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Sector
Healthcare
Size
Mid Cap
Market Cap £825.8m
Enterprise Value £792.9m
Revenue £87.7m
Position in Universe 476th / 1824

Oxford Biomedica plc Preliminary results for the year ended 31 December 2020

Thu 15th April, 2021 12:00pm
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Oxford Biomedica plc
Preliminary results for the year ended 31 December 2020

Saving Lives

Oxford, UK – 15 April 2021: Oxford Biomedica plc (LSE: OXB), (“OXB” or
“the Group”), a leading cell and gene therapy group, today announces its
preliminary results for the year ended 31 December 2020.

John Dawson, Chief Executive Officer of Oxford Biomedica, said:

“I am truly proud of the Group’s achievements over the period. We not only
secured major new partnerships, brought the Oxbox manufacturing facility
online in record time and responded to the challenges of the pandemic, but the
team has also been able to rapidly work with AstraZeneca to provide a vaccine
solution for COVID-19. This is a true testament to the world-class calibre and
dedication of our staff in the year that the Group also gained entry to the
FTSE250. Looking to the future, with the continued tide of growth in cell and
gene therapy, coupled with the Group’s leadership position in the lentiviral
vector field, we are well positioned to advance both our own proprietary
pipeline and that of our current and future partners’ programmes. I would
like to thank all of Oxford Biomedica’s employees for their hard work
throughout 2020 and our shareholders and partners for their continued support,
and I look forward to a successful 2021.”

FINANCIAL HIGHLIGHTS
* Total revenues increased by 37% to £87.7 million (2019: Revenue of £64.1
million)
* Bioprocessing and commercial development revenues increased by 45% to £68.5
million (2019: £47.3 million) with double digit growth across both
activities, driven by new customers AstraZeneca, Beam Therapeutics and
Juno/BMS
* Revenues from licences, milestones & royalties increased to £19.2 million
(2019: £16.8 million) due to the recognition of a £7.8 million ($10 million)
licence fee from Juno/BMS as well as other licence fees, milestones and
royalties from customers
* Operating expenses(1) increased by less than revenues, growing by 23% in the
year to £51.7 million  (2019: £41.9 million) aided by the move to the lower
cost bioreactor manufacturing process
* Operating EBITDA(2) profit of £7.3 million (2019: £5.2 million loss),
marginally above guided range
* Operating loss incurred of £5.7 million (2019: £14.5 million loss)
* The platform segment generated an operating profit of £2.0 million ( 2019:
20.2 million loss) whilst the Product segment made a loss of £7.7 million (
2019: £5.7 million profit)
* Capital expenditure decreased to £13.4 million (2019: £25.8 million)
mainly reflecting the Windrush Court laboratory conversion and equipment
purchases and leasehold improvements at Oxbox
* Cash of £46.7 million at 31 December 2020 (2019: £16.2 million) and £65.9
million at 31 March 2021
* Cash used in operations of £3.9 million in 2020 (2019: £6.6 million)
decreased as a result of the increased revenues as explained above, offset by
further operational investments required
* Successful £38.3 million (net) equity fundraise in June 2020 to exploit the
growth in the cell and gene therapy market
1. Operating expenses is made up out of Bioprocessing expenses, Research and
development expenses and Administrative expenses. A reconciliation to GAAP
measures is provided on page 15.
2. Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit & 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 options. A
reconciliation to GAAP measures is provided on page 16. 
OPERATIONAL HIGHLIGHTS

Juno Therapeutics / Bristol Myers Squibb partnership

      -     New licence and five-year clinical supply agreement with
Juno Therapeutics/Bristol Myers Squibb for multiple CAR-T and TCR-T
programmes, signed in March. A £7.8 million ($10 million) upfront payment was
recognised by the Group and up to $217 million could be paid in development,
regulatory and sales related milestones in addition to undisclosed process
development, scale up and batch revenues, and with an undisclosed royalty on
sales

COVID-19 vaccine partnership with AstraZeneca

     -       The Group is a key manufacturer of the Oxford
AstraZeneca COVID-19 vaccine, AZD1222. Having signed an initial agreement in
May, in September the Group signed an 18-month supply agreement under a
three-year master supply and development agreement for the large-scale
manufacture of the Oxford AstraZeneca COVID-19 vaccine. The Group received a
£15 million capacity reservation fee with additional revenue in excess of
£35 million expected by the end of
          2021
           
    -       By the fourth quarter, the Group was manufacturing the
Oxford AstraZeneca COVID-19 vaccine in three suites at 1000L scale ahead of
the MHRA granting emergency use for the Oxford AstraZeneca COVID-19 vaccine in
December

Novartis partnership
* Collaboration with Novartis continued to strengthen with a sixth vector
construct added in the first quarter of 2020, with partnership having been
previously extended by five years in December 2019
 
* The roll out of Kymriah® continues to accelerate in relapsed and refractory
B-cell acute lymphoblastic leukaemia and relapsed and refractory diffuse large
B-cell lymphoma with reimbursement approved in 28 countries in at least one
indication in over 300 qualified treatment centres
Other partnership updates
* In July, the Group signed a three-year clinical supply agreement with Sio
Gene Therapies for the manufacture and supply of Parkinson’s disease gene
therapy programme AXO-Lenti-PD, building on the worldwide licence agreement
signed between the two companies in June 2018
 
* In August, the Group signed a development, manufacture and licence agreement
with Beam Therapeutics for next generation CAR-T programmes including a
three-year clinical supply agreement
 
* Post period end in March 2021, the Group announced that Sanofi had given
notice that they intend to terminate the 2018 collaboration and licence
agreement for the process development and manufacturing of lentiviral vectors
to treat haemophilia. The Group expects the impact on revenue will be
negligible over the coming 24 month period
 
* Post period end in April 2021, the Group signed a three-year development and
supply agreement with Boehringer Ingelheim for the manufacture and supply of
viral vectors, building on the partnership that started in 2018
Facilities and capacity expansion
* By October 2020, the MHRA had approved all four suites in the first phase of
development of Oxbox, the Group’s new 84,000 sq. ft. manufacturing facility.
Three suites are producing the Oxford AstraZeneca COVID-19 vaccine at 1000L
scale and one suite added to the existing capabilities of producing lentiviral
vector-based products for the Group’s partners at 200L scale
 
* Building work at Windrush Court to convert office space into GMP
laboratories progressed throughout the year, with the first of the
laboratories completed by the end of 2020
 
* Opening of the new Corporate Head Office on new site within the Oxford
Business Park
           
Corporate Governance and Organisational Progress
* In June, the Group welcomed Dr Roch Doliveux as Non-Executive Chairman,
following the retirement of prior Chair, Dr. Lorenzo Tallarigo
 
* The Group has made significant strides forward in its commitment to best
practice in Corporate Governance and diversification of talent on the Board.
In November, Dr. Sam Rasty was appointed to the Board as an Independent
Non-Executive Director. Post period-end in February, the Group announced the
appointment of Professor Dame Kay Davies as an Independent Non-Executive
Director and Martin Diggle stepped down as a Non-Independent Director after
nine years. Dr. Andrew Heath will not be standing for re-election at the 2021
AGM having served on the Board since 2010
Analyst briefing

Management will be hosting a briefing for analysts via conference call and
webcast at 13:00 BST (8:00 ET) on 15 April 2021.  

A live webcast of the presentation will be available via this link
(https://www.globenewswire.com/Tracker?data=Cqou3ngyNVuhhElCe1R232T5Os7zSuCfyk4AmQYfTbk0oZQ2JMUJqSNlV8P1EAT1C4uFqjgdpp_Xa227E-JNNnMf8hnrOIHzb2LZ0NcHeZCJFnJuuwIleYMQWL7mtSlF9EWIQfCUQpJ_Ktul8qgdZfo81KjNRwLqUb2CwXgfyCFZTwGdYT3at0LKTmRthvMivu9zWfdrGnXdIBzn1Ldp1w==).

If you would like to dial-in to the call and ask a question during the live
Q&A, please follow this link to register and receive dial-in details
(https://www.globenewswire.com/Tracker?data=U4kWHcC2sprbYNbLprs8nFHJ-ctQ5mrTAo5r_Rc-kTzcXubQ_gWZM6rgve5BB3F_bMtydZzLQz80KVlKBTBsTvzrmBqDNL2HJJqp1HLYiBhsY3HUFthBelWXUoP9eAsx46_ag2mC5t1Kuhlv1holnmYo8C2T3y-1aceEHbNnqcmG5_H6blQPBBli4TK9D5pk).

 Enquiries:                                                                                                                                                                                                                                      
 Oxford Biomedica plc    John Dawson, Chief Executive Officer Stuart Paynter, Chief Financial Officer Catherine Isted, Head of Corporate Development & IR  T: +44 (0)1865 783 000 T: +44 (0)1865 783 000 T: +44 (0)1865 954 161 / E: ir@oxb.com  
 Consilium Strategic Communications    Mary-Jane Elliott/Matthew Neal                                                                                      T: +44 (0)20 3709 5700                                                                

About Oxford Biomedica

Oxford Biomedica (LSE:OXB) is a leading, fully integrated, cell and gene
therapy group focused on developing life changing treatments for serious
diseases. Oxford Biomedica and its subsidiaries (the "Group") have built a
sector leading lentiviral vector delivery platform (LentiVector(®)), which
the Group leverages to develop in vivo and ex vivo products both in-house and
with partners. The Group has created a valuable proprietary portfolio of gene
and cell therapy product candidates in the areas of oncology, ophthalmology,
CNS disorders and liver diseases. The Group has also entered into a number of
partnerships, including with Novartis, Bristol Myers Squibb, Sio Gene
Therapies, Orchard Therapeutics, Santen, Beam Therapeutics, Boehringer
Ingelheim, the UK Cystic Fibrosis Gene Therapy Consortium and Imperial
Innovations, through which it has long-term economic interests in other
potential gene and cell therapy products. Additionally the group has signed a
3 year master supply and development agreement with AstraZeneca for
large-scale manufacturing of the adenoviral based COVID-19 vaccine, AZD1222.
Oxford Biomedica is based across several locations in Oxfordshire, UK and
employs more than 670 people. Further information is available at www.oxb.com

 

CHAIRMAN’S STATEMENT

A Purpose of which to be Proud

Our Purpose 
It is with great pride that I present my first statement as the Chair of
Oxford Biomedica (OXB). I was first attracted to the Company by its strong
purpose and great technology. Saving patients’ lives is what the healthcare
industry strives to do and OXB is delivering on that promise in both its cell
and gene therapy work, and now with the manufacture of the Oxford AstraZeneca
COVID-19 vaccine. Cell and gene therapies have the potential to be curative
for many untreated diseases and to be able to play my part in realising this
potential is my duty.

