REG - Oxford Biomedica PLC - Preliminary Results <Origin Href="QuoteRef">OXB.L</Origin> - Part 2

Oxford BioMedicaAnnouncement

13/03/2015 07:01

- Part 2: For the preceding part double click  ID:nRSM3403Ha 

ended 31 December 2014 and 31 December 2013 were
unqualified and did not contain statements under section 498 of the Companies
Act 2006.  The financial information in this report does not constitute a
statutory financial statement within the meaning of sections 434-436 of the
Companies Act 2006. 
 
The financial statements have been prepared in accordance with IFRIC
interpretations, as applicable to companies using International Financial
Reporting Standards ('IFRS') as adopted by the European Union and with the
Companies Act 2006 under the historic cost convention.  Whilst the financial
information included in this preliminary announcement has been prepared in
accordance with IFRSs adopted for use in the European Union, this announcement
does not itself contain sufficient information to comply with IFRSs. 
 
Copies of this announcement and the Annual report for 2014 are available from
the Company Secretary, and are on the Group's website. The audited statutory
financial statements for the year ended 31 December 2014 are expected to be
distributed to shareholders by 30 April 2015 and will be available at the
registered office of the Company, Windrush Court, Transport Way, Oxford, OX4
6LT. Details can also be found on the Group's website at:
www.oxfordbiomedica.co.uk. 
 
This announcement was approved by the Board of Oxford BioMedica plc on 12
March 2015. 
 
Going concern 
 
The Group had £14.2m of cash at the end of 2014 and is now generating
profitable revenues from its manufacturing activities. However, it will incur
substantial capital expenditure over the next 15 months as it expands
manufacturing and analytical testing capacity to enable it to meet the volumes
expected under the Novartis contracts. In the absence of any further upfront
receipts from potential product or IP licence deals, the Directors estimate
that the cash held by the Group including known cash inflows will be
sufficient to support the current level of activities into the first quarter
of 2016. Known cash inflows include a proportion of the contractual milestone
payments from Novartis which are based on process development progress
continuing at its current rate. 
 
The Directors have also considered the range of potential sources of cash to
the Group and expect to be able to secure adequate resources should they be
required. Whilst the Directors have confidence that such resources could be
obtained, no such additional resources are committed at the date of these
financial statements. In the absence of securing such funds or other sources
of cash, the Group would choose to curtail or suspend part of its capital
expenditure programme until such funds were secured. 
 
After due consideration, the Directors are of the view that the Group will
have access to adequate resources to allow the Group to continue for the
foreseeable future and have therefore prepared the financial statements on a
going concern basis. 
 
Critical accounting judgements and estimates 
 
In applying the Group's accounting policies, management is required to make
judgements and assumptions concerning the future in a number of areas. Actual
results may be different from those estimated using these judgements and
assumptions. The key sources of estimation uncertainty and critical accounting
judgements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below. 
 
Revenue recognition 
 
In October 2014, the Group entered into a series of contractual arrangements
with Novartis, including a licence over the Group's existing Lentivector
platform, a manufacturing and clinical supply agreement and an agreement
covering process development. Total amounts of up to $90m, plus further
potential royalties, are receivable under these arrangements. These amounts
include $4.3m of shares subscribed for by Novartis on completion of the
arrangements. 
 
Under these arrangements, the Group received $9.7m (£6.1m) in upfront payments
of which $7.7m (£4.8m) was received in respect of the non-exclusive worldwide
development and commercialisation licence in oncology under the Group's
existing Lentivector intellectual property platform. 
 
Management has judged that this amount should be recognised as a separate
deliverable in 2014, discrete from amounts to be recognised over the period of
the 3-year manufacturing contract. This judgement is based on management being
satisfied that the customer is able and intends to realise value from this
licence independently from any further intellectual property generated in the
collaboration, and that its fair value is sufficiently reliable.  In reaching
this judgement management had regard to several considerations including: 
 
- The existing intellectual property covered by the licence is sufficient to
allow CTL019 to be manufactured for commercial use, and any intellectual
property that might arise from the process development under the contract is
not a pre-requisite for its commercial manufacture, 
 
- The licence allows Novartis to use the existing intellectual property for
other oncology products apart from CTL019, 
 
- The other elements of the arrangements have an appropriate price and fair
value (the residual elements) 
 
- The $7.7m rate is comparable with similar transactions with third parties
that the Group has previously contracted, taking into account the stage of
development and the market potential of the product. 
 
