TIDMOXB
RNS Number : 6201Z
Oxford Biomedica PLC
16 March 2017
OXFORD BIOMEDICA PLC
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2016
Oxford, UK - 16 March 2017: Oxford BioMedica plc (LSE: OXB),
("OXB" or "the Group") a leading gene and cell therapy group, today
announces preliminary results for the twelve months ended 31
December 2016.
HIGHLIGHTS (INCLUDING POST-PERIOD)
OPERATIONAL
Leading LentiVector(R) delivery platform for gene and cell
therapy partnerships
- Novartis collaboration progressing well with blockbuster
potential product CTL019 close to market and second undisclosed
CAR-T programme
- Strategic alliance established with Orchard Therapeutics to
develop and supply lentiviral vectors for ex vivo treatments
- Immune Design collaboration expanded, including licence to use
lentiviral vector-based products for in vivo treatments for
cancer
- New R&D collaboration with Green Cross LabCell focused on
gene modified natural killer (NK) cell-based therapies
- 200 litre bioreactor production process established at
commercial scale with potential to increase yield substantially and
reduce cost of a patient dose
- Transgene Repression In Vector Production (TRiP) system
developed to enhance the production titres of a broad range of gene
therapy vectors
State-of-the-art bioprocessing and laboratory facilities
- Major capacity expansion completed
- MHRA approval granted for GMP vector manufacture
- Vector production volume increased by 54% compared with 2015
Progress with proprietary product development
- Ground-breaking long-term results seen from follow-up studies
of patients treated with OXB-101 (for Parkinson's disease) and
OXB-201 (for wet AMD)
- OXB-102 (for Parkinson's disease) and OXB-202 (for corneal
graft rejection) ready to start Phase I/II studies following
out-licensing / spin out
- OXB-302 (for solid cancer tumours) pre-clinical
proof-of-concept achieved and ready for further development
following out-licensing / spin out
- SAR422459 (licensed to Sanofi for Stargardt disease) in Phase II development
FINANCIAL
- Gross income (1) increased by 64% to GBP30.8 million (2015: GBP18.8million)
- Operating expenses excluding depreciation and amortisation and
share based payments increased by 4% to GBP26.1 million (2015:
GBP25.1 million)
- EBITDA loss reduced to GBP7.1 million (2015: GBP12.1 million)
- EBITDA loss in second six months reduced to GBP1.9 million (2015: GBP4.7 million)
- Operating loss GBP11.3 million (2015: GBP14.1 million)
- Net cash used in operating activities reduced to GBP5.1 million (2015: GBP13.1 million)
- Capital expenditure GBP6.5 million (2015: GBP16.7 million)
- Cash of GBP15.3 million (31 December 2015: GBP9.4 million)
including $10 million (GBP8.1 million) ring-fenced under Oberland
loan agreement
- Fundraising of GBP17.5 million net
(1) Gross income is the aggregate of revenue (GBP27.8 million)
and other operating income (GBP3.0 million) (2015: GBP15.9 million
and GBP2.9 million respectively)
CORPORATE
- Tim Watts, Chief Financial Officer, will leave the Board and
the Group in September 2017. His successor, Stuart Paynter, will
join the Group in August 2017.
Commenting on the Group's 2016 full year results, John Dawson,
Oxford BioMedica's Chief Executive Officer, said:
"Oxford BioMedica has a world-leading lentiviral vector delivery
(LentiVector(R) ) platform for gene and cell therapy which is
becoming the platform of choice for lentiviral vector products.
With state-of-the-art bioprocessing and laboratory facilities our
gross income is growing rapidly and, as the manufacturer of the
lentiviral vector for Novartis' blockbuster-potential therapy
CTL019, we look forward to the product's launch as the Group will
benefit from supplying the viral vector and a royalty on CTL019's
sales. Beyond Novartis, we have added new revenue-generating
partnerships and collaborations during 2016 which are progressing
well and are confident we can add further relationships during
2017. The process to spin-out or out-license our priority product
development candidates is well underway and I am optimistic we will
have success with this in 2017. We will continue to invest in our
platform technology in order to consolidate our leadership position
and in our gene and cell therapy product concepts so that we
exploit our LentiVector(R) platform to the full."
Conference call for analysts
A briefing for analysts will be held at 9:30am GMT today at 85
Gresham Street, London, EC2V 7NQ. There will be a simultaneous live
conference call with Q&A and the presentation will be available
on the Group's website at www.oxfordbiomedica.co.uk.
Please visit the website approximately 10 minutes before the
conference call to download the presentation slides. Conference
call details:
Participant dial-in: 08006940257
International dial-in: +44 (0) 1452 555566
Participant code: 89005113
An audio replay file will be made available shortly afterwards
via the Group's website: www.oxfordbiomedica.co.uk
For further information, please contact:
Oxford BioMedica plc: Tel: +44 (0)1865 783 000
John Dawson, Chief Executive Officer
Tim Watts, Chief Financial Officer
Financial PR Enquiries: Tel: +44 (0)20 3709 5700
Mary-Jane Elliott / Matthew Neal / Chris Welsh / Laura
Thornton
Consilium Strategic Communications
Jefferies (Corporate Broker): Tel: +44 (0)20 7029 8000
Gil Bar-Nahum
Simon Hardy
Lee Morton
Max Jones
Nicholas Moore
About Oxford BioMedica
Oxford BioMedica (LSE:OXB) is a leading gene and cell 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(R) ), 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 and CNS
disorders. The Group has also entered into a number of
partnerships, including with Novartis, Sanofi, GSK, Orchard
Therapeutics and Immune Design, through which it has long-term
economic interests in other potential gene and cell therapy
products. Oxford BioMedica is based across several locations in
Oxfordshire, UK and employs more than 250 people. Further
information is available at www.oxfordbiomedica.co.uk.
Disclaimer
This press release contains "forward-looking statements",
including statements about the discovery, development and
commercialisation of products. Various risks may cause Oxford
BioMedica's actual results to differ materially from those
expressed or implied by the forward-looking statements, including
adverse results in clinical development programmes; failure to
obtain patent protection for inventions; commercial limitations
imposed by patents owned or controlled by third parties; dependence
upon strategic alliance partners to develop and commercialise
products and services; difficulties or delays in obtaining
regulatory approvals and services resulting from development
efforts; the requirement for substantial funding to conduct
research and development and to expand commercialisation
activities; and product initiatives by competitors. As a result of
these factors, prospective investors are cautioned not to rely on
any forward-looking statements. Oxford BioMedica disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
CHAIRMAN'S STATEMENT
A year after joining Oxford BioMedica as Chairman, I am pleased
to report that the Group has made good progress in reviewing and
refining its strategy and advancing its operational activities.
With the continued support of shareholders, the Group is
progressing towards its goal of becoming a financially robust gene
and cell therapy business.
Strategy
The field of gene and cell therapy holds significant promise,
with the first commercial products now launched and others rapidly
approaching the market. The gene and cell therapy market has the
potential to grow into a multi-billion dollar sector and Oxford
BioMedica has the expertise with lentiviral vectors to fully
benefit from this opportunity.
During the first few months of 2016 the Board and management
team reviewed the Group's strategy in the light of the evolution
seen in the business and the sector since we signed the Novartis
contract in 2014. I reported the results of this review in my
statement in the 2015 Annual Report - the key conclusions were that
the Group has an outstanding gene delivery platform (LentiVector(R)
) which can be used to develop our own gene and cell therapy
products and also to assist in the development of third party
products in exchange for revenues from process development,
bioprocessing and IP-related royalties.
During the summer months we further refined the strategy. Taking
into account the balance of risk and reward, given the substantial
investment required over the next two to three years to conduct the
Phase I/II studies and future development work for Phase III and
commercialisation, we decided that the optimal way forward for the
priority clinical product candidates is to spin them out into one
or more product-focused special purpose vehicles (SPVs) with
dedicated externally-sourced funding, or to out-licence them. This
approach will ensure that the Group's priority clinical assets
(OXB-102 for Parkinson's disease, OXB-202 for corneal graft
rejection, and OXB-302 a CAR-T cell approach to targeting solid
tumours) are advanced using external funding whilst capturing value
via a potential combination of upfront payments and/or equity
stakes, development milestones and royalties.