It has been a challenging time to assume my role, as our organisation has
found new ways of working. Face to face contact has been kept to a minimum for
the right reasons, and I thank the Board and the wider OXB team, key opinion
leaders and investors for helping me to gain an in-depth understanding of the
business. It’s inspiring to me that OXB is now a key part of the global
effort to return life to normality, and I am looking forward to supplementing
the relationships built online with in-person discussions.

I could not be more proud to lead the Company’s Board through its next phase
of growth.

Our Culture
Underlying the purpose of OXB is a strong culture. The pandemic response has
both tested and fortified that culture. We pride ourselves on our core values
including delivering innovation with integrity.

Our ability to deliver the Oxford AstraZeneca COVID-19 vaccine in the most
challenging of circumstances given global demand, has impressed me and has
demonstrated that these values run deep through our organisation. This has
been achieved whilst continuing to execute the underlying Group strategy, and
I give my admiration and appreciation to the team for continuing to deliver on
all fronts whilst adapting to new working environments.

Utilising our capabilities to play our part against one of the biggest
challenges humankind has recently faced is inspirational and all stakeholders
of OXB are, justifiably, proud to be involved in this effort.

During the year we also implemented a Group-wide bonus scheme to ensure all
staff benefit from the Group achieving its objectives.

Our Strategy
OXB continues to deliver on its core strategy of being the leading provider of
lentiviral based vectors for cell and gene therapy companies, growing our
customer base and service. Significant progress has been made in 2020 both in
new technologies and new customers such as Juno Therapeutics/Bristol Myers
Squibb and Beam Therapeutics. Our successful work on the adenovirus based
Oxford AstraZeneca COVID-19 vaccine has also demonstrated our ability to also
broaden our Contract Development and Manufacturing Organisation (CDMO) to more
viral vectors.

Significant value to stakeholders can also be provided by applying our
knowledge to our own therapeutic products. The Board realises that the
re-balancing of the Group towards products in this way is not easy, as we wish
to first build on the CDMO momentum, but given the medical need and the number
of nascent technologies and therapeutic programmes using lentiviral based
vectors, we are committed to making it happen over time and as opportunities
arise.

The continued innovation of OXB’s platform is key to providing solutions for
both partners and patients. We will accelerate this effort, and retain and
build upon our leadership role in this space.

It is also clear, through our Oxford AstraZeneca COVID-19 vaccine efforts,
that our manufacturing capabilities and state of the art facilities are
inherently valuable, and there is the opportunity to leverage these
capabilities and facilities to help more partners. We shall be pursuing more
partnerships in these adjacencies.

 

Governance
The role of boards in ensuring the societal impact, sustainability and
viability of businesses has never been more critical than in the uncertain
times of 2020. I joined the Board in June 2020, and would like to thank Dr.
Lorenzo Tallarigo for his stewardship of the Board prior to this time,
culminating with OXB entering the FTSE250 index.

The level of engagement and collegiality in all Board members is impressive as
we have been delivering upon our commitment to both strengthen the
capabilities on the Board and increase diversity.

To that end, I am delighted to welcome both Dr. Sam Rasty and Professor Dame
Kay Davies to the Board. Sam’s contributions have already been very
insightful and I know Kay will also add significant insights and enormous
value to the Board. Meanwhile, Dr. Andrew Heath is retiring from the Board and
I wish to thank him for his guidance and defining role on the Board over the
past 10 years. After 9 years on the Board, Martin Diggle has also stepped down
as a Non-Executive Director, but remains invested in our journey as a
supportive shareholder. I thank Martin for his relentless support of OXB at
several defining moments over his tenure.

We continue to assess the capabilities needed at Board level to set and
deliver strategy, apply best in class governance practices and ensure
succession plans are in place, and we will look to strengthen these
capabilities and diversity, where appropriate.

The Future
We enter 2021 and beyond with a rapid growth, a proven strategy, experienced
leadership and financial strength which gives me great confidence to continue
to succeed in our mission to deliver lifesaving therapies to patients and
continue to help in the fight against the pandemic.

We continue to push the boundaries of our platform technologies, and develop
the capabilities of the Group and my thanks go to all the staff at OXB for the
very important work that each of them are doing. I also thank our customers
for their trust, our suppliers who have responded with resilience to the
demands we have placed upon them, and our shareholders for their support.

We are in the initial phase of the cell and gene therapy revolution in
healthcare and OXB is particularly well positioned to play a major role in
this rapidly expanding field. I look forward to enabling OXB to fulfil its
potential.

Dr. Roch Doliveux
Chair

 

CHIEF EXECUTIVE OFFICER’S AND 2020 PERFORMANCE REVIEW

Introduction

2020 was an unprecedented year globally. The challenges borne by the COVID-19
virus were managed well by the Group and, due to our world-leadership position
in lentiviral vectors and the strength and expertise of our staff, the Group
thrived. The Group’s model is now focused on the provision of its cell and
gene therapy CDMO offering coupled with its own proprietary product
development.  

The Group’s number of partner programmes grew by 54% from 13 to 20 in the
year, adding Juno/Bristol Myers Squibb and Beam Therapeutics to the list of
cell and gene therapy leaders that the Group collaborates with. In the period
Novartis and Sio Gene Therapies also extended their partnerships with the
Group.

Outside of cell and gene therapy, the Group’s work with Oxford University
and then AstraZeneca has been historic. The Group has successfully brought
three extra manufacturing suites online for vaccine production and has rapidly
scaled the manufacturing of AZD1222, an adenovirus-based vaccine, to 1000L
scale, in under nine months.

Financially, the Group, which entered the FTSE250 this year, had a strong year
with revenues increasing by 37% to £87.7 million driven by strong growth in
commercial development and bioprocessing revenues. In addition, our market
capitalisation has more than doubled from a 12 month average capitalisation of
c.£350 million in 2018 to over £750 million currently. The oversubscribed
£40 million gross fundraise in June gave the Group the ability to progress
its planned expansion projects and invest in both sides of the Group, to
capitalise on its world leading position and the opportunities that present
themselves in the fast growing cell and gene therapy market.

CDMO – Partner Programmes

Juno Therapeutics / Bristol Myers Squibb Partnership

In March, the Group announced it had entered into a major new licence and
five-year clinical supply agreement with Juno Therapeutics Inc. (a wholly
owned subsidiary of Bristol Myers Squibb Inc.), one of the major innovators in
the cell and gene therapy field. The deal is worth up to $227 million for
multiple CAR-T and TCR-T programmes in oncology and other indications. There
are currently four active programmes in development.

Under the terms of the agreement Oxford Biomedica received and recognised a
£7.8 million ($10 million) licence fee and announced OXB could potentially
receive up to $86 million in development and regulatory milestones and up to a
further $131 million in sales-based milestone payments as well as undisclosed
royalties on sales. In addition, the Group will receive undisclosed process
development, scale up and batch revenues for these programmes. As part of the
agreement Oxford Biomedica will provide Juno Therapeutics access to its new
approved manufacturing facility, Oxbox.

COVID-19 Vaccine production and Partnership with AstraZeneca

The Group’s initial involvement with the Oxford AstraZeneca COVID-19 vaccine
was in April 2020 when the Group joined a consortium led by the Oxford
University, Jenner Institute, to rapidly develop, scale and manufacture a
potential vaccine for COVID-19, ChAdOx1 nCOV-19.

Shortly afterwards, AstraZeneca entered into an agreement with Oxford
University for the global development and distribution of the vaccine,
renaming the programme AZD1222. In May, the Group entered into an initial one
year clinical and commercial supply agreement with AstraZeneca to GMP
manufacture the adenovirus vector-based COVID-19 vaccine candidate. This
initial agreement required the Group to manufacture a small number of batches
as the programme progressed through development.  

In June, the Group signed a five-year collaboration agreement with VMIC
(Vaccines Manufacturing and Innovation Centre) to enable the rapid manufacture
of viral vector based vaccines. As part of the agreement VMIC provided
equipment for 1000L scale production in two GMP manufacturing suites in Oxbox
to further scale up production of AZD1222. The Group is currently engaged in
discussions with VMIC regarding the purchasing of this equipment to allow for
longer term use, which would require a capital outlay of £3.8 million to be
paid in 2021.

Following positive data readouts from the early clinical trials of AZD1222, in
September, the Group announced a second agreement with AstraZeneca which
consisted of an 18-month supply agreement under a three-year master supply and
development agreement for the large-scale manufacture of AZD1222. This
agreement was for up to three manufacturing suites running at 1000L scale. The
Group was paid a £15 million capacity reservation fee and expects to receive
additional revenue in excess of £35 million until the end of 2021.

By October, the Group received approval from the MHRA for the third of its
three 1000L suites for the purpose of vaccine production. To be able to cope
with the heightened demand, new extended shift patterns were introduced to
maximise vaccine production and for the first time in the Group’s history,
production continued through Christmas and New Year to ensure the maximum
number of batches were able to be delivered in the early part of 2021.