This judgement reflects both the separability of the licence for the existing
intellectual property and the assessment of the fair values of each of the
components of the Novartis agreements. 
 
Intangible asset impairment 
 
The Group has significant intangible assets arising from purchases of
intellectual property rights and in-process R&D. Amortisation is charged over
the assets' patent life on a straight line basis from the date that the asset
becomes available for use. When there is an indicator of a significant and
permanent reduction in the value of intangible assets, an impairment review is
carried out. The impairment analysis is principally based on estimated
discounted future cash flows. Actual outcomes could vary significantly from
such estimates of discounted future cash flows due to the sensitivity of the
assessment to the assumptions used. The determination of the assumptions is
subjective and requires the exercise of considerable judgement. Any changes in
key assumptions about the Group's business and prospects, or changes in market
conditions affecting the Group, or its development partners, could materially
affect whether an impairment exists. This risk is now concentrated on
purchased patent rights which have been sublicensed to collaborative partners.
At 31 December 2014 the book value of intangible assets was £2.1 million of
which £1.5 million related to PrimeBoost technology. 
 
Going concern 
 
Management and the Directors have had to make estimates and important
judgements when assessing the going concern status of the Group.  Going
concern is as stated in several places in this report including in note 1
(page 18) and the Financial review (page 10). 
 
2    Segmental analysis 
 
The chief operating decision-maker has been identified as the Senior Executive
Team (SET), comprising the Executive Directors, Kyriacos Mitrophanous and
James Miskin. The SET considers that the business comprises a single activity,
which is biotechnology research and development, and the related
manufacturing. The SET reviews the Group's financial performance on a
whole-company, consolidated basis in order to assess performance and allocate
resources. Therefore the segment financial information is the same as that set
out in the consolidated statement of comprehensive income, the consolidated
balance sheet, the consolidated statement of cash flows and the consolidated
statement of changes in equity. 
 
3    Taxation 
 
The Group is entitled to claim tax credits in the United Kingdom for certain
research and development expenditure. The amount included in the statement of
comprehensive income for the year ended 31 December 2014 comprises the credit
receivable by the Group for the year, less overseas tax paid in the year. The
United Kingdom corporation tax research and development credit is paid in
arrears once tax returns have been filed and agreed. The tax credit recognised
in the financial statements, but not yet received, is included in current tax
assets in the balance sheet. The amounts for 2014 have not yet been agreed
with the relevant tax authorities. 
 
                                                                 Group    
                                                                 2014     2013     
                                                                 £'000    £'000    
 Current tax                                                                       
 United Kingdom corporation tax research and development credit  (2,000)  (1,500)  
 Overseas taxation                                               (51)     (3)      
                                                                 (2,051)  (1,503)  
 Adjustments in respect of prior periods                                           
 United Kingdom corporation tax research and development credit  (86)     (142)    
 Overseas taxation                                               -        (22)     
 Taxation credit                                                 (2,137)  (1,667)  
 
 
4   Basic loss and diluted loss per ordinary share 
 
The basic loss per share has been calculated by dividing the loss for the year
by the weighted average number of shares in issue during the year ended 31
December 2014 (2,019,291,808; 2013: 1,416,149,005). As the Group is
loss-making, there were no potentially dilutive options in either year. There
is therefore no difference between the basic loss per ordinary share and the
diluted loss per ordinary share. 
 
5   Intangible assets 
 
                                              Intellectual property rights  
 Group                                        £'000                         
 Cost                                                                       
 At 1 January 2014                            5,591                         
 Additions                                    -                             
 At 31 December 2014                          5,591                         
 Accumulated amortisation and impairment                                    
 At 1 January 2014                            2,958                         
 Amortisation charge for the year             396                           
 Impairment charge for the year               131                           
 At 31 December 2014                          3,485                         
 Net book amount at 31 December 2014          2,106                         
 Cost                                                                       
 At 1 January 2013                            5,493                         
 Additions                                    98                            
 At 31 December 2013                          5,591                         
 Accumulated amortisation and impairment                                    
 At 1 January 2013                            2,562                         
 Amortisation charge for the year             396                           
 At 31 December 2013                          2,958                         
 Net book amount at 31 December 2013          2,633                         
 
 
For intangible assets regarded as having a finite useful life, amortisation
commences when products underpinned by the intellectual property rights become
available for use. Amortisation is calculated on a straight line basis over
the remaining patent life of the asset. Amortisation of £396,000 (2013:
£396,000) is included in 'Research and development costs' in the statement of
comprehensive income. 
 