This strategy provides the right balance for our shareholders as
the Group will have exposure to multiple products in the rapidly
advancing gene and cell therapy field with the potential for
significant economic upside. Concurrently, operational costs will
be covered by revenues from bioprocessing work with partners, while
using external funding for our priority development programmes will
greatly reduce the Group's R&D expenditure. As a result, the
Group's risk / reward profile will be closely managed and economic
interests in the future success of exciting high-value new
therapies will be retained.
Operational progress
Operationally the Group has made good progress during the year,
providing Oxford BioMedica with world-leading, state-of-the-art
gene therapy facilities. The major expansion of the bioprocessing
and laboratory facilities was completed by mid-year and the
necessary regulatory approvals for the manufacture of clinical
grade lentiviral vectors have been received. As a result of this,
the Group has now fully relocated its headquarters from the Medawar
Centre, which had been the Group's headquarters for the past twenty
years, to Windrush Court.
The Group continues to supply lentiviral vector to Novartis for
its CTL019 clinical studies with production volumes increasing over
the course of 2016 as our new facilities started production.
Following impressive results of the ELIANA clinical study in r/r
paediatric ALL patients, announced by Novartis in December 2016,
Novartis indicated its intention to submit CTL019 for approval by
the FDA in early 2017 and we look forward to continuing to supply
vector to them.
The potential of our strategy and business model has already
seen results with new partnerships and collaborations announced
during 2016. Finally, we have made steady progress in preparing our
priority product candidates for entry into clinical studies and we
are encouraged by the significant interest shown from third parties
wishing to invest in the next stage of development of these
products.
Building financial resilience
I am very grateful to our existing and new shareholders who
helped us to raise GBP17.5 million (net of expenses) during the
year. The Group has substantially grown its revenues over the past
three years and the operational cash burn has been reducing in
parallel. The Board and management team are determined to fully
utilise the expanded facilities to continue to grow the revenues to
a point where the Group generates positive cash flow making it more
financially robust.
Board changes and organisation
I was delighted to join the Group as Chairman in early 2016 and
I thank Nick Rogers, the outgoing Chairman for his contribution to
the Group over many years and also for his support during the
three-month transition period. The Board was strengthened with the
appointment of a new non-executive director and Audit Committee
Chairman, Stuart Henderson, who has many years' experience of the
healthcare and life sciences sectors from his time as an audit
partner at Deloitte and Arthur Andersen. Daniel Soland and Paul
Blake stepped down from the Board during the year and we recently
announced that Tim Watts is retiring from executive roles and will
leave the Company and the Board in September 2017. The Board thanks
all of them for their valuable contributions. Tim Watts will be
succeeded by Stuart Paynter who will join the Company in August
2017.
I would also like to recognise and thank all the Group's
employees for the outstanding contribution they have made which I
know has demanded a huge effort. It is always the case that the
success of an organisation depends first and foremost on its people
and Oxford BioMedica is no exception to this.
Outlook
I look forward to 2017 with confidence that it will be a
successful and important year for the Group. We are pleased to be
supporting Novartis' breakthrough therapy, CTL019, which they
believe is a potential blockbuster product. We hope that it will be
approved and launched in the USA this year. I also believe that our
other current partnership programmes will progress well and that we
will be able to announce other similar collaborations that will
help make the business model even more robust. I expect that we
will find ways to advance our own priority programmes in a way that
creates value for shareholders at an acceptable level of risk. By
the end of 2017, I anticipate that the Group will have grown its
partnerships and revenues significantly and that our own priority
product candidates will be making progress with funding from third
parties.
Dr Lorenzo Tallarigo
Chairman
CHIEF EXECUTIVE'S REVIEW
Building a successful gene and cell therapy business
In his Chairman's Statement, Lorenzo has explained our strategy
and how it developed during 2016. Our business model is
fundamentally built on our world- leading LentiVector(R) gene
delivery platform, which is the result of over 20 years of
pioneering science in the lentiviral vector field. Oxford BioMedica
was the first organisation of any kind to administer lentiviral
vectors in vivo, meaning that we had to solve many technical
challenges to ensure that the vector we administered would be safe
and sufficiently purified and concentrated to be effective. These
experiences helped to give us the lead we have today. Lentiviral
vectors are key components of many promising new gene and cell
therapies, and so our LentiVector(R) platform provides us with
opportunities to generate short- and longer-term value through:
- In-house development: we have our own portfolio of
LentiVector(R) platform gene and cell therapy product candidates.
During 2016, we decided that clinical studies for these candidates
will be developed with third party finance, using either
out-licensing or by spinning out the programmes into one or more
special purpose vehicles. This will significantly reduce the cost
and risk associated with clinical development while providing us
with significant equity stakes and/or potential upfront, milestone
and royalty payments as well as bioprocessing and process
development revenues. We will continue to invest in early stage
product concept development and pre-clinical studies with a view to
maintaining a pipeline of candidates ready for clinical
studies.
- Partnering: we can provide our bioprocessing and process
development expertise and facilities to third parties who want to
accelerate the development of their own lentiviral vector
programmes, in return for which we receive short and medium term
revenues and longer term royalties based on licences to our
extensive know-how as well as our patents.
- Freedom-to-operate licensing: we can provide other
organisations with licences to use our important patents relating
to lentiviral vector safety features and manufacturing
efficiencies.
Advancing our business
During 2016, we have made significant progress in these areas of
our business. The two-year programme to expand our bioprocessing
and laboratory facilities has been essential to the delivery of the
Novartis contracts and to our strategy of building a
revenue-generating and financially robust business. The expansion
programme lasted from October 2014 to June 2016 with a GBP26
million capital investment. We now have two clean rooms, previously
only one, in our Harrow House facility in Oxford and a third clean
room at our Yarnton site just outside Oxford. We acquired Windrush
Court in October 2014 and re-developed it to include a suite of
state-of-the art biological laboratories which are large enough to
handle the analysis of increasing volumes of vector manufacture and
also the process development for our partners and our own
technology development requirements. These facilities were all
approved by the UK regulator in 2016. The increased capacity is
leading to significant growth in our revenues with gross income
rising to GBP31 million in 2016 from GBP19 million in 2015.
To date much of these increasing revenues come from our
relationship with Novartis but we are already starting to diversify
our revenues by working with more partners. I am proud that we are
supporting Novartis in bringing CTL019 to the market by supplying
the lentiviral vector needed for their clinical studies, assisting
them in preparing the application for approval of CTL019 for r/r
paediatric ALL and in developing the next generation of vector
manufacturing processes.
We have also expanded our relationship with Immune Design and
signed new partnerships and collaborations with Orchard
Therapeutics and Green Cross LabCell. These demonstrate the power
of our technology and the business model at work and discussions
are underway with several other potential partners. We are
determined to keep our leading position in lentiviral vector
technology and we are therefore continuing to invest in R&D
activities in this field.
We have decided that the optimum way to advance our product
candidates which are ready to enter clinical studies is to reduce
the financial risk to the Group by out-licensing or spinning them
out into special purpose vehicles (SPVs). The intention with SPVs
is that the Group will contribute the product and related IP to the
SPVs with third parties contributing the necessary funding to carry
out Phase I/II clinical studies. We would expect to own a
substantial proportion of each SPV. I am pleased to report that our
priority product candidates are all close to the point where they
could enter clinical studies subject to the right funding model. We
have already seen significant interest from both pharmaceutical
companies and venture capitalists in our product candidates and I
am confident that we will report progress with this in 2017. Since
our LentiVector(R) platform has the potential to generate new gene
and cell therapies, we intend to continue to invest in discovery
research and pre-clinical product concepts to the point of being
ready for clinical studies and potential spin out or
out-licensing.
A promising future
In the coming year we intend to build on the progress of 2016.