At the end of December 2020, the MHRA approved the Oxford AstraZeneca COVID-19
vaccine for emergency use in the UK and manufacturing continues at full pace
to maximise production of vaccine from the Group’s facilities.

Novartis Partner Progress

Following the extension of the Novartis collaboration In December 2019 by a
further five years and expansion of the number of vector constructs (including
Kymriah(®)) from two to five, the partnership was further expanded with a
sixth vector construct added in the first quarter of 2020. The Group continues
to be Novartis’ sole global supplier of lentiviral vector for Kymriah(®
)(tisagenlecleucel, formerly CTL019).

Global roll out of Kymriah(®) in both relapsed or refractory B-cell acute
lymphoblastic leukaemia (r/r ALL) and relapsed or refractory diffuse large
B-cell lymphoma (r/r DLBCL) indications continues at pace with more than 28
countries worldwide having approved reimbursement in at least one indication
in over 300 qualified treatment centres. Kymriah(®) continues to build
momentum showing 71% growth for the full year 2020 over 2019, with sales of
$474 million.

Indication expansion of Kymriah(®) continued to progress well and in
December, Novartis announced positive data from the Phase II ELARA trial of
Kymriah(® )in patients with relapsed or refractory follicular lymphoma, with
the filing in this indication anticipated in the US in the second half of
2021. Novartis also plans to file Kymriah(®) for extended use in patients
with r/r DLBCL in first relapse in the second half of 2021.

The Group continues to progress other partner programmes with Novartis and
will update the market when further data is available.

Beam Therapeutics
In August, the Group signed a development, manufacture and license agreement
with Beam Therapeutics (Beam), a pioneering biotech company which utilises
base editing to develop precision genetic medicines. The agreement grants Beam
a non-exclusive license to Oxford Biomedica’s LentiVector(®) platform for
its application in next generation CAR-T programmes in oncology, and also puts
in place a three-year clinical supply agreement.

Under the terms of the Agreement, the Group could receive additional licence
fees, as well as payments related to development and manufacturing of
lentiviral vectors for use in clinical trials, and certain development and
regulatory milestones. In addition, the Group will receive an undisclosed
royalty on the net sales of products sold by Beam that utilise the Group’s
LentiVector(®) platform.

Further partner updates 
In May, Orchard Therapeutics (Orchard) announced a new strategic plan with an
emphasis on neurometabolic disorders, such as their MPS-IIIA (OLT-201)
programme, while reducing investment on other programmes such as ADA-SCID
(OTL-101). OLT-201 is moving ahead in clinical trials with interim data from
their proof-of-concept study expected to be released in 2021.

Post period end in March 2021, the Group announced that Sanofi had given
notice that they intend to terminate the 2018 collaboration and licence
agreement for the process development and manufacturing of lentiviral vectors
to treat haemophilia. The Group expects the impact on revenue will be
negligible over the coming 24 month period.

The Group’s partnership with Boehringer Ingelheim and the UK Cystic Fibrosis
Gene Therapy Consortium also continued to progress through development. In
April 2021, post period end, the Group signed a three-year development and
supply agreement with Boehringer Ingelheim for the manufacture and supply of
viral vectors, building on the partnership that started in 2018.

Proprietary Product Development

Sio Gene Therapies (formally Axovant Gene Therapies)
Following the initial worldwide licence agreement signed in June 2018, in July
2020 the Group signed a three-year clinical supply agreement with Sio Gene
Therapies (Sio) for the manufacture and supply of Parkinson’s disease gene
therapy programme AXO-Lenti-PD. Under the terms of the agreement, the Group
will manufacture GMP batches for Sio to support the ongoing and future
clinical development of AXO-Lenti-PD.

Sio is currently conducting a Phase 2 SUNRISE-PD trial with AXO-Lenti-PD. In
October, Sio announced positive six-month follow up data from the second
cohort of the trial, showing a 21-point mean improvement in UPDRS Part III
‘OFF’ score, a 40% improvement from baseline based on the two evaluable
patients in the study. AXO-Lenti-PD continued to be shown to be well-tolerated
with no treatment-related serious adverse events at six months.

Unencumbered proprietary pipeline programmes 
In the first quarter of 2020 the Group undertook an internal pipeline review
to prioritise where pre-clinical investment will be made on its wholly-owned
early-stage pipeline assets. The current portfolio consists of five programmes
targeting a number of indications in ophthalmology, oncology, liver and CNS
disorders.

OXB-302 (CART-5T4) is currently the Group’s priority candidate and targets
haematological tumours. The 5T4 antigen has been shown to be highly expressed
on various haematological tumours as well as most solid tumours with
restricted expression on normal tissues. The Group continues to advance
pre-clinical work on OXB-302 as the Group gets the programme ready for entry
into the clinic.

OXB-203, currently in pre-clinical studies, is targeting Wet AMD and uses the
Group’s technology to deliver a gene to express afibercept (a VEGF-trap).
This programme builds on the demonstrated long term gene expression data seen
with its predecessor OXB-201. In addition, the Group is continuing preclinical
work on OXB-204 (LCA10) and OXB-103 (ALS) and a new preclinical program,
OXB-401 (liver indication) was initiated.

Sanofi – Ocular assets
In June, the Group announced it had been informed by Sanofi that it intended
to return the rights to ophthalmology programmes SAR422459 for Stargardt’s
disease and SAR421869 for Usher Syndrome type 1b. This process is still
on-going and, once returned, the Group will undertake its own internal
evaluation to determine the potential future for these programmes and decide
whether to commit further resources to them.

 

Research Collaborations
During the year, Oxford Biomedica entered into two CAR-T research
collaboration, firstly one with Papyrus Therapeutics Inc. (Papyrus) then one
with PhoreMost Limited (PhoreMost) later in the year.

The Group signed the research collaboration agreement with Papyrus, an
emerging biopharmaceutical company developing novel extracellular tumour
suppressor therapies for the treatment of cancer, in August. This early stage
collaboration will assess what impact and potential therapeutic benefit
Papyrus’ PYTX-002, a potential first-in-class gene replacement
therapy, may confer on a CAR-T cell therapy developed by the Group,
initially in preclinical in vivo models of solid tumours.

In November, the Group entered into a gene therapy discovery collaboration
with PhoreMost to develop next-generation CAR-T cell therapies with improved
efficacy and durability. This will use PhoreMost’s SITESEEKER platform to
identify active peptides to be deployed within the Group’s LentiVector(®
)delivery system.

Both of these early stage collaborations highlight the continued focus on the
developments of the Group’s proprietary pipeline.

Innovation and LentiVector(®) platform development

Innovation and the development of the platform are core to the Group’s goal
of industrialising lentiviral vectors. By industrialising lentiviral vector
production and reducing the cost through innovation, the Group will open up
therapeutic indications that are currently inaccessible in the field of cell
and gene therapy due to the amount (and therefore cost) of the vector needed
to address these targets. In addition, the reduction in cost will help drive
adoption by payors into indications where there are far larger numbers of
patients, by potentially bringing down the overall cost per patient treated.

Development of technologies such as TRiPSystem™, SecNuc™, LentiStable™
and most recently U1 and U2, along with the corresponding IP, continue to move
ahead. In addition, the Group is utilising automation and the use of robotics
to further drive productivity improvements and is collaborating with Microsoft
in an exciting project using artificial intelligence and machine learning to
improve yields and quality of next generation vectors.

Facilities and Capacity Expansion

Post completion of the building phase of the new 84,000 sqft manufacturing
facility (Oxbox) at the end of 2019, the Group received MHRA regulatory
approval for the first two suites and supporting areas such as the warehouse,
cold chain facilities and QC laboratories, in May 2020. The first partner
batches were being produced within Oxbox by the end of the second quarter.

Following on from the agreement with VMIC for equipment for the two further
suites, the MHRA approved the third and fourth manufacturing suites in
September and October, respectively. This meant that by early in the fourth
quarter of 2020, Oxbox had four suites approved and manufacturing was
underway; one at 200L scale for the Groups LentiVector(®) platform partners
and three at 1000L scale for the Oxford AstraZeneca COVID-19 vaccine.

The instalment of the equipment for the first fill/finish suite is progressing
well and is expected to be completed and approved during 2021. This first
phase of development fits out approximately 45,000 sq. ft. with the remaining
fallow area available for flexible expansion in the future.

In January 2021, the Group was delighted to host the Prime Minister, the Rt.
Hon Boris Johnson MP, to formally open the Group’s Oxbox manufacturing
facility.

Building work is also currently being undertaken at Windrush Court to convert
office space into GMP laboratories to meet the expected near term demand in
commercial development and analytics. The conversion of the first of these
areas to laboratories was completed by the end of 2020 and is now operational.
A further area within Windrush Court will be converted during the course of
2021 and work will also start on the development of the Windrush Innovation
Centre (WIC) a dedicated building for both platform and proprietary product
innovation.

In the first half of 2020, a lease was taken on a new 11,000 sq. ft. site
within the Oxford Business Park, close to Oxbox, as a new Corporate Head
Office to house the Senior Executive Team and various support functions.

Investment progress

In June 2020, the Group successfully completed a £40 million equity
fundraising which included new and existing investors, with net proceeds of
£38.3 million. The proceeds of the equity fundraising provided funding to
enable the Group to continue to exploit the significant opportunities in the
growing cell and gene therapy market both with current and future partners.
The fundraise also strengthened the Group’s cash positioning allowing it to
remain at the forefront of innovation of lentiviral technology and progress
towards the Group’s goal of industrialising lentiviral vectors and further
develop its own propriety products. It also provided additional resources to
be used for the Group’s involvement in the Oxford AstraZeneca COVID-19
vaccine or other vaccine candidates as required.

Organisational Progress

In the past 12 months the Group has made significant progress in its
commitment to best practice in Corporate Governance and the diversification of
talent on the Board.

