated revenues of £0.1 million (2021: £0.1
million) and an Operating EBITDA loss and operating loss of £10.0 million and
£12.3 million respectively (2021: loss of £9.4 million and £10.6 million
respectively). Product operating expenses were higher due to increased
research, development and pre-clinical product expenditure, but also increased
manpower costs.
In the first quarter of 2023, the Senior Executive Team has re-assessed the
reporting segments to reflect the way the business will be managed in future.
Management reporting is currently being reworked to align with these new
segments going forward and the Group expects to be able to report on these new
segments during 2023 and thereafter. No changes from the current basis has
been reflected in the 2022 Annual report and accounts.
Cash flow
The Group held £141.3 million of cash at 31 December 2022, having begun the
year with £108.9 million. Significant movements across the year are explained
below.
£m 2022 2021 2020 2019 2018
Operating (loss)/profit (30.2) 20.8 (5.7) (14.5) 13.9
Non-cash items(1) included in operating loss 31.8 15.1 13.0 9.3 (0.5)
Operating EBITDA(2) 1.6 35.9 7.3 (5.2) 13.4
Working capital movement(3) (14.8) (11.4) (11.2) (1.4) (4.2)
Cash (used in)/generated from operations (13.2) 24.5 (3.9) (6.6) 9.2
R&D tax credit received 0.6 1.0 7.0 3.1 3.7
Net cash (used in)/generated from operations (12.6) 25.5 3.1 (3.5) 12.9
Interest paid, less received (4.1) - - (3.3) (4.7)
Sale of investment asset - - 2.5 6.3 -
Capex(4) (16.3) (9.5) (13.4) (25.8) (10.1)
Cash burn(5) (33.0) 16.0 (7.8) (26.3) (1.9)
Acquisition of subsidiary (99.2) - - - -
Sale of building 60.0 - - - -
Net proceeds from financing(6) 104.6 46.2 38.3 10.3 19.8
Movement in year(7) 32.4 62.2 30.5 (16.0) 17.9
1 Depreciation, Amortisation, revaluation of investments and assets
at fair value through profit and loss, and Share Based Payments.
2 Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit and loss, and Share Based Payments) is a non-GAAP measure often used as
a surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share based payments.
However, deferred bonus share option charges are not added back to operating
profits in the determination of Operating EBITDA as they may be paid in cash
upon the instruction of the Remuneration Committee.A reconciliation to GAAP
measures is provided on page 14
3 The working capital movement includes the movement in trade and
other receivables (-£17.9 million), trade and other payables (+£17.0
million), deferred income (-£0.7 million), contract liabilities (+£5.9
million), inventory (+£0.7 million), as well as adding the amortisation of
loan fees (+£0.6 million), the deferred bonus portion of the share option
charge (+£1.0 million), and the gain on sale and leaseback (+21.4 million) as
outlined on page 39.
4 This is Purchases of property, plant and equipment as per the cash
flow statement which excludes additions to Right-of-use assets. A
reconciliation to GAAP measures is provided on page 16.
5 Cash (burn)/inflow is net cash generated from operations plus net
interest paid plus capital expenditure.
6 Net proceeds from financing consists of Proceeds from issue of
ordinary share capital, Costs of share issues, Payment of lease liabilities,
Loans received and Loan arrangement fees as outlined on page 22.
7 The movement in the year is made up out of the net increase in
cash and cash equivalents of £29.5 million and the effect of movements in
exchange rates on cash held of £2.8 million.
• The negative working capital movement of £14.8 million is driven mainly by
adding back the profit on the sale of the Windrush Court facility of £21.4
million offset by an increase in trade payables and contract liabilities due
to the acquisition of Oxford Biomedica Solutions, and a decrease in trade and
other receivables.
• Interest paid less interest received increased by £4.1 million due to
interest paid on the Oaktree loan.
• The Group received £0.6 million from an SME R&D tax claim related to the
2020 financial year.
• Purchases of property, plant and equipment increased from £9.5 million to
£16.3 million, mainly as a result of the purchase of manufacturing and
laboratory equipment required by Oxford Biomedica Solutions for its
activities.
• The Group acquired an 80% ownership stake in Oxford Biomedica Solutions for
£99.2 million net of cash acquired.
• The Group sold its Windrush Court facility in a sale and lease back
transaction, receiving proceeds of £60.0 million.
• The net proceeds from financing during 2022 was £104.6 million, consisting of
£77.0 million equity share placement in two tranches, £33.4 million in loans
received from Oaktree, share option equity issued of £0.2 million and foreign
exchange gains on cash held of £2.8 million and reduced by lease payments of
£4.2 million and loan arrangement fees of £4.6 million in the year.
• The result of the above movements is a net increase in cash of £32.4 million
from £108.9 million to £141.3 million.
Statement of financial position review
The most notable items on the Statement of financial position, including
changes from 31 December 2021, are as follows:
• Intangible assets increased from £0.1 million to £105.9 million due mainly
to £102.9 million of technology assets and £0.6 million of goodwill acquired
as part of the acquisition of Oxford Biomedica Solutions.
• Property, plant and equipment has increased by £64.0 million to £133.8
million due to £58.9 million of property plant and equipment acquired as part
of the transaction to establish Oxford Biomedica Solutions, £29.3 million of
capital expenditure incurred, positive foreign exchange movements of £4.9
million, offset by depreciation of £20.3 million, a change in estimate of
£1.3 million and £7.5 million as a result of the disposal of the Windrush
Court facility.
• Inventories have increased from £9.5 million to £12.6 million due to
inventory balances held by Oxford Biomedica Solutions at year end.
• Trade and other receivables increased from £44.7 million to £61.6 million
due to invoices raised at year end for contracted bioprocessing and process
development activities.
• Trade and other payables have increased from £19.1 million at the start of
the year to £36.6 million due to the inclusion of the trade and other
payables of Oxford Biomedica Solutions.
• Contract liabilities increased from £12.6 million in 2021 to £18.4 million
due to invoices raised at the end of 2022 for future process development
activities.
• Deferred Income decreased from £2.7 million in 2021 to £2.0 million due to
the release of amounts deferred as part of the Innovate UK capex grant
funding.
• Provisions increased by £2.2 million as a result of the recognition of an
decreased liability for the costs of restoring existing properties to their
original state, as well as the recognition of a liability for the costs of
restoring the newly leased Windrush Court head office and laboratories, and
Wallingford warehouse property to its original state at the end of the lease
term.
• Lease liabilities increased by £65.2 million to £74.5 million due to the
inclusion of the lease liabilities for Windrush Court, as part of the sale and
lease back of the building, the Bedford, Massachusetts, property lease as part
of the acquisition of Oxford Biomedica Solutions, and the new Wallingford
warehouse lease.
• Loans have increased from £nil to £39.8 million as the Group entered into a
4-year US$50 million loan facility with Oaktree in October, after repaying
US$35 million of the initial one year US$85 million (£64.9 million) loan
entered into in March 2022.