The progress of our Novartis collaboration underlines our
credibility and strengthens our position as a partner-of-choice in
this rapidly developing field. We anticipate Novartis reaching a
significant milestone in the coming year, with the approval and
launch of CTL019, for r/r paediatric ALL, representing the first
ever launch of a therapeutic product incorporating our
LentiVector(R) technology and leading to further bioprocessing
revenues and a new royalty stream. Our recent agreement with
Orchard Therapeutics for the development of cell therapies for
life-threatening immune deficiency and metabolic disorders
highlights the increasing industry demand for our proprietary
lentiviral vector technology and I look forward to establishing
further partnerships. In addition, we are focused on making
progress in out-licensing or spinning out our in-house priority
product candidates, allowing them to move quickly through clinical
development to benefit both patients and shareholders.
Following a number of years of steady progress, we have built an
enviable leadership position in the field of gene and cell therapy.
With world-class facilities, unrivalled intellectual property and
an exciting pipeline of products, I look forward to accelerating
the progress in each area of the Group in 2017 as we move closer
towards our goal of becoming a self-sustaining, world-class gene
and cell therapy company.
John Dawson
Chief Executive Officer
OPERATIONAL REVIEW
Advancing our in-house products
During the first half of 2016, the Group concluded a review of
its in-house portfolio to prioritise the product candidates with
the most compelling value propositions based on risk, probability
of success and reward. While highly promising, these priority
products will require significant financial resources to progress
through clinical studies in the coming years. Therefore, Oxford
BioMedica is now pursuing an external funding strategy to advance
their clinical-stage development through out-licensing or spinning
out the assets into special purpose vehicles (SPVs) which could be
funded by third parties. This approach will allow the Group to
retain significant economic interest while removing the financial
commitment associated with further development.
In recent months, the Group's three priority candidates OXB-102,
OXB-202 and OXB-302 have continued to progress. The Group has
entered discussions with a number of third-parties regarding
potential out-licensing/ spin out, and if these are successful all
three products are well positioned to move into the clinic.
-- OXB-102 targeting Parkinson's disease
Parkinson's disease affects over 1.7 million people in the US,
Japan and EU5 alone, and it is a significant unmet medical need.
Oxford BioMedica's second generation gene therapy targeting the
disease, OXB-102, encodes three enzymes in the dopamine
biosynthetic pathway and is designed for delivery as a single
treatment directly into a key region of the brain implicated in
Parkinson's disease. OXB-101 (ProSavin(R)), the Group's first
generation approach, showed very encouraging efficacy and four-year
duration in a Phase I/II clinical study which provides great
encouragement for OXB-102. OXB-102 has delivered compelling
proof-of-concept results in a 'gold standard' model of Parkinson's
disease indicating potency 5-10 times greater than OXB-101, and the
Group has completed manufacturing of GMP clinical study material in
preparation for the next stage of development. The Group has been
working on appropriate regulatory approvals for a planned three
cohort Phase I/II study to be conducted in Cambridge and London, UK
and Paris, France.
-- OXB-202 targeting corneal graft rejection
The cornea is one of the most successfully transplanted tissues
but a significant number are rejected due to neovascularisation.
Currently, approximately 100,000 transplants are performed each
year, and this is predicted to increase significantly. Oxford
BioMedica's gene therapy, OXB-202, genetically modifies the cornea
using the LentiVector(R) platform to express two anti-angiogenic
proteins that inhibit neovascularisation following transplant. This
gene therapy has achieved impressive proof-of-concept results
showing significantly reduced neovascularisation in a corneal
rejection model. The Group has been working on appropriate
regulatory approval for the initiation of a Phase I/II clinical
study in the UK.
-- OXB-302 (CAR-T 5T4) targeting a range of cancers
Most solid tumours and a number of haematological malignancies
express the 5T4 oncofoetal antigen, while its profile is highly
restricted on normal tissues. This makes the antigen an attractive
therapeutic target, and Oxford BioMedica's cell therapy, OXB-302,
is designed to destroy cancer cells expressing the antigen. OXB-302
is based on a modified autologous T-cell that is engineered using a
lentiviral vector to express a chimeric antigen receptor (CAR)
targeting 5T4. When these CAR-T cells are infused into the patient
they bind to the antigen, triggering normal immune mechanisms that
kill the cancer cells. OXB-302 has completed pre-clinical
development, delivering encouraging efficacy in an in vivo industry
standard tumour challenge model.
OXB-302 has now completed pre-clinical studies which have
demonstrated proof of concept in both in vitro and in in vivo
industry-standard models. Highlights from the studies include the
ability of 5T4 CAR-T cells to kill a wide range of 5T4 expressing
tumour cell lines in vitro; the ability of T cells taken from
patients with ovarian cancer to be re-programmed with the 5T4 CAR
construct and respond functionally to their own tumour cells in
vitro through the secretion of cytokines; and the ability of 5T4
CAR-T cells to control tumour cell growth in in vivo models.
Further data will be presented in due course either at a conference
or in a publication.
-- OXB-201 targeting Wet Age-related Macular Degeneration (Wet AMD)
In May 2016, data was presented at the Association for Research
in Vision and Ophthalmology (ARVO) conference demonstrating that
lentiviral vector gene expression measured in the eyes of patients
treated in the Phase I/II study continued without significant
decline for more than four years. We believe this is the first time
such longevity of expression has been shown and the data reinforces
the benefits of the Company's pioneering LentiVector(R) gene
delivery platform in the treatment of chronic conditions.
-- OXB-301 cancer vaccine
In February 2017 the clinical investigators leading the
open-label Phase I/II clinical trial in 53 patients with advanced
colorectal cancer (TaCTiCC) presented a poster at the American
Society of Clinical Oncology and Society for Immunotherapy of
Cancer (ASCO-SITC) symposium. The study findings demonstrated that
significant anti-5T4 immune responses were generated at treatment
day 43. Secondary analysis revealed that both low dose
cyclophosphamide and OXB-301 (TroVax(R)) independently induced
highly beneficial anti-tumour immune responses, resulting in
significant survival of end stage colorectal cancer patients,
without any major toxicity. This was the first randomised study to
show a benefit of immunotherapy in advanced colorectal cancer
patients.
Partnership products
By providing our partners with access to our LentiVector(R) gene
delivery platform, Oxford BioMedica generates significant revenues
while retaining the upside potential of milestone payments and
royalties on future product sales. During 2016, the Group
contributed to the progress of a number of partners' products
towards the market:
Sanofi (SAR422459 and SAR421669)
Oxford BioMedica has previously licensed to Sanofi SAR422459,
for the treatment of Stargardt disease, and SAR412669, for the
treatment of Usher syndrome type 1B. These products have continued
to make progress in their Phase I/II clinical studies. The Group
has no further financial liability for the development of these
products although it is supporting Sanofi with analysis of clinical
study samples and is entitled to receive development milestone
payments and royalties on future sales.
Novartis (CTL019)
Throughout 2016, the Group produced CTL019 batches for Novartis
at our original Harrow House clean room and at our new facility at
Yarnton. With significantly increased capacity now fully
operational, production revenues have grown substantially compared
to 2015. The Group also continued its process development
activities for Novartis. In December 2016, Novartis announced the
results of the ELIANA study which evaluated the efficacy and safety
of CTL019 in relapsed/refractory (r/r) paediatric and young adult
patients with B-cell acute lymphoblastic leukaemia (ALL). Novartis
has indicated their intention to submit CTL019 for approval by the
US regulatory authority in early 2017. Based on this the Group
anticipates a potential launch in H2 2017, with further revenues
for manufacturing batches of the lentiviral vector and royalties
becoming payable on product sales.
Immune Design (LV305)
In the first half of 2016, Immune Design expanded its
collaboration with Oxford BioMedica to include a licence for the
use of lentiviral vector-based products in the in vivo treatment
and prevention of cancer. Immune Design is currently progressing
gene therapy products targeting NY-ESO-1 expressing tumours with
clinical development underway in a number of cancers, including
soft tissue sarcoma.