In June, the Group announced the appointment of Dr. Roch Doliveux as
Non-executive Chair following the retirement of former Chair, Dr. Lorenzo
Tallarigo. Dr. Doliveux was previously the Chief Executive Officer of UCB SA
for ten years during which time he transformed the Company from a diversified
chemical group into a global biopharmaceutical leader and he is currently the
Chair of the Board of Directors at Pierre Fabre S.A and a Non-Executive
Director at Stryker Corporation and UCB SA.

In November, Dr. Sam Rasty was appointed to the board as an Independent
Non-Executive Director, and brings invaluable experience in building and
growing successful gene therapy companies. Post period end, in February 2021,
the Group announced the appointment to the board as of 1 March of Professor
Dame Kay Davies as an Independent Non-Executive Director. Kay is a
world-renowned geneticist and Professor at Oxford University. At the same time
as Kay’s appointment, it was announced the Martin Diggle, a Partner at
Vulpes Investment Management would step down from the Board as a Non-Executive
Director after nearly nine years. Dr. Andrew Heath will not be standing for
re-election at the 2021 AGM having served on the board since 2010.

During the year, the wider Oxford Biomedica team also continued to grow,
reflecting the expansion of the business and the extra employees recruited as
part of the scale of vaccine manufacture for AstraZeneca. Headcount increased
by over 20% reaching 673 at the end of the year, compared with 554 at the end
of 2019.

Environmental, Social and Governance

The Group remains committed to its role as a responsible business having
developed a strategy over the past few years which is now deeply embedded in
everything that the Group does. Throughout 2020, the Group particularly
focussed on the wellbeing of our staff with the introduction of a number of
initiatives, including, workshops and access to mental health professionals.
We were delighted to receive the “Commitment to Workforce Wellbeing” award
from Oxfordshire Mind, in recognition of our various initiatives.

 

Outlook

With the growth in partner programmes during 2020, the Group expects an
increase in underlying LentiVector(®) platform based revenues in 2021 from
both bioprocessing and commercial development activities. In addition,
following approval of the Oxford AstraZeneca COVID-19 vaccine and with
production at the Oxbox manufacturing facilities progressing well, subject to
the continued manufacture of the vaccine, the Group expects total cumulative
revenues from this programme to be in excess of £50 million by the end of
2021. It is therefore expected that revenues for the Group should grow
strongly in 2021.

At an Operating EBITDA level, the Group also expects an increase from 2020,
albeit at a more modest rate than revenues due to increased R&D spend as we
invest for the future.

Discussions and feasibility studies are ongoing with various potential cell
and gene therapy partners and the Group aims to increase not only the number
of partners but also the number of programmes worked on by existing partners
during the course of 2021.

Looking to 2021 and beyond, with the Group’s ever increasing number of
partners programmes and continued broader market growth in cell and gene
therapy, the future has never looked more exciting and the Group is well
positioned to maximise the opportunities ahead.

John Dawson
Chief Executive Officer
 
FINANCIAL REVIEW

Operational resilience
2020 has been a period of operational resilience, adaptability and revenue
growth for the Group. Whilst the COVID-19 pandemic enforced changes to the
Group’s operating methods, with employees working from home where possible,
the Group has been able to continue its bioprocessing and commercial
development activities throughout the period. This great achievement allowed
the Group to generate revenue growth during a very difficult period for
businesses across the world. From first joining the Oxford University Jenner
Institute consortium in April, the Group ultimately signed an agreement with
AstraZeneca in May to develop and bioprocess batches of the Oxford AstraZeneca
COVID-19 vaccine, which was then converted into a full commercial supply
agreement in September 2020. These additional vaccine bioprocessing batches,
together with the new commercial agreements entered into with Juno
Therapeutics/Bristol Myers Squibb and Beam Therapeutics earlier in the year,
has seen the Group deliver increased commercial activity and revenues
throughout 2020.

In the first half of the year the Group obtained MHRA approval for the
bioprocessing of batches in two of its suites at its new Oxbox bioprocessing
facility. All four cleanroom suites ended up being approved and extensively
used in the second half of 2020 to meet both lentiviral vector and adenovirus
vaccine clinical and commercial bioprocessing requirements. Construction of
the Group’s fill/finish suite was completed during 2020 and this is expected
to be brought online during 2021. Once validated and operational the Group
will be able to provide its customers with an end-to-end offering. Subject to
the impact of the global COVID-19 pandemic on the Group’s financial
position, the Group will continue to look to make selective investments in
infrastructure to both have the capacity for new customers and to innovate
valuable intellectual property to add to the Group’s offering.

The Group has had a very good year in terms of both an increase in commercial
activities as well as revenues. Bioprocessing and commercial development
revenue increased by 45%, and the Group achieved an Operating EBITDA profit of
£7.3 million, with growth driven by the commercial development and
bioprocessing activities undertaken for Juno Therapeutics/Bristol Myers Squibb
and AstraZeneca. New commercial agreements were signed with Juno
Therapeutics/Bristol Myers Squibb, Beam Therapeutics and AstraZeneca, and new
research and development collaborations signed with PhoreMost and Papyrus
Therapeutics. As a result of the execution of the Juno Therapeutics/Bristol
Myers Squibb licence and supply agreement, a licence fee of £7.8 million ($10
million) was recognised in 2020.

The Group also made further significant improvements to its Statement of
financial position, raising £40 million of new equity (£38.3 million net of
expenses) in June 2020 in order to refurbish its Windrush Innovation Centre
and Windrush Court sites, exploit new opportunities in the cell and gene
therapy market, and also provide additional resources required for the Oxford
AstraZeneca COVID-19 vaccine.

Selected highlights are as follows:

— Total revenues increased by 37% over 2019, and have now increased by
1,524% since 2013 when the revenue generating Platform division was created
— Revenues from the underlying bioprocessing and commercial development
business continued its upward trend, growing 45% due to additional activities
performed for new customers AstraZeneca, Beam Therapeutics and Juno
Therapeutics/Bristol Myers Squibb. Double digit growth was achieved across
both activities with revenues from these areas now having increased by 2,183%
since 2013
— Revenues from milestones, licences and royalties increased to £19.2
million due to the recognition of a £7.8 million ($10 million) licence fee
from Juno Therapeutics/Bristol Myers Squibb as well as various other licence
fees, milestones and royalties from customers
— Operating EBITDA(1) and operating losses improved by £12.5 million and
£8.8 million respectively, with the Group generating an Operating EBITDA(1)
profit of £7.3 million and an operating loss of £5.7 million
— The Platform division made an Operating EBITDA profit of £13.9 million
(2019: £11.7 million loss) and an operating profit of £2.0 million (2019:
£20.2 million loss), whilst the Product division made an Operating EBITDA
loss of £6.6 million (2019: £6.5 million profit) and an operating loss of
£7.7 million (2019: £5.7 million profit)
— Cash used in operations of £3.9 million in 2020 (2019: £6.6 million)
decreased as a result of the increased revenues as explained above, offset by
further operational investments required
— Gross proceeds of £40.0 million (£38.3 million net of expenses) were
raised from new and existing investors through a successful equity fundraising
in June 2020
— Cash at 31 December was £46.7 million bolstered by the equity fundraising
in the year

1. Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit & 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 options. A
reconciliation to GAAP measures is provided on page 16.

Overview

The Group saw a large increase in revenues which was driven by a 45% increase
in bioprocessing and commercial development revenues. As a result of the new
commercial contract signed with Juno Therapeutics/Bristol Myers Squibb and the
vaccine development and bioprocessing contracts signed with AstraZeneca.
Double digit growth was seen across both bioprocessing and commercial
development activities. Licences, milestones and royalty revenues increased
14% due to the achievement of the £7.8 million Juno Therapeutics/Bristol
Myers Squibb licence fee, as well as various milestones and royalties.

Operating costs, including Cost of Sales, grew by 20%, and by 16% when
non-cash items(1) are excluded. Manpower and facility costs have increased as
the Group saw the full year effect of its investments in people, facilities
and operations required for the Oxbox bioprocessing facility and the
development and manufacture of batches of the Oxford AstraZeneca COVID-19
vaccine. The Group will continue to invest in its people and facilities in
2021 to allow it to meet increasing customer demand for the Group’s
bioprocessing and commercial development services. Headcount rose from 554 at
December 2019 to 673 at the end of 2020.

The Group made an Operating EBITDA profit of £7.3 million, an improvement of
£12.5 million from the prior year. Once non-cash items(1) are added back, the
Group made an Operating loss of £5.7 million, an improvement of £8.8 million
on the prior year.

1. Non-cash items include depreciation, amortisation, revaluation of
investments, fair value adjustments of assets held at fair value through
profit & loss and the share based payment charge. A reconciliation to GAAP
measures is provided on page 16.

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 an 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 Reports
for those years and have not been restated where a change in accounting
standards may have required this (e.g. revenue under IFRS 15 during 2018 to
2020 but IAS 18 during 2015 to 2017).

Key Financial and Non-Financial Indicators

 Key Financial Performance Indicators                                            
 £m                                          2020   2019    2018  2017   2016    
 Revenue                                                                         
 Bioprocessing / commercial development      68.5   47.3    40.5  31.8   22.6    
 Licences, milestones & royalties            19.2   16.8    26.3  5.8    5.2     
 Total Revenues                              87.7   64.1    66.8  37.6   27.8    
                                                                                 
 Operations                                                                      
 Operating EBITDA (1)                        7.3    (5.2)   13.4  (1.9)  (7.1)   
 Operating profit/(loss)                     (5.7)  (14.5)  13.9  (5.7)  (11.3)  
                                                                                 
 Cash flow                                                                       
 Cash (used in) / generated from operations  (3.9)  (6.6)   9.2   (1.5)  (5.9)   
 Capex (2)                                   13.4   25.8    10.1  2.0    6.4     
 Cash burn (3)                               7.8    26.3    1.9   9.8    11.5    
                                                                                 
 Financing                                                                       
 Cash                                        46.7   16.2    32.2  14.3   15.3    
 Loan                                        -      -       41.2  36.9   34.4    
 Non-Financial Key Indicators Headcount                                          
 Year-end                                    673    554     432   321    256     
 Average                                     609    500     377   295    247     

1. Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit & 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. A
reconciliation to GAAP measures is provided on page 16.
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 17.
3. Cash burn is net cash generated from operations plus net interest paid plus
capital expenditure. A reconciliation to GAAP measures is provided on page 17.