• Put option liability - the Group has recognised a liability of £38.2 million
for the put option to acquire the remaining 20% of Oxford Biomedica Solutions
that it does not already own.
Financial outlook
The Group is building a quality and innovation-led, high growth, global viral
vector leader, operating across all viral vector types. To achieve this, the
Group is targeting new client relationships for lentiviral vector and AAV
while also broadening existing client relationships. Oxford Biomedica has a
strong, diversified and growing business development pipeline and has seen a
strong increase in pipeline opportunities in the last quarter, giving the
Group confidence in growth prospects.
In 2023, the Group is targeting double-digit growth in lentiviral vector
manufacturing and commercial development revenues driven by the successful
progression, development and expansion of existing client programmes. Further,
the Group is expecting to secure multiple new agreements across both
lentiviral vector and AAV.
Oxford Biomedica Solutions is targeting double-digit growth in AAV
manufacturing and clinical development revenues through services provided to
existing and new clients.
Overall, the Group expects total revenues to be marginally lower in 2023 than
2022 due to the cessation of COVID-19 vaccine manufacturing which generated in
excess of £40 million of revenues in 2022. However, the Group expects to
deliver strong double-digit growth in both lentiviral vector and AAV related
revenues in 2023.
Cost of goods, which includes material costs and the transfer of bioprocessing
manpower and overheads, is expected to be at similar levels to 2022, with the
impact of marginally lower revenues offset by ongoing inflationary pressures.
Bioprocessing and research and development costs are expected to increase due
to the full year impact of Oxford Biomedica Solutions. Administrative
expenditure is expected to decrease due to one-off costs related to the Oxford
Biomedica Solutions transaction not recurring and successful cost containment
measures.
Oxford Biomedica Solutions continues to be funded through the Group's US$50
million (£38.2 million) capital injection into the business in March 2022 and
is expected to break even on an Operating EBITDA basis during 2025 as
previously indicated. As a result of the financial consolidation of this
initially loss-making part of the Group, the Group expects to deliver an
Operating EBITDA loss in 2023.
With the significant revenue growth targeted in the Group's viral vector
business, the cost base has been right-sized to anticipate future growth and
the Group maintains a strong balance sheet. Progress is being made on
potential external funding for the therapeutics portfolio. No costs associated
with the therapeutics portfolio are expected to be carried by the Group after
2023.
Capex levels are expected to be similar to those incurred in 2022 with the
Group taking a suitably cautious approach to planning significant new
projects. The Group will continue to invest in new technologies in order to
maintain its competitive edge in lentiviral vectors, and to continue to build
a leading position in AAV.
Building on its leading position in lentiviral vectors, the Group aims to
ultimately have a market leading position in the viral vector outsourced
supply market across all key vector types, with long term revenue growth rates
exceeding the broader market.
Going concern
The financial position of the Group, its cash flows and liquidity position are
described in the strategic report, primary statements and notes to these
financial statements.
The Group made a loss for the year ended 31 December 2022 of £45.2 million
and consumed net cash flows from operating activities for the year of £12.6
million. The Group also:
• raised £77.0 million (net of £3 million of share issue cost) in cash from an
equity fundraise in January and March 2022;
• entered into a one year US$85 million (£63 million) loan facility with
Oaktree as part of the acquisition of Oxford Biomedica Solutions in March 2022
which was then converted into a four-year term loan facility together with
repayment of US$35 million of the initial principal amount in October 2022;
• during November 2022, sold its Windrush Court facility in a sale and leaseback
transaction for £60 million to Kadans, whilst also agreeing an occupational
lease of the property for 15 years; and
• ended the year with cash and cash equivalents of £141.3 million.
In considering the basis of preparation of the Annual report and accounts, the
Directors have prepared cash flow forecasts for a period of at least 12 months
from the date of approval of these financial statements, based in the first
instance on the Group's 2023 annual budget and forecasts for 2024. The
Directors have undertaken a rigorous assessment of this base case forecast and
have also assessed the potential impact from the principal risks and
uncertainties outlined in the strategic report of the Group's Annual report
and accounts, taking into consideration the magnitude and likelihood of these
risks and uncertainties occurring to prepare a downside scenario with
associated mitigated actions.
The cash flow forecast prepared for the severe but plausible downside scenario
with mitigating actions assumes the following:
• Commercial challenges leading to a substantial manufacturing and development
revenue downside affecting both the LentiVector(®) platform and AAV
businesses;
• Significant decreases in forecasted existing customer milestone and royalty
revenues;
• The product development spin out strategy taking longer, or ultimately being
unsuccessful; and
• The potential impacts of the current ongoing war in Ukraine on the Group and
its clients including expected revenues from existing clients under long term
contracts.
Under both the base case and mitigated downside scenario, the Group and parent
company has sufficient cash resources to continue in operation for a period of
at least 12 months from the date of approval of these financial statements.
In the event of the downside scenarios crystallising, the Group would continue
to meet its existing loan covenants until June 2024 without taking any
mitigating actions, but the Board has mitigating actions in place that are
entirely within its control that would enable the Group to reduce its spend
within a reasonably short time-frame to increase its cash covenant headroom as
required by the loan facility with Oaktree Capital Management.
The Board has confidence in the Group's ability to continue as a going concern
for the following reasons:
• The Group has cash balances of £141.3 million at the end of December 2022 and
£139.1 million at the end of March 2023;
• Approximately two-thirds of 2023 forecasted revenues are covered by binding
purchase orders which give certainty to revenues over the next 12 months;
• The Group's history of being able to access capital markets including raising
£77 million of equity during 2022;
• The Group's history of being able to obtain loan financing when required for
purposes of both capital expenditure and operational purposes, as recently
evidenced by the US$85 million one-year facility and US$50 million replacement
four-year facility obtained with Oaktree;
• The Group's ability to continue to be successful in winning new clients and
building its brand as demonstrated by successfully entering into new and
expanding existing Client agreements with AstraZeneca, Juno Therapeutics (a
wholly owned subsidiary of Bristol Myers Squibb Company), Homology Medicines
and multiple other new clients over the last twelve months.
Taking account of the matters described above, the Directors are confident
that the Group and parent company will have sufficient funds to continue to
meet their liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared the
financial statements on a going concern basis.