An intangible asset is regarded as having an indefinite useful life when,
based on an analysis of all of the relevant factors, there is no foreseeable
limit to the period over which the asset is expected to generate net cash
inflows for the entity. There are currently no assets with indefinite useful
lives. 
 
Following the cancellation of the Fire and Mello RNai licenses the related
intangible asset was fully impaired resulting in an impairment charge of
£131,000. 
 
6   Property, plant and equipment 
 
                                      Freehold property  Shortleasehold  improvements  Office equipment & computers  Manufacturing & Laboratory equipment  Total   
                                      £'000              £'000                         £'000                         £'000                                 £'000   
 Cost                                                                                                                                                              
 At 1 January 2014                    3,225              2,623                         621                           4,265                                 10,734  
 Additions at cost                    4,142              166                           199                           1,070                                 5,577   
 At 31 December 2014                  7,367              2,789                         820                           5,335                                 16,311  
 Accumulated depreciation                                                                                                                                          
 At 1 January 2014                    476                2,515                         543                           3,130                                 6,664   
 Charge for the year                  222                64                            52                            365                                   703     
 At 31 December 2014                  698                2,579                         595                           3,495                                 7,367   
 Net book amount at 31 December 2014  6,669              210                           225                           1,840                                 8,944   
 
 
                                        Freehold property  Shortleasehold  improvements  Office equipment & computers  Manufacturing & Laboratoryequipment  Total   
                                        £'000              £'000                         £'000                         £'000                                £'000   
 Cost                                                                                                                                                               
 At 1 January 2013                      3,130              2,604                         591                           3,570                                9,895   
 Additions at cost                      95                 19                            30                            695                                  839     
 At 31 December 2013                    3,225              2,623                         621                           4,265                                10,734  
 Accumulated depreciation                                                                                                                                           
 At 1 January 2013                      258                2,449                         467                           2,819                                5,993   
 Charge for the year                    218                66                            76                            311                                  671     
 At 31 December 2013                    476                2,515                         543                           3,130                                6,664   
 Net book amount at 31 December 2013    2,749              108                           78                            1,135                                4,070   
 
 
On 13 October 2014, the Group announced that it had acquired the freehold of
the Windrush Court office and laboratory facilities for a cash consideration
of £3.2 million.  This, together with stamp duty and other related legal costs
constitutes a significant part of the Freehold property additions for 2014. 
 
7   Inventories 
 
                          Group  
                   2014   2013   
                   £'000  £'000  
 Raw Materials     1,214  558    
 Work in progress  193    122    
 Total inventory   1,407  680    
 
 
Inventories constitute raw materials held for commercial manufacturing
purposes, and work-in-progress inventory related to contractual manufacturing
obligations. 
 
8   Trade and other receivables 
 
                                      Group  
                                             2014   2013   
                                             £'000  £'000  
 Current                                                   
 Trade receivables                           3,621  1,040  
 Accrued income                              340    637    
 Other receivables                           16     28     
 Other tax receivable                        397    285    
 Prepayments                                 779    602    
 Total trade and other receivables           5,153  2,592  
 
 
The fair value of trade and other receivables are the current book values. 
 
Included in the Group's trade receivable balance are debtors with a carrying
amount of £66,000 (2013: £142,000) which are past due at the reporting date.
The Group does not hold any collateral over these balances. No provision for
impairment of receivables has been recognised as the Directors do not believe
there has been a significant change in credit quality and consider the
remaining amounts to be recoverable in full. 
 
9   Trade and other payables 
 
                                         2014   2013   
                                         £'000  £'000  
 Trade payables                          2,787  1,218  
 Other taxation and social security      270    201    
 Accruals                                3,247  1,515  
 Total trade and other payables          6,304  2,934  
 
 
10 Deferred income 
 
 Group                  2014£'000  2013£'000  
 Current                2,927      1,280      
 Total deferred income  2,927      1,280      
 
 
Deferred income arises from contractual agreements with customers. 
 
11 Loans 
 
During April 2014 the Group drew down a tranche of £1.0 millio