Revenue
Revenue increased by 37% to £87.7 million (2019 £64.1 million). Revenue
generated from bioprocessing/commercial development increased by 45% to £68.5
million (from £47.3 million in 2019), and is up 2,183% since 2013. The main
contributor to growth in 2020 has been the revenues generated from increased
bioprocessing batches produced for AstraZeneca as part of the vaccine
manufacturing efforts, and also increased commercial development services
provided to new customers Juno Therapeutics/Bristol Myers Squibb, Beam
Therapeutics, and AstraZeneca.

Revenues from licence fees, milestones and royalties of £19.2 million (2019:
£16.8 million), which included a licence fee from Juno Therapeutics/Bristol
Myers Squibb of £7.8 million ($10 million), and other customer licences,
milestones and royalties of £11.4 million, increased 14% from the prior year
when the £11.5 million ($15 million) Sio Gene Therapies milestone was
achieved.

The Group’s customer base and revenue streams have continued to diversify,
although the largest portion of its revenues came from its development and
supply agreement with AstraZeneca as part of their worldwide COVID-19 vaccine
rollout.

 £m       2020  2019  2018  2017  2016  
 Revenue  87.7  64.1  66.8  37.6  27.8  

Operating EBITDA

 £m                       2020    2019    2018    2017    2016    
 Revenue                  87.7    64.1    66.8    37.6    27.8    
 Other income             0.8     0.9     1.1     1.8     3.0     
 Total expenses           (81.2)  (70.2)  (54.5)  (41.3)  (37.9)  
 Operating EBITDA (1)     7.3     (5.2)   13.4    (1.9)   (7.1)   
 Non cash items (2)       (13.0)  (9.3)   0.5     (3.8)   (4.2)   
 Operating (loss)/profit  (5.7)   (14.5)  13.9    (5.7)   (11.3)  

1. Operating EBITDA (Earnings Before Interest, Tax, Depreciation,
Amortisation, revaluation of investments and assets at fair value through
profit & 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. A
reconciliation to GAAP measures is provided on page 16.
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
16.

Revenue increased by 37% in 2020 whilst the Group’s cost base grew by 16% to
£81.2 million as we saw the full year effect of the Group’s investments in
people, facilities and operations required to bring the additional Oxbox
bioprocessing capacity online in the first half of 2020. Further additional
investments were made in order to facilitate the development and manufacture
of batches of Oxford AstraZeneca COVID-19 vaccine on behalf of AstraZeneca.
The Operating EBITDA profit of £7.3 million is £12.5 million higher than the
£5.2 million loss generated in 2019, as a result of the large increase in
revenues when compared to the prior year.

 

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 on the next page.

 £m                               2020   2019   2018   2017   2016   
 Research & development (1)       29.7   22.6   18.0   21.6   24.3   
 Bioprocessing costs              10.7   7.4    1.2    -      -      
 Administrative expenses          11.3   11.9   7.4    7.3    6.0    
 Operating expenses               51.7   41.9   26.6   28.9   30.3   
 Depreciation                     (9.8)  (5.8)  (4.3)  (4.1)  (3.3)  
 Amortisation                     -      -      -      (1.2)  (0.3)  
 Share option charge              (2.4)  (1.6)  (1.1)  (0.7)  (0.6)  
 Adjusted operating expenses (2)  39.5   34.5   21.2   22.9   26.1   
 Cost of sales                    41.7   35.7   33.3   18.4   11.8   
 Total expenses (3)               81.2   70.2   54.5   41.3   37.9   

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.

 £m                                                                 2020   2019   2018  2017  2016  
 Raw materials, consumables and other external bioprocessing costs  22.0   22.8   18.3  13.2  9.3   
 Manpower-related                                                   45.3   35.2   26.7  19.3  17.4  
 External R&D expenditure                                           1.4    1.4    1.9   1.7   2.8   
 Other costs                                                        17.1   12.0   7.6   7.1   8.4   
 RDEC tax credit                                                    (4.6)  (1.2)  -     -     -     
 Total expenses                                                     81.2   70.2   54.5  41.3  37.9  

— Raw materials, consumables and other external bioprocessing costs have
remained stable as, although volumes were higher, the Group moved away from
performing high cost adherent manufacturing to the lower cost bioreactor
process. The Group is also not responsible for fill/finish of vaccine batches
manufactured on behalf of AstraZeneca leading to lower external bioprocessing
costs.
— The increase in manpower-related costs is due to the increase in the
average headcount from 500 in 2019 to 609 in 2020. As the Group was able to
bring Oxbox and additional laboratory space at Windrush Court online in 2020,
the Group was able to increase the Group’s commercial development and
bioprocessing capacity resulting in increased Group revenues.
— External R&D expenditure remained the same in 2020 with activities slowed
down in the first half of the year due to the impact of the COVID-19 pandemic,
before resuming more fully in the second half of 2020.
— Other costs were higher as a result of the operational and facility costs
incurred due to the additional Oxbox bioprocessing capacity coming online, as
well as the additional laboratory space put in place at Windrush Court.
Increased costs included £0.6 million to settle a customer development claim,
and were offset by a forex gain of £0.5 million (2019: £0.6 million loss) as
sterling strengthened against the dollar.
— Whilst the RDEC tax credit has increased to £4.6 million (2019: £1.2
million), total R&D related tax credits have decreased significantly as the
Group ceased being eligible to claim a research and development tax credit
under the Government’s small company scheme in 2020 (see Operating and Net
profit/(loss) commentary below), with most of those costs now being eligible
under the Governments’ large company RDEC tax credit scheme.

Operating and Net profit/(loss)

 £m                                                                                             2020    2019    2018   2017   2016    
 Operating EBITDA                                                                               7.3     (5.2)   13.4   (1.9)  (7.1)   
 Depreciation, amortisation and share option charge                                             (12.2)  (7.4)   (5.5)  (6.1)  (4.2)   
 Revaluation of investments/Change in fair value of assets at fair value through profit & loss  (0.8)   (1.9)   6.0    2.3    -       
 Operating (loss)/profit                                                                        (5.7)   (14.5)  13.9   (5.7)  (11.3)  
 Interest                                                                                       (0.8)   (5.4)   (6.2)  (9.3)  (4.9)   
 R&D tax credit                                                                                 0.3     4.8     2.5    2.7    3.7     
 Foreign exchange revaluation (non-cash)                                                        -       (1.0)   (2.7)  3.3    (4.1)   
 Net (loss)/profit                                                                              (6.2)   (16.1)  7.5    (9.0)  (16.6)  

In arriving at Operating loss/profit it is necessary to deduct from Operating
EBITDA the non-cash items referred to above. The depreciation charge was much
higher in 2020 due to Oxbox becoming operationally active in the first half of
the year. The Orchard Therapeutics investment asset incurred a loss of £0.8
million after the share price gave up more of the gains achieved in 2017 and
2018. Amortisation of intangible assets is insignificant, and the share option
charge was higher due to the increased employee headcount. The interest charge
of £0.8 million was lower than the prior year as a result of the early
repayment of the Oaktree loan in June 2019, with only interest arising on the
IFRS 16 leases remaining as compared to the prior year. The R&D tax credit in
2020 has decreased significantly as the Group ceased being eligible to claim a
research and development tax credit under the Government’s small company
scheme in 2020, whilst now being eligible to make a claim under the
Governments’ large companies RDEC scheme (see the last bullet under Total
expenses in the previous section). The credit of £0.3 million is made up of a
£1.5 million small company credit related to prior years, and a £1.2 million
liability on the large company research and development taxation credit
included under Other costs which the Group is still able to claim. There was
no foreign exchange revaluation gain/(loss) during 2020 as the Oaktree loan
was repaid in 2019.

Segmental analysis
Reflecting the way the business is currently being managed by the Senior
Executive Team, the Group reports its results within two segments, namely:
1. 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®
platform.
2. The “Product” segment, which includes the costs of researching and
developing new gene therapeutic product candidates.
 £m                       Platform  Product  Total   
 2020                                                
 Revenue                  87.1      0.6      87.7    
 Operating EBITDA         13.9      (6.6)    7.3     
 Operating profit/(loss)  2.0       (7.7)    (5.7)   
                                                     
 2019                                                
 Revenue                  51.0      13.1     64.1    
 Operating EBITDA         (11.7)    6.5      (5.2)   
 Operating (loss)/profit  (20.2)    5.7      (14.5)  

The Platform segment in 2020 saw an increase in revenue of 71% from £51.0
million to £87.1 million due to the Juno Therapeutics/Bristol Myers Squibb
licence fee received, as well as increased bioprocessing and commercial
development activities for customers AstraZeneca, Juno Therapeutics/Bristol
Myers Squibb, Beam Therapeutics and Sanofi. This was offset by a decrease in
revenues from existing customers Orchard and also Novartis, where revenues
were impacted in 2020 due to the transition over to the more profitable
bioreactor process which occurred during 2019.
Operational results saw the positive impact of the large increases in revenues
but this did come at the cost of additional investment in headcount and
facilities, resulting in an Operating EBITDA profit of £13.9 million, and an
operating profit of £2.0 million. The Group will target maintaining 2020
operating margins and improve revenues and operating results from this segment
through higher bioprocessing volumes, increased licence and royalty payments
from partners and additional commercial development services to customers.