Stuart Paynter
Chief Financial Officer
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Group
2022 2021
Total Total
Continuing operations Note £'000 £'000
Revenue 139,989 142,797
Cost of sales (70,808) (60,157)
Gross profit 69,181 82,640
Research and development costs (60,937) (40,189)
Bioprocessing costs (33,886) (7,233)
Administrative expenses (28,223) (15,152)
Other operating income 2,307 867
Gain on sale and leaseback 21,389 -
Change in fair value of asset held at fair value through profit and loss (51) (165)
Operating (loss) / profit (30,220) 20,768
Finance income 973 -
Finance costs 5 (16,729) (888)
(Loss)/profit before tax (45,976) 19,880
Taxation 3 817 (869)
(Loss)/ profit for the period
(45,159) 19,011
Other comprehensive income/(expense)
Items that will not be reclassified to profit and loss
Foreign currency translation differences 10,575 -
Other comprehensive income 10,575 -
Total comprehensive (expense)/income (34,584) 19,011
(Loss)/profit attributable to:
Owners of the company (39,157) 19,011
Non-controlling interest 20 (6,002) -
(45,159) 19,011
Total comprehensive (expense)/ income
attributable to:
Owners of the company (31,332) 19,011
Non-controlling interest 20 (3,252) -
(34,584) 19,011
Basic (loss)/profit per share 4 (41.29p) 22.77p
Diluted (loss)/profit per share 4 (41.29p) 22.2p
Statement of financial position
as at 31 December 2022
Group
Note 2022 2021
£'000 £'000
Assets
Non-current assets
Intangible assets 6 105,886 52
Property, plant and equipment 7 133,780 69,728
Deferred tax asset - -
Trade and other receivables 10 5,010 3,605
244,676 73,385
Current assets
Inventories 9 12,625 9,521
Assets at fair value through profit and loss 8 23 74
Trade and other receivables 10 61,571 44,747
Current tax assets - 558
Cash and cash equivalents 141,285 108,944
215,504 163,844
Current liabilities
Trade and other payables 11 36,579 19,058
Contract liabilities 12 18,370 12,502
Deferred income 12 894 894
Lease liabilities 16 3,295 853
Deferred tax 525 -
59,663 33,307
Net current assets 155,841 130,537
Non-current liabilities
Provisions 13 8,424 6,244
Contract liabilities 12 76 92
Deferred income 12 1,069 1,760
Loans 14 39,780 -
Lease liabilities 16 71,206 8,488
Put Option liability 15 38,182 -
Deferred tax liabilities 5,588 -
164,325 16,584
Net assets 236,192 187,338
Equity attributable to owners of the parent
Ordinary share 17 48,132 43,088
capital
Share premium account 17 379,953 307,765
Other reserves (24,887) 2,291
Accumulated losses (198,545) (165,806)
Equity attributable to owners of the Company 204,653 187,338
Non-controlling interest 31,539 -
Total equity 236,192 187,338
The notes on pages 24 to 41 form part of this preliminary information.
Statement of cash flows
for the year ended 31 December 2022
Group
2022 2021
Note £'000 £'000
Cash flows from operating activities
Cash generated (used in)/from operations 18 (13,173) 24,461
Tax credit received 558 994
Net cash generated (used in)/from operating activities (12,615) 25,455
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (99,206) -
Purchases of property, plant and equipment 7 (16,296) (9,461)
Proceeds on disposal of PPE 7 60,000 -
Other direct costs in relation to leases (1,420) -
Interest received 460 -
Net cash used in investing activities (56,462) (9,461)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 17 80,154 51,600
Costs of share issues 17 (2,952) -
Payment of lease liabilities capital (1,120) (4,520)
Payment of lease liabilities interest (3,124) (873)
Loans received 64,866 -
Loans repaid (31,424) -
Interest paid (4,554) -
Loans arrangement fees (3,224) -
Net cash generated from financing activities
98,622 46,207
Net increase in cash and cash equivalents 29,545 62,201
Cash and cash equivalents at 1 January 108,944 46,743
Effects of movements in
exchange rates on cash held 2,796 -
Cash and cash equivalents at 31 December 141,285 108,944
The notes on pages 24 to 41 form part of this preliminary information.
Statement of changes in equity attributable to owners of the parent company
for the year ended 31 December 2022
Ordinary shares Share premium account Other Reserves Accumulated losses Total Non-controlling interest Total equity
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 41,161 258,017 2,291 (188,723) 112,746 - 112,746
Year ended 31 December 2021:
Profit for the year - - - 19,011 19,011 - 19,011
Total comprehensive expense for the year - - - 19,011 19,011 - 19,011
Transactions with owners:
Share options
Proceeds from shares issued 236 1,439 - (75) 1,600 - 1,600
Value of employee services - - - 3,523 3,523 - 3,523
Deferred tax on share options - - - 458 458 - 458
Issue of shares excluding options
1,691 48,309 - - 50,000 - 50,000
Cost of share issues - - - - - - -
Transfer of share premium related to warrants - - - - - - -
At 31 December 2021 43,088 307,765 2,291 (165,806) 187,338 - 187,338
Year ended 31 December 2022:
Loss for the year - - - (39,157) (39,157) (6,002) (45,159)
Foreign currency translation difference 7,825 7,825 2,750 10,575
Total comprehensive loss for the year - - 7,825 (39,157) (31,332) (3,252) (34,584)
Transactions with owners:
Share options
Proceeds from shares issued 106 78 - (29) 155 - 155
Value of employee services - - - 5,922 5,922 549 6,471
Tax on share options - - - 125 125 - 125
Deferred tax on share options - - - - - - -
Issue of shares excluding options 4,938 75,062 - - 80,000 - 80,000
Cost of share issue - (2,952) - - (2,952) - (2,952)
Total contributions 5,044 72,188 - 6,018 83,250 549 83,799
Changes in ownership interests:
Acquisition of subsidiary with NCI - - - - - 34,642 34,642
Acquisition of NCI without a change in control - - - 400 400 (400) -
Put option recognition - - (38,996) - (38,996) - (38,996)
Put option revaluation - - 3,993 - 3,993 - 3,993
At 31 December 2022 48,132 379,953 (24,887) (198,545) 204,653 31,539 236,192
NOTES TO THE PRELIMINARY FINANCIAL INFORMATION
for the year ended 31 December 2022
1 Basis of accounting
This preliminary announcement was approved by the Board of Directors on 25
April 2023.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2021 or 2022 but is derived
from those accounts.
Statutory accounts for 2021 have been delivered to the registrar of companies,
and those for 2022 will be delivered in due course.
The auditor has reported on the 2022 accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
Going concern
The financial position of the Group, its cash flows and liquidity position are
described in the strategic report, primary statements and notes to these
financial statements.
The Group made a loss for the year ended 31 December 2022 of £45.2 million
and consumed net cash flows from operating activities for the year of £12.6
million. The Group also:
• raised £77.0 million (net of £3 million of share issue cost) in cash from an
equity fundraise in January and March 2022;
• entered into a one year US$85 million (£63 million) loan facility with
Oaktree as part of the acquisition of Oxford Biomedica Solutions in March 2022
which was then converted into a four-year term loan facility together with
repayment of US$35 million of the initial principal amount in October 2022;
• during November 2022, sold its Windrush Court facility in a sale and leaseback
transaction for £60 million to Kadans, whilst also agreeing an occupational
lease of the property for 15 years; and
• ended the year with cash and cash equivalents of £141.3 million.
In considering the basis of preparation of the Annual report and accounts, the
Directors have prepared cash flow forecasts for a period of at least 12 months
from the date of approval of these financial statements, based in the first
instance on the Group's 2023 annual budget and forecasts for 2024. The
Directors have undertaken a rigorous assessment of this base case forecast and
have also assessed the potential impact from the principal risks and
uncertainties outlined in the strategic report of the Group's Annual report
and accounts, taking into consideration the magnitude and likelihood of these
risks and uncertainties occurring to prepare a downside scenario with
associated mitigated actions.