Orchard Therapeutics (ADA-SCID, MPS III A)
The Group signed a new collaboration with Orchard Therapeutics
focusing on the development of transformative gene therapies for
patients with serious life threatening orphan diseases. Oxford
BioMedica will initially develop and supply lentiviral vectors for
two of Orchard Therapeutics' stem cell based treatments, targeting
primary immune deficiency and metabolic disorders.
Discovery and pre-clinical
The Group will continue to invest in the identification and
early-stage development of novel gene and cell therapy products
based on the LentiVector(R) gene delivery platform. This approach
is designed to provide an ongoing pipeline of next generation
product candidates while also building new intellectual property to
maintain Oxford BioMedica's leadership position in the gene and
cell therapy field. The Group is currently investing in a number of
product concepts including the new NK cell research and development
collaboration with Green Cross LabCell. Where appropriate, the
Group would also consider in-licensing suitable targets and
technologies.
Bioprocessing
State-of-the-art commercial-scale facilities
During 2016, the Group completed its GBP26 million facilities
expansion programme and obtained UK regulatory approval for GMP
bioprocessing and analytical testing at its custom-built clean room
production suites and state- of-the-art biological laboratories.
The Group's GMP clean room footprint has increased three-fold to
1,200m(2) .
The Group's expanded facilities are now fully operational, and
provide capabilities for both current and next generation
lentiviral vector production, as well as offering sufficient
capacity for existing partners, future collaborations and in-house
platform development work. During 2016, two clean room suites at
the Group's Yarnton and Harrow House GMP bioprocessing facilities
were dedicated to production for our partners. The third clean room
suite, located at Harrow House which came into operation mid-year,
has been used for the development of next generation processes
designed to substantially improve bioprocessing yields and
volume.
These production facilities are complemented by Oxford
BioMedica's purpose-built laboratories at Windrush Court, which
were approved by the UK regulatory authorities in July for
analytical testing of GMP material. Following the completion of the
expansion programme the Group has now moved out of its previous
facilities at the Medawar Centre on the Oxford Science Park.
Next generation bioprocessing
Using its development expertise, Oxford BioMedica has
successfully established a novel next generation lentiviral vector
production process at commercial scale. This new process uses
self-contained, single-use 200 litre bioreactors, greatly improving
efficiency and increasing production capacity by approximately
600%. The serum-free, suspension cell line process boosts
productivity, offering the prospect of significantly reduced cost
per dose and substantially greater volumes allowing the possibility
of developing therapies for indications requiring large doses of
vector (e.g. liver or lung disease). This technological advance
will allow Oxford BioMedica to address the industry's challenge of
bridging clinical and commercial supply, thereby maintaining the
Group's position as a partner-of-choice in the gene and cell
therapy field.
Leveraging our industry-leading intellectual property
As an original pioneer of gene and cell therapy, we have a
strong position in lentiviral vector intellectual property, in both
patents and know-how. Between 2017 and 2023 many of the core
patents will expire although we will still benefit from them over
the period. However our extensive world-class know-how is now
increasingly important to our business model. The know-how covers
lentiviral vector optimisation, process development and
manufacturing.
In 2016, we filed an international patent application for
technology which increases vector yields and particle purity. The
TRiP (Transgene Repression in vector Production) system represses
the expression of transgene during the manufacturing process as
this can adversely impact vector yield and purity.
During 2016, we also announced new data from two clinical
studies indicating ground-breaking long-term four year sustained
and, in one of the studies, dose-dependent gene expression with the
Group's LentiVector(R) delivery platform.
In the Phase I/II study of OXB-101 for the treatment of
Parkinson's disease (PD) 15 advanced stage patients were treated
with OXB-101 in three dose cohorts and demonstrated a favourable
safety profile and a statistically significant improvement in motor
function relative to baseline at six and 12 months post-treatment.
The follow-up data, which was presented in May 2016 at the Annual
Meeting of the American Society of Gene and Cell Therapy (ASGCT),
showed that the majority of patients continued to experience
improvement in motor function relative to baseline over the four
years since treatment.
In addition, in May 2016, new data were presented at the
Association for Research in Vision and Ophthalmology (ARVO)
conference. The new data demonstrates that lentiviral vector gene
expression is dose-dependent and continued without significant
decline for more than four years. We believe this is the first time
gene therapy products have been directly measured in the eye and
the longevity in both expression and efficacy to date reinforces
the benefits of the Company's pioneering LentiVector(R) gene
delivery platform in the treatment of chronic conditions.
FINANCIAL REVIEW
In 2016 we started to deliver the financial transformation of
the Group. Gross income increased by 64% over 2015 and "EBIDA"
losses (EBITDA adjusted by the R&D tax credit) were reduced
from GBP8.1 million to GBP3.4 million.
The growth in gross income was enabled by our new bioprocessing
and laboratory facilities coming online during 2016. During 2015,
bioprocessing volume output was limited by having only our original
GMP clean room suite in Harrow House operational. In 2016, we
brought the second GMP clean room into operation at the start of
the year, at our new Yarnton site, and the third suite (the second
Harrow House suite) came online mid-year at the same time as the
new and larger laboratories in Windrush Court. This extra capacity
allowed us to step up the production of CTL019 vector production
for Novartis and the facilities were all operated virtually
continually throughout the year except for planned shutdown
periods.
Whilst gross income grew by 64%, our operating costs however,
other than Cost of Sales, grew by only 12% and by only 4% when
depreciation, amortisation and share bonus payments are excluded.
In 2015, I explained that we had grown our headcount and cost base
significantly as we built the teams necessary to operate the
facilities and processes in 2016. We have seen the benefit from
this in 2016 as end-year headcount numbers rose by only 25 from 231
at December 2015 to 256 at December 2016, and we were able to
operate the new facilities fully as soon as they became
available.
The revenue growth to date has been dominated by our
relationship with Novartis and we expect this relationship to
continue to grow. But we have also started to bring in new business
from partners such as Immune Design and Orchard Therapeutics and we
expect that we will generate further such relationships in
2017.
The capital markets were challenging in 2016 but we were able to
raise GBP19.6 million gross proceeds during the year from both
existing shareholders and new investors. Having assessed the
financial risk/reward profile we decided to continue the
development of our priority product projects whilst minimising our
expenditure by seeking funding for the clinical studies from third
parties such as venture capital funds or larger pharmaceutical
companies.
Key Financial Indicators
The Board regularly reviews the Key Financial Indicators set out
below:
Key Financial Indicators (GBPm) 2016 2015 2014
Gross income
- Bioprocessing/commercial development 24.0 12.4 7.2
- Licences, milestones, grants 6.8 6.4 7.5
Total 30.8 18.8 14.7
EBITDA (7.1) (12.1) (9.3)
EBIDA (3.4) (8.1) (7.2)
Operating loss (11.3) (14.1) (10.6)
Cash used in operations 5.9 14.9 7.4
Capex 6.5 16.7 5.6
Cash burn 11.5 29.8 11.6
Period end cash
- Cash 15.3 9.4 14.2
- Loan 34.4 27.3 1.0
Headcount
- Year end 256 231 134
- Average 247 196 113
---------------------------------------- ------- ------- -------
Gross income
GBPm 2016 2015 2014
------------------------ ----- ----- -----
Revenue 27.8 15.9 13.6
Other operating income 3.0 2.9 1.1
Gross income 30.8 18.8 14.7
------------------------ ----- ----- -----
Gross income increased to GBP30.8 million, giving 64% growth
over 2015 (GBP18.8 million). Revenues generated from
bioprocessing/commercial development almost doubled to GBP24.0
million (from GBP12.4 million in 2015) due to using the new
capacity in 2016 as described above and is up 233% since 2014. The
GBP6.8 million income generated from licence upfront payments,
performance incentives and grants has remained broadly constant
over the past three years (2015 GBP6.4 million; 2014 GBP7.5
million) despite comprising individual items which are lumpy by
nature.
A substantial portion of the gross income derives from our
relationship with Novartis but revenue was also generated from the
partnerships with Immune Design and Orchard Therapeutics, which we
expect to grow in 2017.
EBITDA/EBIDA
EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation 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.