The Product segment has generated revenues of £0.6 million (2019: £13.1
million) and an Operating EBITDA loss of £6.6 million (2019: £6.5 million
profit), as no further significant licences or milestones from Sio Gene
Therapies (2019: £11.5 million) or other customers was achieved during 2020.

Cash flow

The Group held £46.7million cash at 31 December 2020, having begun the year
with £16.2 million. Significant movements across the year are explained
below.

 Cash flow movements                                 2020    2019    2018    2017    2016    
 Operating (loss)/profit                             (5.7)   (14.5)  13.9    (5.7)   (11.3)  
 Non-cash items included in operating profit/(loss)  13.0    9.3     (0.5)   3.8     4.2     
 Operating EBITDA profit /(loss)                     7.3     (5.2)   13.4    (1.9)   (7.1)   
 Working capital movement                            (11.2)  (1.4)   (4.2)   0.4     1.2     
 Cash (used in)/ generated from operations           (3.9)   (6.6)   9.2     (1.5)   (5.9)   
 R&D tax credit received                             7.0     3.1     3.7     4.5     4.1     
 Net cash (used in)/generated from operations        3.1     (3.5)   12.9    3.0     (1.8)   
 Interest paid, less received                        -       (3.3)   (4.7)   (10.8)  (3.3)   
 Sale of available for sale asset                    2.5     6.3                             
 Capex                                               (13.4)  (25.8)  (10.1)  (2.0)   (6.4)   
 Cash burn                                           (7.8)   (26.3)  (1.9)   (9.8)   (11.5)  
 Net proceeds from financing                         38.3    10.3    19.8    8.8     17.5    
 Movement in year                                    30.5    (16.0)  17.9    (1.0)   6.0     

— The operating loss in 2020 was £8.8 million better than the operating
loss of £14.5 million achieved in 2019. These improved operational results
flowed through to Operating EBITDA profit of £7.3 million (2019: £5.2
million loss).
— The negative working capital movement of £11.2 million is driven largely
by an increase in Trade and other debtors (£25.9 million) and inventory
(£4.3 million) offset by an increased in Trade and other payables (£5.4
million) and Contract liabilities (£13.4 million). These movements were
driven by increased revenue generating activities and the impact of this
increase on the Group’s operational activities.
— The Group received £7.0 million R&D tax funding in 2020 in respect of the
2019 claim, up £3.9 million from the prior year. The increase in 2020 was due
to the tax credit received in 2019 being capped as a result of the profits
achieved in 2018.
— Interest paid during the year was nil, down from £3.3 million in the
prior year as the Oaktree loan facility was repaid at the end of June 2019.
— £2.5 million of funds was generated from the sale of shares in Orchard
Therapeutics, an asset held at fair value through profit & loss.
— Purchases of property, plant and equipment decreased from £25.8 million
to £13.4 million, mainly as a result of main construction phase of the new
Oxbox manufacturing facility being completed in 2019 and cash preservation
measures put in place in the first half of 2020.
— The net proceeds from financing during 2020 was £38.3 million, consisting
of the June 2020 equity fundraise of £38.3 million, share option issues of
£1.1 million, and reduced by lease payments of £1.1 million in the year.
— The result of the above movements is a net increase in cash of £30.5
million from £16.2 million to £46.7 million.

Statement of financial position review

The most notable items on the Statement of financial position, including
changes from 31 December 2019, are as follows:
— Assets at fair value through profit & loss decreased by £2.5 million as a
result of the sale of £2.5 million worth of Orchard Therapeutics shares.
— Property, plant and equipment has increased by £10.4 million to £72.3
million as depreciation of £9.6 million only partially offset additions of
£19.7 million, mainly purchases of equipment and leasehold improvements for
the new Oxbox manufacturing facility, additional laboratory space at Windrush
Court, and right to use assets recognised upon signing the VMIC equipment
lease and the Corporate Head Office lease in Oxford.
— Inventories have increased from £2.6 million to £6.9 million due to
increased raw material balances as a result of forecasted increased
bioprocessing vaccine manufacturing activities, but also due to Brexit and
COVID-19 stock building.
— Trade and other receivables increased from £33.7 million to £57.5
million due to increased levels of bioprocessing and process development
activities across the year end, as well as the increased RDEC tax credit
receivable.
— Tax assets decreased from £5.4 million to £0.1 million as the Group
ceased being eligible to claim a research and development tax credit under the
Government’s small company scheme in 2020. The balance of £0.1 million is
made up of a £1.0 million small company credit related to prior years, and a
£1.1 million corporate tax liability on the large company research and
development taxation credit included under Trade and other receivables.
— Trade and other payables increased from £14.3 million to £19.7 million
due to the increased level of operational activity, including the increased
headcount levels.
— Contract liabilities increased from £14.9 million in 2019 to £28.3
million due to funds received in advance for future bioprocessing and process
development activities.
— Deferred Income decreased from £4.3 million in 2019 to £3.5 million due
to the release of amounts deferred as part of the Innovate UK capex grant
funding.
— Provisions increased as a result of the recognition of a £0.8 million
liability for future dilapidations cost on the corporate office and Oxbox
leases.
— Lease liabilities increased from £8.4 million to £13.8 million due to
the recognition of an IFRS 16 liability with regard to the new corporate
office lease entered into in 2020, as well as a £3.8 million liability with
regard to bioprocessing equipment used within the Oxbox manufacturing
facility.

The Company had no provisions at 31 December 2020 or 31 December 2019.

Financial outlook
The Group will continue to target improved financial performance in 2021. The
contracts signed in 2020 with AstraZeneca, Juno Therapeutics/Bristol Myers
Squibb, Beam Therapeutics and Sio Gene Therapies, together with continued
bioprocessing and commercial development activities performed for existing
customers, have driven the growth in revenues in 2020. Additive bioprocessing
and commercial development revenues are expected from these partnerships in
the future with the Group expecting to continue to increase its commercial
activities, assisted by an expanded Oxbox facility being in use throughout
2021.

The Group continues to recognise the importance of focusing on building and
maintaining the Group’s commercial relationships with the Group’s
customers, both old and new. The success of the Group’s existing customers
is seen as key to the Group’s success, including driving growth in new
customer relationships in 2021 and beyond. The Group will continue to target
new strategic commercial relationships in 2021, but also remain focused on
meeting the growing demands of the Group’s existing customer base.

R&D expenditure in 2021 is expected to be above the £29.7 million seen in
2020. The Group intends to invest in the development of its platform to
accelerate the ambition to industrialise lentiviral vector production as well
as increased investment in R&D on propriety programmes to progress them
towards the clinic. Headcount is also likely to increase but by lower levels
than seen in 2020. This investment means that while Operating EBITDA is
expected to be above 2020 levels it will not grow at the same rate as
revenues.

Capex for 2021 will be above 2020 levels due to the expansion being undertaken
at both Windrush Court and Windrush Innovation Centre, as highlighted in the
equity fundraise in June 2020. The Group continues to make selective strategic
investments in its products and enabling technologies where the opportunity
exists to improve patient outcomes and increase shareholder value.

 

Going concern
The Group made a loss for the year ended 31 December 2020 of £6.2 million,
but generated net cash flows from operating activities for the year of £3.1
million. Furthermore, the Group raised an additional £38.3 million in cash
through a successful equity placement in June 2020. The Group ended the year
with cash and cash equivalents of £46.7 million.

In considering the basis of preparation of the Annual Report and financial
statements, 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 2021 annual budget and forecasts for
2022. These cash flow forecasts also take into consideration severe but
plausible downside scenarios including:
— A substantial revenue downside affecting the core LentiVector(®) platform
business,
— No revenues from new customers,
— Significant decreases in forecasted existing customer milestone and
royalty revenues,
— The impacts of COVID-19 on the Group and its customers including expected
revenues from existing customers under long term contracts.

The Board has confidence in the Group’s ability to continue as a going
concern for the following reasons:
— As noted above the Group has cash balances of £46.7 million at the end of
December 2020 and £65.9 million at the end of March 2021,
— The Group has the ability to control capital expenditure costs and lower
other operational spend, as necessary,
— A large proportion of 2021 forecasted revenues are covered by binding
purchase orders and rolling customer forecasts which give additional certainty
to revenues over the next 12 months,
— The Group has key worker status which allows continuity of providing
services to the Group’s financially stable customer base throughout the
lockdown period, 
— The Group’s history of being able to access capital markets.

The Directors have also considered the impact of the UK’s decision to leave
the European Union. Although Brexit has significantly affected the fiscal,
monetary and regulatory landscape in the UK, the Group has assessed its impact
on its operations to be minor.

Taking account of the matters described above, the Directors are confident
that the Group will have sufficient funds to continue to meet its 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 2020

                                                                                      Group                
                                                                               2020          2019          
                                                                               Total         Total         
 Continuing operations                                                   Note  £’000         £’000         
 Revenue                                                                       87,728        64,060        
 Cost of sales                                                                 (41,655)      (35,723)      
 Gross profit                                                                  46,073        28,337        
 Research, development costs                                                   (29,749)      (22,546)      
 Bioprocessing costs                                                           (10,720)      (7,378)       
 Administrative expenses                                                       (11,262)      (11,881)      
 Other operating income                                                        795           884           
 Change in fair value of asset held at fair value through profit & loss  6     (831)         (1,883)       
 Operating loss                                                                (5,694)       (14,467)      
 Finance income                                                                34            104           
 Finance costs                                                                 (912)         (6,526)       
 Loss before tax                                                               (6,572)       (20,889)      
 Taxation                                                                3     327           4,823         
 Loss and total comprehensive expense for the year                             (6,245)       (16,066)      

There was no other comprehensive income or loss.

The loss for the year is attributable to the owners of the parent.

The notes on pages 24 to 31 form part of this preliminary information.