The cash flow forecast prepared for the severe but plausible downside scenario
with mitigating actions assumes the following:
• Commercial challenges leading to a substantial manufacturing and development
revenue downside affecting both the LentiVector(®) platform and AAV
businesses;
• Significant decreases in forecasted existing customer milestone and royalty
revenues;
• The product development spin out strategy taking longer, or ultimately being
unsuccessful; and
• The potential impacts of the current ongoing war in Ukraine on the Group and
its clients including expected revenues from existing clients under long term
contracts.
Under both the base case and mitigated downside scenario, the Group and parent
company has sufficient cash resources to continue in operation for a period of
at least 12 months from the date of approval of these financial statements.
In the event of the downside scenarios crystallising, the Group would continue
to meet its existing loan covenants until June 2024 without taking any
mitigating actions, but the Board has mitigating actions in place that are
entirely within its control that would enable the Group to reduce its spend
within a reasonably short time-frame to increase its cash covenant headroom as
required by the loan facility with Oaktree Capital Management.
The Board has confidence in the Group's ability to continue as a going concern
for the following reasons:
• The Group has cash balances of £141.3 million at the end of December 2022 and
£139.1 million at the end of March 2023;
• Approximately two-thirds of 2023 forecasted revenues are covered by binding
purchase orders which give certainty to revenues over the next 12 months;
• The Group's history of being able to access capital markets including raising
£77 million of equity during 2022;
• The Group's history of being able to obtain loan financing when required for
purposes of both capital expenditure and operational purposes, as recently
evidenced by the US$85 million one-year facility and US$50 million replacement
four-year facility obtained with Oaktree;
• The Group's ability to continue to be successful in winning new clients and
building its brand as demonstrated by successfully entering into new and
expanding existing customer agreements with AstraZeneca, Juno Therapeutics (a
wholly owned subsidiary of Bristol Myers Squibb Company), Homology Medicines
and multiple other new clients over the last six months.
Taking account of the matters described above, the Directors are confident
that the Group and parent company will have sufficient funds to continue to
meet their liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared the
financial statements on a going concern basis.
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 the 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.
Key accounting matters
Judgements
Contract revenues: Identification of performance obligations, allocation of
revenue and timing of revenue recognition
The Group has identified three key areas of judgement within the collaboration
agreements entered into during the period. Firstly, in relation to the number
of distinct performance obligations contained within each collaboration
agreement; secondly the fair value allocation of revenue to each performance
obligation; and thirdly the timing of revenue recognition based on the
achievement of the relevant performance obligation. The sales royalties
contained within the collaboration agreements qualify for the royalty
exemption available under IFRS 15 and will only be recognised as the
underlying sales are made even though the performance obligation, in terms of
the technology license, has already been met.
The judgements with regards to the number of distinct performance obligations
and the fair value allocation of revenue to each performance obligation takes
place on a contract-by-contract basis across numerous contracts entered into
by the Group. As these judgements take place across numerous contracts, each
with different characteristics, it is not practical to provide a quantitative
analysis of the impact of applying different judgements, and the Directors do
not believe that disclosing a range of outcomes resulting from applying
different judgements provides meaningful information to the reader of the
financial statements. Consequently, no quantitative analysis has been provided
for these judgements.
Number of distinct performance obligations
Upon review of certain customer contracts and preparation of accounting papers
setting out the accounting treatment as per IFRS 15, the Group is required to
exercise judgement in identifying the distinct performance obligations
contained within the contract. These have been identified as being:
· The granting of technology licences
· Milestones relating to bioprocessing or process development activities
The fair value allocation of revenue to each performance obligation
Because there is no readily available market price for many of the performance
obligations contained in the customer contracts, the Group exercises judgment
in estimating the stand alone selling price of each of these performance
obligations. Key areas of judgement are assessed to be:
• The stand alone selling price of technology licences. The Group assesses the
stand alone selling price of licences by reference to the stand alone selling
price of previously recognised customer technology licences, and the size of
the market of the target indication and other market related observable inputs
• The stand alone selling price of bioprocessing batches. The Group assesses the
stand alone selling price of the batches in terms the stand alone selling
price of its other customer contract batch selling prices
• The stand alone selling price in terms of the annual full time equivalent rate
to charge for process development activities. The Group assesses the full time
equivalent rate in terms the stand alone equivalent rate of its other customer
contract equivalent rates
Timing of revenue recognition: technology licence revenues
One of the key judgemental areas identified within the collaboration
agreements is the timing of recognition of licence revenue based on the
achievement of the relevant performance obligation. The individual factors and
aspects relating to licence revenue are assessed as part of the IFRS 15
accounting paper prepared for each agreement and a judgement is made as to
whether the licence fee performance obligation related to the granting of the
licence to the customer has been achieved. If it was judged that the
performance obligations on licences granted in 2022 had not been met,
revenues would have been £3,385,000 lower with the revenue expected to be
recognised in future when the performance obligations were deemed to have
been met.
Modification of Oaktree loan agreement
When a loan agreement with an existing lender is modified, a determination has
to be made as to whether the modification is treated as the extinguishment of
the existing financial liability and the recognition of a new liability, or
accounting for the modification of the agreement as a modification to the
existing financial liability.
On 10 March 2022, the Group entered into and drew down an US$85 million loan
facility agreement with Oaktree Capital Management under a 1 year facility
agreement maturing in 2023 with a nominal interest rate on the loan of 8.5%.
On 7 October 2022, the Loan Agreement was amended, US$35 million was repaid
and the term extended to October 2026, with a variable interest rate which is
capped at 10.25% per annum.
A substantial modification under IFRS 9 is deemed to have occurred if the net
present value of the cash flows under the new terms, including any fees,
differs by at least 10% from the present value of the remaining cashflows
under the original terms.
Management has determined that the modification of the Oaktree loan agreement
on 7 October 2022 does not meet the substantial modification criteria and
therefore will be recognised as a non-substantial modification to the existing
loan, with the loan being restated to its present value and subsequently at
amortised cost under the effective interest rate method.
This was determined on the basis of the quanititative test performed as
required by IFRS 9 resulting in a 3% change to the net present value of the
remaining cash flows when comapred to the original cash flows under the
original terms. Management has also performed a qualitative assessment to
identify substantial differences in terms that by nature were not captured by
the quantitative assessment. In considering the qualitative factors,
Management has considered the payment terms, options, change in other terms
and collaterals. Based on the quantitative and qualitative assessment,
Management has determined that the modification of the loan does not meet the
substantial modification criteria.
If the Group had concluded that the amendment consititutes a significant
modification, this accounting treatment would have resulted in the recognition
of a loss on extinguisment of £1,391,000, recognition of legal fees of
£439,000, and an increase in the loan balance of £409,000 on the 7th of
October 2022.
Estimations
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date 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. The nature of estimation means
that actual outcomes could differ from those estimates.