EBIDA is an internal measure used by the Group, defined as
EBITDA with the R&D tax credit included. The Board refers to
EBIDA periodically as the R&D tax credit is, in essence, a
subsidy or grant which offsets the Group's R&D expenditure.
GBPm 2016 2015 2014
----------------------------------------------------------------- ------- ------- -------
Gross income 30.8 18.8 14.7
Cost of sales (11.8) (5.8) (4.4)
Operating expenses
(excluding depreciation, amortisation and share option charge) (26.1) (25.1) (19.6)
EBITDA (7.1) (12.1) (9.3)
R&D tax credit 3.7 4.0 2.1
EBIDA (3.4) (8.1) (7.2)
----------------------------------------------------------------- ------- ------- -------
The doubling in 2016 of income generated from
bioprocessing/commercial development has been broadly matched by
the growth of the cost of sales (from GBP5.8 million to GBP11.8
million) which includes the raw materials, labour and overheads
associated with bioprocessing. This resulted in the gross profit
increasing to GBP15.9 million from GBP10.1 million in 2015, a
growth of 57%.
The aggregate of cost of sales and operating expenses excluding
the non-cash items of depreciation, amortisation and share option
charge rose from GBP30.9 million in 2015 to GBP37.9 million in
2016.
GBPm 2016 2015
------------------------------------------------------------------- ----- -----
Raw materials, consumables and other external bioprocessing costs 9.3 6.1
Manpower-related 17.4 13.6
External R&D expenditure 2.8 3.0
Other costs 8.4 8.2
37.9 30.9
------------------------------------------------------------------- ----- -----
The increase in manpower-related costs is due to the increase in
the average headcount from 196 in 2015 to 247 in 2016.
Operating expenses other than cost of sales and excluding
non-cash items (depreciation, amortisation and the charge for share
options) increased by GBP1.0 million from GBP25.1 million in 2015
to GBP26.1 million in 2016, an increase of 4%.
With the increase in gross margin and modest increase in the
operating expenses the EBITDA loss was reduced in 2016 to GBP7.1
million, from GBP12.1 million in 2015. The EBITDA and EBIDA losses
were lower in the second six months of 2016 than in the first six
months.
Full year July-Dec Jan - July
2016 2016 2016
--------------- ---------- --------- -----------
EBITDA (loss) (7.1) (1.9) (5.2)
EBIDA (loss) (3.4) (0.8) (2.6)
--------------- ---------- --------- -----------
Operating loss and net loss
GBPm 2016 2015 2014
---------------------------------------------------- ------- ------- -------
EBITDA (7.1) (12.1) (9.3)
Depreciation, amortisation and share option charge (4.2) (2.0) (1.3)
Operating loss (11.3) (14.1) (10.6)
Interest (4.9) (1.9) (0.2)
R&D tax credit 3.7 4.0 2.1
Foreign exchange revaluation (non-cash) (4.1) (1.0) -
Net loss (16.6) (13.0) (8.7)
---------------------------------------------------- ------- ------- -------
The operating loss in 2016 was GBP11.3 million, compared with
GBP14.1 million in 2015. 2016 saw a higher charge for depreciation,
amortisation and share option charge (GBP4.2 million in 2016
compared with GBP2.0 million in 2015), as the new facilities
entered operation thereby triggering the start of the depreciation
charge on much of the GBP26 million capacity expansion programme
that took place between October 2014 and June 2016.
The interest charge on the Oberland US$ loan facility was
significantly higher at GBP4.9 million in 2016 compared with GBP1.9
million in 2015 caused by a combination of a full year charge in
2016 compared with only eight months in 2015, the impact of the
substantial fall in sterling against the US$ following the outcome
of the EU referendum in the UK, and the cost of providing for the
potential 15% Internal Rate of Return (IRR) due to Oberland should
the loan run to full maturity in 2022. Of the GBP4.9 million,
GBP3.2 million is cash paid and GBP1.7 million represents the
provision for the 15% IRR.
The R&D tax credit in 2016 was lower than 2015 which
included a benefit relating to prior years. The tax credit results
from a UK Government scheme which supports R&D expenditure in
the UK.
The net loss in 2016 was also adversely impacted by the
revaluation in sterling of the US$ denominated Oberland loan,
caused by the fall in sterling against the US$. This does represent
a potential increase in the sterling cost of repaying the loan
should exchange rates remain as they are currently but it does not
have an immediate cash impact. To some extent the Group expects to
have a currency hedge against this liability as a significant
portion of its anticipated future revenues are likely to be US$
denominated, such as the royalty stream arising from Novartis's
sales to US CTL019 patients.
Segmental analysis
We presented an analysis of the business by segment for the
first time in the 2015 Annual Report. The segments are "Partnering"
which includes the bioprocessing and process development activities
for third parties and which are revenue-generating, and "R&D"
which includes the costs of our proprietary R&D activities in
product and technology developments.
GBPm Partnering R&D Total
------------------------- ----------- ------- -------
2016
Gross income 27.9 2.9 30.8
EBITDA 3.0 (10.1) (7.1)
Operating profit/(loss) 0.2 (11.5) (11.3)
2015
Gross income 16.3 2.5 18.8
EBITDA (2.7) (9.4) (12.1)
Operating loss (3.9) (10.2) (14.1)
------------------------- ----------- ------- -------
Partnering in 2016 saw an increase in gross income from GBP16.3
million to GBP27.9 million due mainly to the GBP11.6 million
increase in bioprocessing and commercial development revenues. The
additional volumes and revenues have enabled this segment to
advance from making GBP2.7 million EBITDA losses in 2015 to GBP3.0
million EBITDA profits, an improvement of GBP5.7 million and to a
small operating profit of GBP0.2 million. As bioprocessing volumes
continue to grow, this segment should become profitable.
The R&D segment generated slightly higher costs in 2016
compared with 2015.
Cash flow
The Group held GBP15.3 million cash at 31 December 2016, having
begun the year with GBP9.4 million. Net cash used in operations
during 2016 was GBP5.1 million, down from GBP13.1 million in 2015.
We concluded our major capacity expansion programme in the first
half of the year with purchases of property, plant and equipment
being GBP6.5 million compared with GBP16.7 million in 2015. Cash
burn, the aggregate of these items, was therefore reduced from
GBP29.8 million in 2015 to GBP11.5 million in 2016. The net
proceeds from financing during 2016 was GBP17.5 million.
The analysis of net cash used in operations is set out
below:
GBPm 2016 2015
-------------------------------------- ------- -------
Operating loss (11.3) (14.1)
Non-cash items included in operating
loss (1) 4.2 2.0
EBITDA loss (7.1) (12.1)
Working capital movement 1.2 (2.8)
Cash used in operations (5.9) (14.9)
Interest paid, less received (3.3) (1.5)
R&D tax credit received 4.1 3.2
Net cash used in operations (5.1) (13.1)
-------------------------------------- ------- -------
(1) Depreciation, amortisation, charge in relation to share schemes
Excluding the non-cash items from the operating loss, the EBITDA
loss in 2016 was GBP7.1 million, significantly better than the
GBP12.1 million EBITDA loss in 2015. A favourable working capital
movement of GBP1.2 million in 2016 compared with an adverse
movement of GBP2.8 million in 2015 resulted in the cash used in
operations in 2016 being only GBP5.9 million, compared with GBP14.9
million in 2015.
Note that the EBITDA loss for the six months to 30 June 2016 was
GBP5.2 million meaning that the EBITDA loss in the second half of
the year was reduced to GBP1.9 million.
Balance sheet review
The most notable items on the balance sheet, including changes
from 31 December 2015, are as follows:
- Property, plant and equipment has increased by GBP3.1 million
to GBP27.5 million as the additions of GBP6.5 million were
partially offset by the depreciation charge of GBP3.3 million.
GBP3.5 million of fully written down assets were disposed of when
we left the Medawar Centre having reached the end of their useful
lives.
- Investments of GBP0.7 million represent the carrying value of
the equity stake in Orchard Therapeutics, received as part of the
strategic alliance announced in November 2016.