 

Statement of financial position 
as at 31 December 2020

                                                    Group                            
                                              Note  2020 £’000     2019 £’000        
 Assets                                                                              
 Non-current assets                                                                  
 Intangible assets                                  73             95                
 Property, plant and equipment                5     72,304         61,932            
 Trade and other receivables                        3,605          3,605             
 Deferred tax assets                                -              359               
                                                    75,982         65,991            
 Current assets                                                                      
 Inventories                                  7     6,912          2,579             
 Assets at fair value through profit & loss   6     239            2,719             
 Trade and other receivables                  8     53,926         30,045            
 Current tax assets                                 126            5,351             
 Cash and cash equivalents                          46,743         16,243            
                                                    107,946        56,937            
 Current liabilities                                                                 
 Trade and other payables                     9     19,716         14,297            
 Contract liabilities                         10    27,258         13,156            
 Deferred income                              10    1,006          1,006             
 Lease Liabilities                                  4,475          482               
                                                    52,455         28,941            
 Net current assets                                 55,491         27,996            
 Non-current liabilities                                                             
 Provisions                                   11    5,839          5,086             
 Contract liabilities                         10    1,003          1,695             
 Deferred income                              10    2,515          3,310             
 Lease liabilities                                  9,370          7,907             
 Deferred tax liability                             -              359               
                                                    18,727         18,357            
 Net assets                                         112,746        75,630            
                                                                                     
 Equity attributable to owners of the parent                                         
 Ordinary share capital                             41,161         38,416            
 Share premium account                              258,017        222,618           
 Other reserves                                     2,291          2,291             
 Accumulated losses                                 (188,723)      (187,695)         
 Total equity                                       112,746        75,630            

The notes on pages 24 to 31 form part of this preliminary information.

 

Statement of cash flows
for the year ended 31 December 2020

                                                               Group                          
                                                               2020      2019                 
                                                         Note  £’000     £’000                
 Cash flows from operating activities                                                         
 Cash used in operations                                 12    (3,889)          (6,636)       
 Tax credit received                                           7,005            3,128         
 Net cash generated from/(used in) operating activities        3,116            (3,508)       
 Cash flows from investing activities                                                         
 Purchases of property, plant and equipment                    (13,358)         (25,774)      
 Proceeds on disposal of property, plant and equipment         -                2             
 Proceeds on disposal of investment assets                     2,523            6,270         
 Interest received                                             34               104           
 Net cash used in investing activities                         (10,801)         (19,398)      
 Cash flows from financing activities                                                         
 Proceeds from issue of ordinary share capital                 41,060           54,132        
 Costs of share issues                                         (1,724)          (769)         
 Proceeds from the exercise of warrants                        -                1,345         
 Interest paid                                                 -                (2,513)       
 Redemption fee                                                -                (866)         
 Payment of lease liabilities                                  (1,151)          (835)         
 Loans repaid                                                  -                (43,589)      
 Net cash generated from financing activities                  38,185           6,905         
 Net increase/(decrease) in cash and cash equivalents          30,500           (16,001)      
 Cash and cash equivalents at 1 January                        16,243           32,244        
 Cash and cash equivalents at 31 December                      46,743           16,243        

The notes on pages 24 to 31 form part of this preliminary information.
 Statement of changes in equity attributable to owners of the parent company
for the year ended 31 December 2020

                                                   Ordinary shares  Share premium account     Merger reserve      Treasury reserve        Warrants reserve        Accumulated losses         Total equity              
 Group                                             £’000            £’000                     £’000               £’000                   £’000                   £’000                      £’000                     
 At 1 January 2019                                 33,034           172,074                   2,291                       -                       1,218                    (173,876)                34,741             
                                                                                                                                                                                                                       
 Year ended 31 December 2019:                                                                                                                                                                                          
 Loss for the year                                 -                -                         -                   -                       --                      (16,066)                   (16,066)                  
 Total comprehensive expense for the year          -                -                         -                   -                       --                      (16,066)                   (16,066)                  
 Transactions with owners: Share options                                                                                                                                                                               
 Proceeds from shares issued                       162              495                       -                   -                       --                      -                          657                       
 Value of employee services                        -                -                         -                   -                       --                      2,247                      2,247                     
 Issue of shares excluding options                 3,875            49,600                    -                   -                       -                       -                          53,475                    
 Exercise of warrants                              1,345            1,218                                                                 (1,218)                                            1,345                     
 Cost of share issues                              -                (769)                     -                   -                       -                       -                          (769)                     
 At 31 December 2019                               38,416           222,618                   2,291               -                       --                      (187,695)                  75,630                    
                                                                                                                                                                                                                       
 Year ended 31 December 2020:                                                                                                                                                                                          
 Loss for the year                                 -                -                         -                   -                       --                      (6,245)                    (6,245)                   
 Total comprehensive income for the year           -                -                         -                   -                       --                      (6,245)                    (6,245)                   
 Transactions with owners: Share options                                                                                                                                                                               
 Proceeds from shares issued                       245              841                       -                   -                       --                      (26)                       1,060                     
 Value of employee services                        -                -                         -                   -                       --                      3,752                      3,752                     
 Tax on share options                           -  -                -                         -                   -                       --                      273                        273                       
 Issue of shares excluding options                 2,500            37,500                    -                   -                       --                      -                          40,000                    
 Transfer of share premium related to warrants     -                (1,218)                   -                   -                       --                      1,218                      -                         
 Cost of share issues                              -                (1,724)                   -                   -                       -                       -                          (1,724)                   
 At 31 December 2020                               41,161           258,017                   -                   -                       --                      (188,723)                  112,746                   
                                                                                                                                                                                                                       



NOTES TO THE PRELIMINARY FINANCIAL INFORMATION 
for the year ended 31 December 2020

1      Basis of accounting

This preliminary announcement was approved by the Board of Directors on 15
April 2021.

The financial information set out above does not constitute the Company’s
statutory accounts for the years ended 31 December 2020 or 2019 but is derived
from those accounts.

Statutory accounts for 2019 have been delivered to the registrar of companies,
and those for 2020 will be delivered in due course.

The auditor has reported on the 2020 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 primary statements and notes to these financial statements.

The Group made a loss for the year ended 31 December 2020 of £6.2 million,
but generated net cash flows from operating activities for the year of £3.1
million. Furthermore, the Group raised an additional £38.3 million in cash
through a successful equity fundraise in June 2020. The Group ended the year
with cash and cash equivalents of £46.7 million.

In considering the basis of preparation of the Annual Report and financial
statements, 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 2021 annual budget and forecasts for
2022. These cash flow forecasts also take into consideration severe but
plausible downside scenarios including:
— A substantial revenue downside affecting the core LentiVector(®) platform
business,
— No revenues from new customers,
— Significant decreases in forecasted existing customer milestone and
royalty revenues,
— The impacts of COVID-19 on the Group and its customers including expected
revenues from existing customers under long term contracts.

The Board has confidence in the Group’s ability to continue as a going
concern for the following reasons:
— As noted above the Group has cash balances of £46.7 million at the end of
December 2020 and £65.9 million at the end of March 2021, 
— The Group has the ability to control capital expenditure costs and lower
other operational spend, as necessary,
— A large proportion of 2021 forecasted revenues are covered by binding
purchase orders and rolling customer forecasts which give additional certainty
to revenues over the next 12 months,
— The Group has key worker status which allows continuity of providing
services to the Group’s financially stable customer base throughout the
lockdown period,
— The Group’s history of being able to access capital markets.

The Directors have also considered the impact of the UK’s decision to leave
the European Union. Although Brexit has significantly affected the fiscal,
monetary and regulatory landscape in the UK, the Group has assessed its impact
on its operations to be minor.

Taking account of the matters described above, the Directors are confident
that the Group will have sufficient funds to continue to meet its 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.

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 the 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 the 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 in terms the stand alone selling
price of previously recognised customer technology licences, but also 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 areas identified within the collaboration agreements is the
recognition of licence revenue based on the achievement of the relevant
performance obligation. The individual factors and aspects relating to licence
revenue is 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 2020 had not been met, revenues would have been £9.4 million lower
with the revenue expected to be recognised during 2021 when the performance
obligations were met.

Customer contract with varying bioprocessing batch prices
During 2020 the Group entered into a supply agreement with a customer for the
supply of bioprocessing batches where the batch price will vary across the
period of the contract. The Group has deemed that the series guidance within
IFRS 15 applies and has therefore recognised revenue based on averaging the
batch price over the period of the contract where the series guidance applies.
If the revenue had been recognised based on an actual batch price, revenues
would have been £2.4 million higher with a corresponding decrease in revenues
in future years.

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 of completion for that
specific bioprocessing batch. The value of the revenue recognised and the
related contract asset raised with regard to the bioprocessing batches which
remain in progress at year end is £21,260,000. If the assessed percentage of
completion was 10 percentage points higher or lower, revenue recognised in the
period would have been £2,126,000 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 regards 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 and the related contract asset raised with
regards to the work packages which remain in progress at year end is
£6,677,000. If the assessed percentage of completion was 10 percentage points
higher or lower, revenue recognised in the period would have been £667,000
higher or lower.

Stock and equipment received in lieu of cash payment for bioprocessing and
development services
During 2020, as part of its supply and development agreements with customers,
the Group received certain stock items and fixed assets in partial lieu of
cash payments from customers. As required by IFRS 15, the Group has valued the
commercial development services and bioprocessing batches it has provided at
their market value for revenue recognition purposes, with a corresponding
entry being passed within cost of goods, depreciation and operating lease
payments to account for the cost of these items. The value of revenue
recognised during 2020 related to these items amounts to £3.3 million (2019:
Nil).

Provision for out of specification bioprocessing batches
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
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 £137,000 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 £1.4 million (2019: £1.8 million) has
not been recognised during 2020 with the corresponding credit to contract
liabilities (note 10). This revenue will be recognised as the batches complete
bioprocessing.

3      Taxation

During 2019 and before the Group was entitled to claim tax credits in the
United Kingdom under the Small company scheme for certain research and
development expenditure. During 2020 the Group ceased being eligible to claim
a research and development tax credit under the Government’s small company
scheme.