Percentage of completion of bioprocessing batch revenues
Bioprocessing of clinical/commercial product for partners is recognised on a
percentage of completion basis over time as the processes are carried out.
Progress is determined based on the achievement of verifiable stages of the
bioprocessing process. Revenues are recognised on a percentage of completion
basis and as such require estimation in terms of the assessment of the correct
stage of completion including the expected costs to completion for that
specific bioprocessing batch. The value of the revenue recognised with
regard to the bioprocessing batches which remain in progress at year end is
£32,051,000. If the assessed percentage of completion was 10 percentage
points higher or lower, revenue recognised in the period would have been
£3,866,000 higher or lower.
Percentage of completion of fixed price process development revenues
As it satisfies its performance obligations the Group recognises revenue and
the related contract asset with regard to fixed price process development work
packages. Revenues are recognised on a percentage of completion basis and as
such require estimation in terms of the assessment of the correct percentage
of completion for that specific process development work package. The value of
the revenue recognised raised with regard to the work packages which remain in
progress at year end is £8,179,000. If the assessed percentage of completion
was 10 percentage points higher or lower, revenue recognised in the period
would have been £818,000 higher or lower.
Provision for out of specification bioprocessing batches
Bioprocessing of clinical/commercial product for clients is recognised on a
percentage of completion basis over time as the processes are carried out.
Progress is determined based on the achievement of verifiable stages of the
process.
As the Group has now been bioprocessing product across a number of years, and
also in a commercial capacity, the Group has assessed the need to include an
estimate of bioprocessed product for which revenue has previously been
recognised and which may be reversed should the product go out of
specification during the remaining period over which the product is
bioprocessed. In calculating this estimate, the Group has looked at historical
rates of out of specification batches across the last four years, and has
applied the percentage of out of specification batches to total batches
produced across the assessed period to the revenue recognised on batches which
have not yet completed the bioprocessing process at year end. This estimate,
based on the historical percentage, may be significantly higher or lower
depending on the number of bioprocessing batches actually going out of
specification in future. If the historical percentage had been 10% higher or
lower, the estimate would be £259,000 higher or lower. The estimate will
increase or decrease based on the number of bioprocessing batches undertaken,
the percentage of completion of those bioprocessing batches, and the number of
batches which go out of specification over the assessment period.
Consequently, bioprocessing revenue of £2,592,000 (2021: £769,000) has not
been recognised during 2022, with the corresponding credit to contract
liabilities (note 12). This revenue will be recognised as the batches complete
bioprocessing.
Amortisation of intangibles assets (developed technology)
The estimated useful life of developed technology acquired by the Group is 15
years as the Group expects the technology to generate cash flows for a total
of 15 years. The estimate of 15 years is based on management's experience of
the time period over which the technology acquired as part of the acquisition
of Oxford Biomedica Solutions will become fully obsolete. Over time as the
platform technology is improved, parts of the technology become obsolete as
they are superseded by new technology until after 15 years the original
technology is expected to have been fully replaced by newer/improved
technology.
If the estimated useful life of the assets had been 10 years, the estimated
amortisation for the year ended 31 December 2022 would be £3,036,000 higher
(2021: nil); whilst, if the estimated useful life of the assets had been 20
years, the estimated amortisation for the year ended 31 December 2022 would be
£1,518,000 lower (2021:nil).
Sale and leaseback - Lease liability discount rate
During November 2022 the Group sold its Windrush Court facility property to
Kadans for a cash consideration of £60 million in a sale and leaseback
transaction (refer note 7). A key estimate identified by the Group within the
sale and leaseback agreement is the incremental borrowing rate used to
discount the lease liability cash flows back to their present value to
determine the lease liability at year end.
Since the rate implicity in the lease is not readily determinable, the Group's
incremental borrowing rate has been used (the rate of interest that would have
to be paid to borrow on a collateralised basis over a similar term for an
amount equal to the lease payments in a similar economic environment) based on
the information available at commencement date in determining the discount
rate used to calculate the present value of lease payments. The rates have
been determined using previously available information on borrowing rates as
well as indicative borrowing rates that would be available based on the value,
currency and borrowing term provided by financial institutions, adjusted for
company and market specific factors. Estimation of uncertainty is involved in
selecting an appropriate rate, and the rate selected for each lease will have
an impact on the value of the lease liability and corresponding right-of-use
(ROU) asset in the Consolidated Statement of financial positions.
If the estimated lease liability discount rate had been one percentage higher
or lower, the gain recognised on the sale of Windrush court would have been
£1,775,000 higher or lower (2021: £nil) with the other side of the entry
decreasing or increasing the lease liability by a £2,027,000 (2021: £nil)
and decreasing and increasing right of use assets by a £253,000 (2021:
£nil).
Valuation of put option liability
Where a put option with non-controlling shareholders exists on their equity
interests, a liability for the fair value of the exercise price of the option
is recognised. On 10th March 2022, the Group recognised a put option
liability to acquire the remaining 20% of Oxford Biomedica Solutions that it
doesn't already own, from Homology Medicines. The fair value of the option at
the date of acquisition was assessed to be £39.0 million. At 31st December
2022 the fair value of the put option liability was £38.2 million (Dec 2021:
£nil).
The Group estimates the value of the put option liability using a Monte Carlo
simulation which calculates the expected future exercise value of the put
option, taking into consideration Oxford Biomedica Solutions' forecasted
revenues over the period up until the expected exercise date along with the
expected volatility of those revenues over that same period. The expected
future exercise value is then discounted to the present using a discount rate
in order to capture the counter party risk of the expected payment.
Key estimation uncertainty inputs which directly impact the valuation of the
put option liability are assessed to be:
• Revenues of Oxford Biomedica Solutions- the revenues of Oxford Biomedica
Solutions are based on the management approved forecast up until the end of
the option period. Should the forecast change or the actual results vary this
may impact the value of the put option liability.
• Expected volatility of revenues - should the expected volatility of Oxford
Biomedica Solutions revenues vary, this may impact the value of the put option
liability,
• Discount rate - the discount rate may be impacted by economic and market
factors, as well as changes to the risk free rate of return which impacts debt
borrowing rates. Should the discount rate calculated by management be
adjusted, this may impact the value of the put option. Management has
calculated the discount rate based on the risk free rate, the expected return
from similar companies and the Group's cost of debt.
Put option liability Fair value
31 December 2022 Increase Decrease
Effect in thousands of pounds:
Revenues of Oxford Biomedica Solutions:
10% higher or lower 2.1 (2.4)
Discount rate 2% lower or higher 1.4 (1.4)
Valuation of acquired intangible assets
As part of the acquisition accounting for the acquisition of Oxford Biomedica
Solutions LLC in 2022, we have performed an assessment on the identification,
fair value, and expected useful economic lives of acquired intangible assets
such as developed technology assets at the date of acquisition. The fair value
attributed to intangible assets arising on acquisition is recognised in
accordance with IAS 38 Intangible assets and is based on a number of
estimates.
The acquired identifiable assets and liabilities have been recognised at their
fair values at acquisition date and in accordance with the Group's accounting
policies. The fair value of the developed technologies intangible asset is
considered a key estimate subject to estimation uncertainty. Below are the
details for the valuation methodologies used for the intangible assets.