- Trade and other receivables fell from GBP10.9 million to
GBP6.9 million, due predominantly to a reduction in trade
receivables, caused primarily by the timing and nature of
receivables at each year end.
- Trade and other payables fell from GBP9.3 million to GBP6.0
million, due to both lower trade payables and accruals at the end
of 2016 compared with 2015 when the capacity expansion programme
was underway.
- Current liability provisions were GBP0.8 million at 31
December 2015 but nil at the end of 2016. This dilapidation
provision had been in place to cover the costs of restoring the
Medawar Centre to its original condition at the end of the lease in
2016 and was fully utilised during the year.
- The loans balance has increased from GBP27.3 million to
GBP34.4 million. This is the fair value, expressed in pounds
sterling, of the $40 million drawn down under the $50 million
Oberland loan facility. It has increased mainly due to the
weakening to sterling against the US dollar during 2016.
Financial outlook
The Group expects that gross income (the aggregate of revenue
and other operating income) will continue to grow strongly in 2017.
We now have three GMP clean room suites and the new laboratory
complex fully operational, we have added new revenue-generating
partnerships during 2016 and we are confident that we can add
further relationships during 2017, all of which will contribute to
revenue growth. We will continue to manage our cost base carefully
as we now have in place most of the resources necessary to support
our plans for 2017. Our stated plan to spinout or out-licence our
product candidates which are ready to enter clinical studies will
mean that our expenditure on the priority programmes of OXB-102,
OXB-202 and OXB-302 should be low although we will continue to
invest in early stage concepts and pre-clinical studies, and also
in our key LentiVector(R) technology platform. The capacity
expansion programme was completed in 2016 therefore capital
expenditure is expected to be relatively modest in 2017.
Going concern
The Group held GBP15.3 million of cash at the end of 2016 and
GBP15.2 million at 28 February 2017. During 2016 the cash burn was
significantly reduced as a result of improved cash flow from
operations and reduced capital expenditure and the directors expect
further progress in 2017. Taking this into account, in conjunction
with currently known and probable cash flows, the Directors
consider that the Group has sufficient cash resources and cash
inflows to continue its activities for not less than twelve months
from the date of these financial statements and have therefore
prepared the financial statements on a going concern basis.
Tim Watts
Chief Financial Officer
Consolidated statement of comprehensive income
for the year ended 31 December 2016
Group
2016 2015
-------- --------
Continuing operations Total Total
Notes GBP'000 GBP'000
----------------------------- ----- -------- --------
Revenue 27,776 15,909
Cost of sales (11,835) (5,839)
----------------------------- ----- -------- --------
Gross profit 15,941 10,070
----------------------------- ----- -------- --------
Research, development and
bioprocessing costs (24,299) (20,274)
Administrative expenses (5,957) (6,741)
Other operating income 3,002 2,862
----------------------------- ----- -------- --------
Operating loss (11,313) (14,083)
Finance income 34 26
Finance costs (9,028) (2,925)
----- -------- --------
Loss before tax (20,307) (16,982)
----------------------------- ----- -------- --------
Taxation 3,666 3,963
----------------------------- ----- -------- --------
Loss and total comprehensive
expense for the year (16,641) (13,019)
Basic loss and diluted loss
per ordinary share 4 (0.60p) (0.51p)
----------------------------- ----- -------- --------
The notes on pages 19 to 25 form part of this preliminary
information.
Balance sheet
as at 31 December 2016
Group
2016 2015
Notes GBP'000 GBP'000
---------------------------- ----- --------- ---------
Assets
Non-current assets
Intangible assets 5 1,330 1,743
Property, plant and
equipment 6 27,514 24,396
Investments 7 657 -
---------------------------- ----- --------- ---------
29,501 26,139
---------------------------- ----- --------- ---------
Current assets
Inventories 8 2,202 2,706
Trade and other receivables 9 6,904 10,930
Current tax assets 3,000 2,721
Cash and cash equivalents 15,335 9,355
---------------------------- ----- --------- ---------
27,441 25,712
---------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 10 6,003 9,286
Deferred income 11 3,313 3,045
Provisions 13 - 838
---------------------------- ----- --------- ---------
9,316 13,169
---------------------------- ----- --------- ---------
Net current assets 18,125 12,543
---------------------------- ----- --------- ---------
Non-current liabilities
Loans 12 34,389 27,255
Provisions 13 622 533
---------------------------- ----- --------- ---------
35,011 27,788
---------------------------- ----- --------- ---------
Net assets 12,615 10,894
---------------------------- ----- --------- ---------
Equity attributable
to owners of the parent
Ordinary shares 30,879 25,741
Share premium account 154,036 141,677
Merger reserve 2,291 2,291
Treasury reserve (102) (102)
Accumulated losses (174,489) (158,713)
---------------------------- ----- --------- ---------
Total equity 12,615 10,894
---------------------------- ----- --------- ---------
The notes on pages 19 to 25 form part of this preliminary
information.
Statement of cash flows
for the year ended 31 December 2016
Group
2016 2015
Notes GBP'000 GBP'000
----------------------------------------------------- ----- ------- --------
Cash flows from operating activities
Cash used in operations 14 (5,929) (14,866)
Interest paid (3,258) (1,494)
Tax credit received 4,131 3,247
Overseas tax paid (50) (5)
----------------------------------------------------- ----- ------- --------
Net cash used in operating activities (5,106) (13,118)
----------------------------------------------------- ----- ------- --------
Cash flows from investing activities
Purchases of property, plant and equipment (6,458) (16,716)
Interest received 47 38
Net cash used in investing activities (6,411) (16,678)
----------------------------------------------------- ----- ------- --------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 19,622 144
Costs of share issues (2,125) -
Loans received - 27,812
Loans repaid - (3,000)
----------------------------------------------------- ----- ------- --------
Net cash generated from financing activities 17,497 24,956
----------------------------------------------------- ----- ------- --------
Net increase/(decrease) in cash and cash equivalents 5,980 (4,840)
Cash and cash equivalents at 1 January 9,355 14,195
Cash and cash equivalents at 31 December 15,335 9,355
----------------------------------------------------- ----- ------- --------
The notes on pages 19 to 25 form part of this preliminary
information.
Statement of changes in equity attributable to owners of the
parent company
for the year ended 31 December 2016
Share
Ordinary premium Merger Treasury Other Accumulated Total
shares account reserve reserve reserves losses equity
Group Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------ -------- -------- -------- -------- --------- ----------- ---------
At 1 January
2015 25,659 141,615 2,291 (226) (682) (145,618) 23,039
Year ended 31
December 2015:
-------------------- ------ -------- -------- -------- -------- --------- ----------- ---------
Loss for the
year - - - - - (13,019) (13,019)
---------------------------- -------- -------- -------- -------- --------- ----------- ---------
Total comprehensive
expense for
the year - - - - - (13,019) (13,019)
Transactions
with owners:
Share options
Proceeds from
shares issued 82 62 - - - - 144
Value of employee
services - - - - - 730 730
Vesting of deferred
share award - - - 124 - (124) -
Liquidation
of BioMedica
inc. - - - - 682 (682) -
At 31 December
2015 25,741 141,677 2,291 (102) - (158,713) 10,894
Year ended 31
December 2016:
-------------------- ------ -------- -------- -------- -------- --------- ----------- ---------
Loss for the
year - - - - - (16,641) (16,641)
---------------------------- -------- -------- -------- -------- --------- ----------- ---------
Total comprehensive
expense for
the year - - - - - (16,641) (16,641)
Transactions
with owners:
Share options
Proceeds from
shares issued 20 39 - - - - 59
Value of employee
services - - - - - 865 865
Issue of shares
excluding options 5,118 14,445 - - - - 19,563
Cost of share
issues - (2,125) - - - - (2,125)
At 31 December
2016 30,879 154,036 2,291 (102) - (174,489) 12,615
---------------------------- -------- -------- -------- -------- --------- ----------- ---------
The notes on pages 19 to 25 form part of this preliminary
information.