                                                                 2020      2019      
                                                                 £’000     £’000     
 Current tax                                                                         
 United Kingdom corporation tax research and development credit  1,140     (5,018)   
 Overseas taxation                                               -         -         
                                                                 1,140     (5,018)   
 Adjustments in respect of prior periods                                             
 United Kingdom corporation tax research and development credit  (1,467)   473       
 Current tax                                                     (327)     (4,545)   

 

 Deferred tax                                                       
 Relating to the origination of timing differences  -      (278)    
 Adjustments in respect of prior periods            -      -        
 Deferred tax                                       (327)  (278)    
 Taxation Credit                                    (327)  (4,823)  

The amount of £1,140,000 included as part of the £327,000 taxation credit,
within the statement of comprehensive income for the year ended 31 December
2020 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 £1,467,000
(2019: £473,000) relates to a higher than anticipated tax receipt received in
2020 (£473,000), and an expected tax repayment relating to prior years
(£994,000). The 2019 sum of £5,018,000 represents the Small company tax
credit receivable by the Group in that 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 Statement of financial position.

During 2020 the Group recognised £273,000 of current tax relating to tax
relief obtained on exercise of share options directly within equity.

4      Basic and diluted loss per ordinary share

The basic loss per share of 7.81p (2019: earnings of 22.10p) has been
calculated by dividing the loss for the period by the weighted average number
of shares in issue during the year ended 31 December 2020 (79,944,911; 2019:
72,709,944).

The Group made a loss for the period ended 31 December 2020. There is
therefore no difference between the basic loss per ordinary share and the
diluted loss per ordinary share in the period.

5      Property, plant and equipment

                                      Freehold property  Leasehold improve-ments  Office equipment and computers  Bioprocessing and Laboratory equipment  Right of use asset  Total     
                                      £’000              £’000                    £’000                           £’000                                   £’000               £’000     
 Cost                                                                                                                                                                                   
 At 1 January 2020                    21,427             21,908                   7,395                           20,174                                  11,400              82,304    
 Additions at cost                    1,678              4,659                    1,484                           5,537                                   6,361               19,719    
 Reclassification                     226                652                      227                             (1,105)                                 -                   -         
 Disposals                            -                  -                        -                               -                                       -                   -         
 Change in Estimate                   -                  -                        -                               -                                       251                 251       
 At 31 December 2020                  23,331             27,219                   9,106                           24,606                                  18,012              102,274   
                                                                                                                                                                                        
 Accumulated depreciation                                                                                                                                                               
 At 1 January 2020                    8,360              1,679                    3,054                           6,440                                   839                 20,372    
 Charge for the year                  2,084              1,840                    1,556                           2,737                                   1,381               9,598     
 At 31 December 2020                  10,444             3,519                    4,610                           9,177                                   2,220               29,970    
 Net book amount at 31 December 2020  12,887             23,700                   4,496                           15,429                                  15,792              72,304    

 

                                      Freehold property  Leasehold improve-ments  Office equipment and computers  Bioprocessing and Laboratory equipment  Right of use asset  Total     
                                      £’000              £’000                    £’000                           £’000                                   £’000               £’000     
 Cost                                                                                                                                                                                   
 At 1 January 2019                    21,283             7,735                    5,088                           12,337                                  -                   46,443    
 Adoption of IFRS 16 (Leases)         -                  (1,263)                  -                               -                                       7,618               6,355     
 Additions at cost                    144                15,436                   2,681                           7,513                                   3,782               29,556    
 Reclassification                     -                  -                        (374)                           374                                     -                   -         
 Disposals                            -                  -                        -                               (50)                                    -                   (50)      
 At 31 December 2019                  21,427             21,908                   7,395                           20,174                                  11,400              82,304    
                                                                                                                                                                                        
 Accumulated depreciation                                                                                                                                                               
 At 1 January 2019                    6,324              1,450                    2,416                           4,462                                   -                   14,652    
 Adoption of IFRS 16 (Leases)         -                  (188)                    -                               -                                       188                 -         
 Charge for the year                  2,036              417                      877                             1,784                                   651                 5,765     
 Reclassification                     -                  -                        (239)                           239                                     -                   -         
 Disposals                            -                  -                        -                               (45)                                    -                   (45)      
 At 31 December 2019                  8,360              1,679                    3,054                           6,440                                   839                 20,372    
 Net book amount at 31 December 2019  13,067             20,229                   4,341                           13,734                                  10,561              61,932    



6      Assets at fair value through profit & loss

                                                                                                    2020     2019     
 Assets at fair value through profit & loss:                                                        £'000    £'000    
 At 1 January                                                                                       2,719    -        
 Reclassification of investment at fair value through profit & loss                                 -        10,966   
 Additions                                                                                          874      -        
 Costs to sell asset at fair value through profit & loss                                            -        (94)     
 Sale of shares                                                                                     (2,523)  (6,270)  
 Change in fair value of available-for-sale asset                                                   (831)    (1,883)  
 At 31 December                                                                                     239      2,719    

Additions in 2020 relate to a contract asset milestone which was met in 2019
with the shares received in 2020 as part of a non-cash consideration.

During the first half of 2019 the Group determined that the equity held in
Orchard Therapeutics met the definition of an Asset at fair value through
profit and loss under IFRS 5. As such, the equity investment was reclassified
from Investments held at fair value through profit and loss (non-current
assets) to Assets at fair value through profit and loss (current assets).

7      Inventories

                  2020      2019      
                  £’000     £’000     
 Raw Materials    6,912     2,579     
 Total inventory  6,912     2,579     

Inventories constitute raw materials held for commercial bioprocessing
purposes.

During the year, the Group wrote down £134,000 (2019: £171,000) of inventory
which is not expected to be used in production or sold onwards. The Company
holds no inventories.

8      Trade and other receivables

                                        2020      2019      
                                        £’000     £’000     
 Trade receivables                      27,214    12,766    
 Contract assets                        16,508    13,406    
 Other receivables                      4,163     563       
 Other tax receivable                   3,412     1,537     
 Prepayments                            2,629     1,773     
 Total trade and other receivables      53,926    30,045    

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 £9,502,000 (2019: £7,472,000) which were past due at the reporting
date and of which £9,460,000 has been received after the reporting date.

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.

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 regards to these work packages is £6,677,000. If the assessed
percentage of completion was 1 percentage point higher or lower, revenue
recognised in the period would have been £67,000 higher or lower.

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 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.

Non-current trade and other receivables constitute other receivables of
£3,605,000 (2019: £3,605,000) which consists of deposits held in escrow as
part of the Windrush Innovation Centre and Oxbox lease arrangements.

9      Trade and other payables

                                         2020      2019      
                                         £’000     £’000     
 Trade payables                          7,777     7,311     
 Other taxation and social security      1,585     1,042     
 Accruals                                10,354    5,944     
 Total trade and other payables          19,716    14,297    

10  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 £14.9 million at
the end of 2019 to £28.3 million at the end of 2020 due to funds received in
advance for future bioprocessing and process development activities. Of the
£14.9 million balance included in the statement of financial position at the
end of 2019, £11.6 million has been recognised as revenue during the 2020
financial year.

Contract liabilities consists primarily of deferred bioprocessing and process
development revenues, which are expected to be released as the related
performance obligations are satisfied over the period as described below:

                              0-1       0-3       0-5       0-10      Total     
 Years                        £’000     £’000     £’000     £’000     £’000     
 Contract liabilities         27,258    50        948       5         28,261    
 Bioprocessing income         24,327    -         -         -         24,327    
 Process development income   2,914     -         -         -         2,914     
 Licence fees and incentives  17        50        948       5         1,020     
 Deferred income              1,006     2,515     -         -         3,521     
 Lease incentives             -         -         -         -         -         
 Grant                        1,006     2,515     -         -         3,521     

Included within bioprocessing contract liabilities is revenue of £1.4 million
which has not been recognised during 2020 (2019: £1.8 million) relating to
the estimate of out of specification batches (see note 2: ’Estimates’ 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.

11  Provisions

                                      2020      2019      
                                      £’000     £’000     
 At 1 January                         5,086     1,287     
 Unwinding of discount                38        58        
 New Provision                        -         3,741     
 Change in estimate                   251       -         
 Additional provision recognised      464       -         
 At 31 December                       5,839     5,086     

Provisions are exclusively in respect of dilapidations. The 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, discounted using the rate per the Bank of England
nominal yield curve. The equivalent rate was used in 2019. The provisions will
be utilised at the end of the leases if they are not renewed.

12  Cash flows from operating activities

Reconciliation of loss before tax to net cash used in operations:

                                                        2020      2019      
                                                        £’000     £’000     
 Continuing operations                                                      
 Operating loss                                         (5,694)   (14,467)  
 Adjustment for:                                                            
 Depreciation                                           9,817     5,765     
 Amortisation of intangible assets                      22        22        
 Loss on disposal of property, plant and equipment      -         3         
 Charge in relation to employee share schemes           3,289     2,247     
 Non-cash gains                                         831       1,883     
 Changes in working capital:                                                
 Increase in trade and other receivables                (25,893)  (4,586)   
 Increase in trade and other payables                   5,419     2,868     
 (Decrease)/ increase in deferred income                (795)     1,533     
 Increase/(decrease) in contract liabilities            13,410    (3,634)   
 Increase in provisions                                 38        58        
 (Increase)/decrease in inventory                       (4,333)   1,672     
 Cash used in operations                                (3,889)   (6,636)   

 

 

Attachment
*     2020 OXB prelim results RNS FINAL
(https://ml-eu.globenewswire.com/Resource/Download/a108ca6f-8a0a-4f1f-9d2a-6b7cda5e71c9)
(https://www.globenewswire.com/NewsRoom/AttachmentNg/28eea7f8-0d39-4be0-8eae-0934a202f8ed)



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