Acquired developed technology has been valued using the multi-period excess
earnings method (MPEEM) method, valued at £102.8 million, The MPEEM method
considers the present value of net cash flows expected to be generated by the
client relationships, by excluding any cash flows related to contributory
assets.
Management considers the weighted average return on assets and discount rates
as critical estimates as a reasonably possible change to these assumptions in
aggregation, or in isolation, will have an impact on the consolidated
financial statements. The weighted average return on assets and discount rate
used by management in the valuation of the developed technology is 17.3% and
20.0% respectively. Below are the various sensitivities of weighted average
return on assets and discount rates and their impact on the related intangible
assets.
Sensitivities
Weighted average rate of return: Adjusted Developed technology value £'m Impact
£'m
Discount rate:
17% 15.0% 121.8 19.0
18% 15.8% 113.5 10.7
19% 16.5% 106.0 3.2
3 Taxation
During 2020 the Group ceased being eligible to claim a research and
development tax credits under the Government's small company scheme.
2022 2021
Current tax £'000 £'000
Corporation tax (1,282) (1,427)
(1,282) (1,427)
Adjustments in respect of prior periods:
United Kingdom corporation tax research and development credit 307 558
Current tax (975) (869)
Deferred tax 1,792 -
Taxation (Charge)/Credit 817 (869)
The amount of £1,282,000 included as part of the taxation charge within the
statement of comprehensive income for the year ended 31 December 2022
comprises the corporation tax payable on the amount claimed as a Large Company
Tax credit (RDEC) within research and development expenses in the statement of
comprehensive income.
The adjustment of current tax in respect of the prior year of £307,000 (2021:
£558,000) relates to a lower (2021: higher) than anticipated tax receipt.
The United Kingdom corporation tax research and development (RDEC) credit
which is included in research and development expenses, 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 Statement of financial position.
During 2022 the Group recognised £125,000 (2021: £458,000) of current tax
relating to tax relief obtained on exercise of share options directly within
equity.
4 Basic and diluted profit/(loss) per ordinary share
The basic loss per share of 41.29p (2021: profit 22.77p) has been calculated
by dividing the (loss)/profit for the period by the weighted average number
of shares in issue during the year ended 31 December 2022 being, 94,829,892
(2021: 83,484,173).
As the Group made a loss this year, there is therefore no difference between
the basic loss per ordinary share and the diluted loss per ordinary share in
the prior period. The Group made a profit in the prior period and the diluted
earnings per share in the year was (22.20p), which was calculated by dividing
the earnings for the period by the weighted average number of shares in issue
during the period after adjusting for the dilutive effect of the share options
outstanding at 31 December 2021 (2,134,494).
5 Finance Costs
Finance costs of £16.7 million (2021: £0.9 million) consists of loan
interest (£5.6 million), foreign exchange losses relating to loans (£8.0
million) and lease liability interest recognised in accordance with IFRS 16
(Leases) (£3.1million).
6 Intangibles
Goodwill Developed technology Patents Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 - - 5,636 5,636
At 31 December 2021 - - 5,636 5,636
At 1 January 2022 - - 5,636 5,636
Aquisitions through business combinations 610 102,869 - 103,479
Retirements - - (3,825) (3,825)
Effects of movements in exchange rates 51 8,536 - 8,587
At 31 December 2022 661 111,405 1,811 113,877
Accumulated amortisation and impairment
At 1 January 2021 - - 5,563 5,563
Charge for the year - - 21 21
At 31 December 2021 - - 5,584 5,584
At 1 January 2022 - - 5,584 5,584
Charge for the year - 6,072 16 6,088
Retirements - - (3,797) (3,797)
Effects of movements in exchange rates - 116 - 116
At 31 December 2022 - 6,188 1,803 7,991
Net book amount at 31 December 2021 - - 52 52
Net book amount at 31 December 2022 661 105,217 8 105,886
Intangible assets comprise Goodwill, Developed Technology and Patents for
intellectual property rights. The Group has not capitalised any internally
generated intangible assets.
7 Property, plant and equipment
Freehold property Leasehold Office Bioprocessing and Laboratory equipment Right of use asset Total
improvements equipment and computers
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 25,409 28,145 10,663 29,505 18,411 112,133
Additions at cost 113 7,767 955 7,461 13,038 29,334
Reallocations 14 (417) (6) 409 - -
Acquisitions through
business combinations 22,747 788 10,436 24,974 58,945
Disposals (15,688) - (45) (127) - (15,860)
Change in estimate - - - - (1,349) (1,349)
Effects of movements in
Exchange rates - 1,986 65 912 2,072 5,035
At 31 December 2022 9,848 60,228 12,420 48,596 57,146 188,238
Accumulated depreciation
At 1 January 2022 12,652 6,226 6,863 12,519 4,145 42,405
Charge for the year 2,052 5,167 2,204 5,916 4,932 20,271
Effects of movements in
Exchange rates - 47 2 40 19 108
Disposals (8,210) - (27) (89) - (8,326)
At 31 December 2022 6,494 11,440 9,042 18,386 9,096 54,458
Net book amount
At 31 December 2022 3,354 48,788 3,378 30,210 48,050 133,780
8 Assets at fair value through profit and loss
2022 2021
Assets at fair value through profit and loss: £'000 £'000
At 1 January 74 239
Additions - -
Sale of shares - -
Change in fair value of FVTPL asset (51) (165)
At 31 December 23 74
9 Inventories
2022 2021
£'000 £'000
Raw Materials 12,625 9,521
Total Inventory 12,625 9,521
Inventories constitute raw materials held for commercial bioprocessing
purposes.
During the year, the Group wrote down £1,117,000 (2021: £766,000) of
inventory which is not expected to be used in production or sold onwards. The
Company holds no inventories. During the year, the Group wrote off
£11,717,000 of inventory as a result of cancelled orders from a customer,
which was recognised as part of cost of sales in the year.
10 Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 34,109 22,398
Contract assets 10,897 13,547
Other receivables 4,832 365
Other tax receivable 7,757 3,227
Prepayments 3,976 3,210
Total trade and other receivables 61,571 44,747
Non-current trade and other receivables constitute other receivables of
£5,010,000 (2021: £3,605,000) which are deposits held in escrow as part of
the Windrush Innovation Centre and Oxbox lease arrangements.
The fair value of trade and other receivables are the current book values. The
Group has performed an impairment assessment under IFRS 9 and has concluded
that the application of the expected credit loss model has had an immaterial
impact on the level of impairment of receivables
Included in the Group's trade receivable balance are debtors with a carrying
amount of £1,336,000 (2021: £3,800,000) which were past due at the reporting
date and of which £1,333,000 (2021: £3,800,000) has been received after the
reporting date.
Contract assets
Contract assets relates to the Group's rights to consideration for work
completed but not invoiced at the reporting date for commercial development
work and bioprocessing batches. The contract assets are transferred to
receivables when the rights become unconditional. This usually occurs when the
Group issues an invoice to the customer.