NOTES TO THE PRELIMINARY FINANCIAL INFORMATION
for the year ended 31 December 2016
1 Basis of preparation
This financial information, for the years ended 31 December 2016
and 31 December 2015, does not constitute the statutory financial
statements for the respective years, and is an extract from the
financial statements. It is based on, and is consistent with, that
in the Group's statutory accounts for the year ended 31 December
2016 and those financial statements will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. Financial statements for the year ended 31 December 2015
have been delivered to the Registrar of Companies. The auditors'
reports on the financial statements for the years ended 31 December
2016 and 31 December 2015 were unqualified and did not contain
statements under section 498 of the Companies Act 2006. The
financial information in this report does not constitute a
statutory financial statement within the meaning of sections
434-436 of the Companies Act 2006.
The financial statements have been prepared in accordance with
IFRIC interpretations, as applicable to companies using
International Financial Reporting Standards ('IFRS') as adopted by
the European Union and with the Companies Act 2006 under the
historic cost convention. Whilst the financial information included
in this preliminary announcement has been prepared in accordance
with IFRSs adopted for use in the European Union, this announcement
does not itself contain sufficient information to comply with
IFRSs.
Copies of this announcement are available from the Company
Secretary, and are on the Group's website. The audited statutory
financial statements for the year ended 31 December 2016 are
expected to be distributed to shareholders by 27 April 2017 and
will be available at the registered office of the Company, Windrush
Court, Transport Way, Oxford, OX4 6LT. Details can also be found on
the Group's website at: www.oxfordbiomedica.co.uk.
This announcement was approved by the Board of Oxford BioMedica
plc on 15 March 2017.
Going concern
The Group held GBP15.3 million of cash at the end of 2016 and
GBP15.2 million at 28 February 2017. During 2016 the cash burn was
significantly reduced as a result of improved cash flow from
operations and reduced capital expenditure and the directors expect
further progress in 2017. Taking this into account, in conjunction
with currently known and probable cash flows, the Directors
consider that the Group has sufficient cash resources and cash
inflows to continue its activities for not less than twelve months
from the date of these financial statements and have therefore
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 critical accounting judgements that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Revenue recognition
In October 2014, the Group entered into a series of contractual
arrangements with Novartis, including a licence over the Group's
existing LentiVector(R) platform, a production and clinical supply
agreement and an agreement covering process development.
Under these arrangements, the Group received $9.7m (GBP6.1m) in
upfront payments of which $7.7m (GBP4.8m) was received in respect
of a non-exclusive worldwide development and commercialisation
licence in oncology under the Group's existing LentiVector(R)
intellectual property gene delivery platform.
Management judged that this amount should be recognised as a
separate deliverable in 2014 discrete from amounts to be recognised
over the period of the three year production contract. This
judgement was based on management being satisfied that the customer
was able and intended to realise value from this licence
independently from any further intellectual property generated in
the collaboration and that its fair value is sufficiently reliable.
In reaching this judgement management had regard to several
considerations including:
- The existing intellectual property covered by the licence is
sufficient to allow the vector for CTL019 to be bioprocessed for
commercial use, and any intellectual property that might arise from
the process development under the contract is not a pre-requisite
for its commercial manufacture
- The licence allows Novartis to use the existing intellectual
property for other oncology products apart from CTL019
- The other elements of the arrangements have an appropriate
price and fair value (the residual elements)
- The $7.7m fee is comparable with similar transactions with
third parties that the Group has previously contracted, taking into
account the stage of development and the market potential of the
product
This judgement reflects both the separability of the licence for
the existing intellectual property and the assessment of the fair
values of each of the components of the Novartis agreements.
The remaining $2.0m of the $9.7m upfront payments are dependent
on certain events and activities over the 3 year period. As at 31
December 2016, $1.2m had been recognised as revenue (2015:
$0.4m).
Under the October 2014 contract, management judged that $1.2m of
a $2m incentive payment for provision of source documentation to
support a proposed BLA submission by Novartis should be recognised
at year end on the basis that, based on the level of work
performed, it is certain that the economic benefits of the
transaction will flow to the entity, and the revenue and related
costs can be measured reliably.
In 2016 the Group received GBP1.4m in one-off payments related
to IP licences. Since these payments are non-refundable and there
is no ongoing commitment from the Group, the amounts received have
been recognised as revenue in the year. GBP657,000 of these items
was received in the form of shares in a partner company. These have
been recognised at fair value.
Intangible asset impairment
The Group has intangible assets arising from purchases of
intellectual property rights and in-process R&D. Amortisation
is charged over the assets' patent life on a straight line basis
from the date that the asset becomes available for use. When there
is an indicator of a significant and permanent reduction in the
value of intangible assets, an impairment review is carried out.
The impairment analysis is principally based on estimated
discounted future cash flows. Actual outcomes could vary
significantly from such estimates of discounted future cash flows
due to the sensitivity of the assessment to the assumptions used.
The determination of the assumptions is subjective and requires the
exercise of considerable judgement. Any changes in key assumptions
about the Group's business and prospects, or changes in market
conditions affecting the Group, or its development partners, could
materially affect whether an impairment exists. This risk is now
concentrated on purchased patent rights which have been sublicensed
to collaborative partners. At 31 December 2016 the book value of
intangible assets was GBP1.3 million of which GBP1.1 million
related to PrimeBoost technology.
Going concern
Management and the Directors have had to make estimates and
important judgements when assessing the going concern status of the
Group. Going concern is as stated in Note 1 and the Financial
review.
3 Taxation
The Group is entitled to claim tax credits in the United Kingdom
for certain research and development expenditure. The amount
included in the statement of comprehensive income for the year
ended 31 December 2016 comprises the credit receivable by the Group
for the year, less overseas tax paid in the year. The United
Kingdom corporation tax research and development credit is paid in
arrears once tax returns have been filed and agreed. The tax credit
recognised in the financial statements, but not yet received, is
included in current assets in the balance sheet. The amounts for
2016 have not yet been agreed with the relevant tax
authorities.
2016 2015
GBP'000 GBP'000
---------------------------------------------------------------- -------- ---------
Current tax
United Kingdom corporation tax research and development credit (3,000) (2,721)
Overseas taxation 50 5
---------------------------------------------------------------- -------- ---------
(2,950) (2,716)
Adjustments in respect of prior periods
United Kingdom corporation tax research and development credit (716) (1,247)
Taxation credit (3,666) (3,963)
---------------------------------------------------------------- -------- ---------
4 Basic loss and diluted loss per ordinary share
The basic loss per share of 0.60p (2015:0.51p) has been
calculated by dividing the loss for the year by the weighted
average number of shares in issue during the year ended 31 December
2016 (2,778,182,534: 2015: 2,570,202,150).
As the Group is loss-making, there were no potentially dilutive
options in either year. There is therefore no difference between
the basic loss per ordinary share and the diluted loss per ordinary
share.
5 Intangible assets
Intangible assets comprise Intellectual Property rights.
2016 2015
GBP'000 GBP'000
-------------------------------- ------- -------
At 1 January and 31 December 5,591 5,591
--------------------------------- ------- -------
Accumulated amortisation
and impairment
At 1 January 3,848 3,485
Amortisation charge for the
year 335 363
Impairment charge for the
year 78 -
--------------------------------- ------- -------
At 31 December 4,261 3,848
--------------------------------- ------- -------
Net book amount at 31 December 1,330 1,743
--------------------------------- ------- -------
For intangible assets regarded as having a finite useful life,
amortisation commences when products underpinned by the
intellectual property rights become available for use. Amortisation
is calculated on a straight line basis over the remaining patent
life of the asset. Amortisation of GBP335,000 (2015: GBP363,000) is
included in 'Research, development and bioprocessing' in the
statement of comprehensive income.