The balance of £10.9 million (2021: £13.5 million) mainly relates to
commercial development milestones which have been accrued as the specific
conditions stipulated in the licence agreement have been met, commercial
development work orders accrued on a percentage complete basis which will be
invoiced as the related work package completes, and bioprocessing batches
accrued on a percentage of completion basis which will be invoiced as the
manufacturing of the batch is completed.
Contract assets have decreased from £13.5 million at the end of 2021 to
£10.9 million at the end of 2022 due to the timing of bioprocessing and
commercial development activities undertaken during the year leading to a
lower level of consideration for work completed but not yet billed.
A portion of contract assets relates to fixed price process development work
packages which are recognised on a percentage of completion basis and as such
requires estimation in terms of the assessment of the correct percentage of
completion for that specific work package. The value of the contract asset
raised with regard to these work packages is £8,179,000 (2021: £8,022,000).
If the assessed percentage of completion was 1 percentage point higher or
lower, revenue recognised in the period would have been £82,000 higher or
lower (2021: £80,000).
The Group performed an impairment assessment under IFRS 9 and has concluded
that the application of the expected credit loss model has had an immaterial
impact on the level of impairment on contract assets. We have noted there has
been no change in the time frame for a right to consideration to become
unconditional and the performance obligation to be satisfied.
11 Trade and other payables
2022 2021
£'000 £'000
Trade payables 13,604 5,260
Other taxation and social security 2,347 1,899
Accruals 20,628 11,899
Total trade and other payables 36,579 19,058
12 Contract liabilities and deferred income
Contract liabilities and deferred income arise when the Group has received
payment for services in excess of the stage of completion of the services
being provided.
Contract liabilities and deferred income have increased from £15.2 million at
the end of 2021 to £20.4 million at the end of 2022 due to funds received in
advance for future licencing, bioprocessing and process development
activities. Of the £12.6 million contract liability balance included in the
statement of financial position at the end of 2021, £12.5 million has been
recognised as revenue during the 2022 financial year.
Years 0-1 1-3 3-5 5-10 Total
At 31 December 2022 £'000 £'000 £'000 £'000 £'000
Contract liabilities 18,370 32 32 12 18,446
Bioprocessing income 10,218 - - - 10,218
Process development income 3,136 - - - 3,136
Licence fees and Milestones 5,016 32 32 12 5,092
Deferred income 894 1,069 - - 1,963
Grant 894 1,069 - - 1,963
Included within bioprocessing contract liabilities is revenue of £2.6 million
which has not been recognised during 2022 (2021: £0.8 million) relating to
the estimate of out of specification batches (see note 2: 'Estimations' for
additional information).
Deferred income relates to grant funding received from the UK Government for
capital equipment purchased as part of the Oxbox bioprocessing facility
expansion. The income will be recognised over the period over which the
purchased assets are depreciated.
13 Provisions
2022 2021
£'000 £'000
At 1 January 6,244 5,839
Unwinding of discount 66 27
Change in estimate (1,349) 378
Additional provision recognised 3,463 -
At 31 December 8,424 6,244
2022 2021
£'000 £'000
Current - -
Non-current 8,424 6,244
Total provisions 8,424 6,244
Provisions are exclusively in respect of dilapidations. The new provisions
during the year relate to new lease liabilities at the Wallingford Warehouse,
and as a result of the sale and leaseback by the Company of Windrush Court
facility. The provisions are based on the anticipated costs of restoring the
leaseholds at the end of the lease terms, both of which are 2037. The
existing dilapidations provisions relate to anticipated costs of restoring
the leasehold Yarnton, Oxbox, Windrush Innovation Centre and Corporate Office
properties in Oxford, UK to their original condition at the end of the lease
terms in 2024, 2033, 2028 and 2030 respectively.
The future anticipated costs of restoring the properties is calculated by
inflating the current expected restoration costs using the 3 year historic
inflation rate up to the end of the lease term. The discount rate utilised for
the purpose of determining the present value of the provision is 5.41% based
on the risk free rate adjusted for inflation. The present value of the future
anticpiated costs of restoration is calculated by discounting the future
expected value using the nominal rate. The unwinding of this discount over
time is included within finance costs.
At the time of establishing the provision, a corresponding asset is
capitalised where it gives rise to a future benefit and dpreciated over the
remain life of the lease. The provision is reviewed on an annual basis for
changes in cost estimates, discount rates or lease end date. Any change in
the dilapidation provisions or underlying assumtions will be recognised in the
corresponding asset and provision when they occur.
14 Loans
On 10 March 2022, the Group drew down an US$85 million loan facility with
Oaktree Capital Management to finance the acqusition of OXB Solutions LLC
under a 1 year facility agreement maturing in 2023. Over the course of the
term loan interest was payable quarterly with a nominal interest rate on the
loan of 8.5%.
On 7 October 2022, the loan facility was refinanced with Oaktree Capital
Management. Under the terms of such refinancing, the Company has partially
repaid the outstanding amounts under the Short-Term Loan Facility and amended
the facility into a new senior secured four year term loan facility provided
by Oaktree in a principal amount of US$50 million. The Term Loan will mature
four years after the date of completion and will not amortise, with the full
aggregate principal and outstanding amount being repayable on the final
maturity date. The Term Loan carries a variable interest rate, which is
capped at 10.25% per annum and payable quarterly in cash, with up to 50% of
interest for the first twelve months payable in kind as additional loan
principal, at the option of the Company. The interest rate is subject to
downward adjustment following the satisfaction of certain commercial
conditions.
The Company also has secured the option, subject to customary conditions and
available for a three-year period, to draw down a further US$25 million from
Oaktree to fund certain permitted acquisitions.
Group
2022 2021
£'000 £'000
At 1 January - -
New Loan 64,866 -
Interest accrued 5,564 -
Interest paid (4,554) -
Foreign exchange movement 7,964 -
Amortised fees 588 -
Loan repayment (31,424) -
Arrangement fees (3,224)
At 31 December 39,780 -
The terms include financial covenants including holding a minimum of US$20
million cash at all times, restrictions on the level of indebtedness the Group
may enter into or distributions made by the Group. The Oaktree facility was
secured by a pledge over substantially all of the Group's assets.
15 Put option liability
2022 2021
£'000 £'000
Balance at 1 January - -
Recognised at fair value 38,996 -
Revaluation (814) -
At 31 December 38,182 -
On 10th March 2022, the Group recognised a put option liability to acquire the
remaining 20% of Oxford Biomedica Solutions that it doesn't already own from
Homology Medicines. The fair value of the option at the date of acquisition
was assessed to be £39.0 million.
At 31st December 2022 the fair value of the Put option liability was £38.2
million (Dec 2021: £nil). The lower liability valuation was due to increases
in borrowing rates over the period leading to a higher discount rate applied
and a resultant lower put option liability.