6 Property, plant and equipment
Assets
Short Office Manufac-turing under
Freehold leasehold equipment and Laboratory constru-
property improve-ments and computers equipment ction(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------------- -------------- --------------- --------- -------
Cost
At 1 January 2016 6,938 7,397 1,374 7,574 9,744 33,027
Additions at cost - 206 506 1,526 4,220 6,458
Reclassifications 13,964 - - - (13,964) -
Disposals - (633) (229) (2,612) - (3,474)
------------------------- --------- -------------- -------------- --------------- --------- -------
At 31 December
2016 20,902 6,970 1,651 6,488 - 36,011
------------------------- --------- -------------- -------------- --------------- --------- -------
Accumulated depreciation
At 1 January 2016 921 2,909 753 4,048 - 8,631
Charge for the
year 1,385 522 353 1,080 - 3,340
Disposals - (633) (229) (2,612) - (3,474)
At 31 December
2016 2,306 2,798 877 2,516 - 8,497
------------------------- --------- -------------- -------------- --------------- --------- -------
Net book amount
at 31 December
2016 18,596 4,172 774 3,972 - 27,514
------------------------- --------- -------------- -------------- --------------- --------- -------
Assets
Short Office Manufac-turing under
Freehold leasehold equipment and Laboratory constru-
property improve-ments and computers equipment ction(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------------- -------------- --------------- --------- -------
Cost
At 1 January
2015 6,887 2,623 820 5,335 646 16,311
Additions at
cost 51 863 554 2,239 13,009 16,716
Disposals - 3,911 - - (3,911) -
At 31 December
2015 6,938 7,397 1,374 7,574 9,744 33,027
------------------------- --------- -------------- -------------- --------------- --------- -------
Accumulated depreciation
At 1 January
2015 698 2,579 595 3,495 - 7,367
Charge for the
year 223 330 158 553 - 1,264
At 31 December
2015 921 2,909 753 4,048 - 8,631
------------------------- --------- -------------- -------------- --------------- --------- -------
Net book amount
at 31 December
2015 6,017 4,488 621 3,526 9,744 24,396
------------------------- --------- -------------- -------------- --------------- --------- -------
1 Assets under construction represent the capitalisation of
construction works at the Harrow House and Yarnton manufacturing
facilities, and the Windrush Court laboratories.
7 Investments
On 29 November 2016, as part of a strategic alliance with
Orchard Therapeutics, the Group received a 1.95 % equity stake in
Orchard. This investment has been classified at fair value through
the profit & loss (2016: GBP657,000; 2015: GBPnil). As Orchard
Therapeutics is a private company, the equity investment has not
been valued based on observable market data.
8 Inventories
2016 2015
GBP'000 GBP'000
----------------- ------- -------
Raw Materials 2,120 2,217
Work in progress 82 489
Total inventory 2,202 2,706
----------------- ------- -------
Inventories constitute raw materials held for commercial
bioprocessing purposes, and work-in-progress inventory related to
contractual bioprocessing obligations.
During 2016, the Group wrote down GBP29,000 of inventory which
is not expected to be used in production or sold onwards.
9 Trade and other receivables
2016 2015
GBP'000 GBP'000
---------------------------------- ------- -------
Trade receivables 1,969 7,374
Accrued income 2,919 1,155
Other receivables 238 31
Other tax receivable 1,330 1,522
Prepayments 448 848
Total trade and other receivables 6,904 10,930
------------------------------------ ------- -------
The fair value of trade and other receivables are the current
book values.
Included in the Group's trade receivable balance are debtors
with a carrying amount of GBP47,000 (2015: GBP826,000) which were
past due at the reporting date, all of which have since been
received.
10 Trade and other payables
2016 2015
GBP'000 GBP'000
----------------------------------- ------- -------
Trade payables 1,576 3,588
Other taxation and social security 442 384
Accruals 3,985 5,314
Total trade and other payables 6,003 9,286
------------------------------------- ------- -------
11 Deferred income
Deferred income arises when the Group has received payment for
services in excess of the stage of completion of the service being
provided.
12 Loans
In May 2015, the Group entered into the $50 million Oberland
Facility. The Group has used $40 million (GBP26.1 million) of the
facility to finance the Group's expansion of its bioprocessing and
laboratory capacity in order to enable it to deliver on commitments
under its bioprocessing agreement with Novartis. The Group drew
down $25 million (GBP16.3 million) of the loan in May 2015 and a
further $15 million (GBP9.8 million) in September 2015 to ensure
adequate finance for the ongoing capacity expansion programme. The
remaining funds under the Oberland Facility are available to be
drawn down in minimum tranches of $5 million at the Group's option
prior to 31 March 2017 and the proceeds of such drawdowns may be
used only for certain permitted acquisitions and licensing
activities as approved by Oberland in its sole discretion. The
Oberland Facility is repayable not later than 1 May 2022 and may be
prepaid at any time. Over the course of the loan term, interest is
payable quarterly at an annual interest rate of 9.5 per cent. plus
the greater of 1 per cent. and three month LIBOR. Under the terms
of the Oberland Facility, loans are issued at an original discount
of 2.5 per cent. In addition to interest, a repayment fee is also
payable upon any repayment including on exit. Oxford BioMedica will
also pay an additional amount of 0.35 per cent. of its annual
worldwide net revenue, as calculated from the Group's financial
statements, from 1 April 2017 to 31 December 2025 for each $5
million of loan drawn down over $30 million. This revenue
participation may be retired at any time upon payment of an exit
fee. In the event that the loan is repaid after the second
anniversary there may be a true-up payment payable to Oberland in
the event that the aggregate of the interest payments, revenue
participation payments and exit fee do not in aggregate provide a
return of 15 per cent. per annum to Oberland. The outstanding
balance at year end is GBP34.4 million (2015: GBP27.3 million).
The Group is required to maintain a cash balance not less than
$10 million (approximately GBP8.1 million) while the Oberland
Facility is outstanding. The Oberland Facility is secured by a
pledge over substantially all of the Group's assets. Drawdowns of
additional tranches are subject to certification by Oxford
BioMedica that representations and warranties under the Oberland
Facility agreement remain true and correct as of the drawdown date,
and certifications relating to no default or material adverse
effect.
In 2013, the Group was awarded a funding package of GBP7.1
million under the UK Government's Advanced Manufacturing Supply
Chain Initiative. Of this package, GBP5.3 million was a loan
facility bearing interest at 6 per cent., and GBP1.8 million was in
the form of grant finance. In April 2014, the Group drew down GBP1
million from the AMSCI facility. In March 2015, the Group drew down
a further GBP2 million from the AMSCI facility. During May 2015,
the loan facility was terminated and the outstanding balance was
repaid.
13 Provisions
Dilapidations
GBP'000
-------------------------------- -------------
At 1 January 2016 1,371
Unwinding of discount 5
Utilisation of provision (833)
Additional provision recognised 79
---------------------------------- -------------
At 31 December 2016 622
---------------------------------- -------------
At 1 January 2015 535
Unwinding of discount 3
Additional provision recognised 833
At 31 December 2015 1,371
---------------------------------- -------------
The dilapidations provision relates to anticipated costs of
restoring the leasehold Medawar and Yarnton properties in Oxford,
UK to their original condition at the end of leases in 2016 and
2024 respectively, discounted using the rate per the Bank of
England nominal yield curve. The equivalent rate was used in 2015.
The provisions will be utilised at the end of the leases if they
are not renewed, and for that reason, the provision in respect of
the Medawar Centre was released in 2016 at the end of the
lease.
14 Cash flows from operating activities
Reconciliation of loss before tax to net cash used in
operations:
2016 2015
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Continuing operations
Operating loss (11,313) (14,083)
Adjustment for:
Depreciation 3,340 1,264
Amortisation of intangible assets 335 363
Charge for impairment 78 -
Charge in relation to employee share schemes 865 730
Non-cash revenues (657) -
Changes in working capital:
Decrease / (increase) in trade and other receivables 4,026 (5,777)
(Decrease) / increase in trade and other payables (3,283) 2,982
Increase in deferred income 268 118
(Decrease) / increase in provisions (749) 836
Increase in investments 657 -
Decrease / (Increase) in inventory 504 (1,299)
-------------------------------------------------------- -------- --------
Net cash used in operations (5,929) (14,866)
-------------------------------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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