16 Leases
Right-of-use assets
Property Equipment IT equipment Total
£'000 £'000 £'000 £'000
Balance at 1 January 2022 11,450 2,780 36 14,266
Additions 13,038 - - 13,038
Acquisitions through business combinations 24,974 - - 24,974
Depreciation charge for the period (4,185) (730) (36) (4,951)
Change in Estimate (1,349) - - (1,349)
Effects of movements in exchange rates 2,072 - - 2,072
Balance at 31 December 2022 46,000 2,050 - 48,050
Lease liabilities
2022 2021
£'000 £'000
Maturity analysis - contractual undiscounted cash flows
Less than one year 9,179 1,590
One to five years 43,035 5,883
Six to ten years 42,224 5,071
More than ten years 25,059 913
Total undiscounted cash flows 119,497 13,457
2022 2021
£'000 £'000
Lease liabilities included in the Statement of Financial Position
Current 3,295 853
Non-current 71,206 8,488
Total undiscounted cash flows at 31 December 2022 74,501 9,341
Amounts recognised in the statement of comprehensive income
2022 2021
£'000 £'000
Interest on lease liabilities 3,124 873
Expense relating to short-term leases 178 369
Amounts recognised in the statement of cash flows
2022 2021
£'000 £'000
Total cash outflow for leases 4,244 5,393
17 Share capital and Share premium
At 31 December 2021 and 31 December 2022 Oxford Biomedica had an issued share
capital of 86,175,055 and 96,264,245 ordinary 50 pence shares respectively.
212,646 shares were created as a result of the exercise of options by
employees during the period.
Between January and March 2022, the Group issued 9,876,544 new ordinary shares
at a price of £8.10 per share. Gross proceeds from the placing were £80.0
million; net proceeds were £77.0 million.
18 Cash flows from operating activities
Reconciliation of profit before tax to net cash used in operations:
2022 2021
£'000 £'000
Continuing operations
Profit/(loss) before taxation (45,976) 19,880
Adjustment for:
Depreciation 20,271 12,435
Amortisation of intangible assets 6,088 21
(Gain) on sale and leaseback (21,389) -
Loss on disposal of PPE 28 -
Loss on disposal of intangible 27 -
Amortisation of loan fees 588 -
Net finance costs 15,756 888
Charge in relation to employee share schemes 6,471 3,981
Non-cash loss 51 165
Changes in working capital:
Increase/(decrease) in trade and other receivables (17,876) 6,891
Increase in trade and other payables 16,959 (657)
Increase/(decrease) in deferred income (691) (867)
Increase/(decrease) in contract liabilities 5,852 (15,667)
Decrease/(increase) in inventory 668 (2,609)
Net cash generated from/(used in) operations (13,173) 24,461
19 Acquisition of subsidiary
On 10 March 2022, the Group acquired 74% of the shares and voting interests in
Oxford Biomedica Solutions LLC. As a result, the Group's equity interest
granted it control of Oxford Biomedica Solutions. Immediately following the
acquisition, the Group acquired a further 6% interest in Oxford Biomedica
Solutions (refer note 21).
Included in the identifiable assets and liabilities acquired at the date of
acquisition of Oxford Biomedica Solutions are inputs, production processes and
an organised workforce. The Group has determined that together the acquired
inputs and processes significantly contribute to the Group's ability to create
revenue. The Group has concluded that the acquired inputs and processes is a
business.
A. Consideration Transferred
The following table summarises the acquisition date fair value of each major
class of consideration transferred.
£'000
Cash 99,206
Total consideration transferred: 99,206
B. Acquisition related expenses:
The Group incurred acquisition related legal and due diligence expenses of
£5.1 million which is included in Administrative expenses.
C. Identifiable assets acquired and liabilities assumed:
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the date of acquisition.
£'000
Property plant and equipment 58,945
Intangible assets 102,869
Inventory 3,476
Prepaid expenses 229
Lease liabilities (24,974)
Deferred tax liabilities (7,307)
Total identifiable net assets acquired: 133,238
The valuation techniques used for measuring the fair value of material assets
acquired were as follows.
Assets acquired Valuation technique
Property plant and equipment Market comparison technique and cost technique - The valuation model considers
market prices for similar items when they are available, and depreciated
replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical deterioration
as well as
functional and economic obsolescence
Intangible assets Multi-period excess earnings method - The multi-period excess earnings method
considers the present value of net cash flows expected to be generated by the
customer relationships, by excluding any cash flows related to contributory
assets.
Inventory Market comparison - To determine the fair value of the inventory, the Group
obtained current prices for each of the items making up the transferred
inventory.
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
£'000
Consideration transferred 99,206
Interest in the identifiable net assets of non-controlling interests 34,642
Fair value of identifiable assets: (133,238)
Goodwill 610
The goodwill is attributable mainly to the skills and technical talent of
Oxford Biomedica Solutions' workforce. None of the goodwill recognised is
expected to be deductible for tax purposes.
20 Non-controlling interest ("NCI")
The proportion of the identifiable net assets of the Non-controlling interest
in Oxford Biomedica Solutions on acquisition was determined to be
£34,642,000.
The following table summarises the information relating to the Group's
subsidiary that has material NCI:
2022
£'000
NCI percentage 20%
Non-current assets 171,419
Current assets 29,732
Non-current liabilities (7,473)
Current liabilities (35,979)
Net assets 157,699
Net assets attributable to NCI 31,539
Revenue 23,722
Loss (30,011)
Other comprehensive income 13,756
Total comprehensive loss (16,255)
Loss allocated to NCI (6,002)
Other comprehensive income allocated to NCI 2,750
Cash flows from operating activities (9,732)
Cash flows from investment activities 30,867
Cash flow from financing activities (dividends to NCI: nil) (2,293)
Net increase in cash and cash equivalents 18,842
There was no Non Controlling interest in 2021.
21 Acquisition of Non-controlling interest
On 10 March 2022, the Group acquired an additional 6% interest in Oxford
Biomedica Solutions from Homology Medicines, increasing its ownership from 74%
to 80%, with Homology Medicines holding the remaining 20%. The carrying amount
of Oxford Biomedica Solutions' net assets in the Group's consolidated
financial statements on the date of the acquisition was £133.2 million.
£'000
Carry amount of NCI acquired 400
Consideration paid to NCI -
Increase in equity attributable to owners of the Company 400
The increase in equity attributable to owners of the Company comprised solely
of an increase to retained earnings.
22 Capital commitments
At 31 December 2022, the Group has a letter of credit £1,405,000 (2021: nil)
related to the deposit on the Patriots park lease which is disclosed within
Trade and other receivables in non current assets.
At 31 December 2022, the Group had commitments of £2,882,000 for capital
expenditure for leasehold improvements and plant and equipment not provided in
the financial statements (Dec 2021 £3,974,000).
23 Related party transactions
31 December 2022 31 December 2021
£ '000s £ '000s
Sales of goods and services
Homology Medicines, Inc. 23,252 -
Purchase of services
Homology Medicines, Inc. 4,258 -
Other
Homology Medicines, Inc. - rental income 1,085 -
All outstanding balances with related parties are to be settled in cash within
six months of the reporting date. None of the balances is secured.
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