8 Jun 2015 07:00
ABZENA PLC
("Abzena", the "Company" or the "Group")
Results for the year ended 31 March 2015
8 June 2015
Cambridge, UK - Abzena plc (AIM: ABZA), a life sciences company providing services and technologies that enable the development of better biopharmaceutical products, today announces its results for the year ended 31 March 2015.
John Burt, CEO of Abzena, and Julian Smith, CFO, will host a presentation of the results for analysts at 9:00am today at the offices of Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY.
Corporate highlights
§ Successful completion of Initial Public Offering and Admission to AIM, a segment of the London Stock Exchange on 10 July 2014, raising £20 million for the Company (before expenses)
§ Launch of the Abzena brand in May 2014 to provide Group identity whilst maintaining the two individual brands of Antitope and PolyTherics
§ Relocation of corporate headquarters and the scientific operations of PolyTherics from London to the Babraham Research Campus near Cambridge, UK
§ Board strengthened with Peter Grant, CEO of Skyepharma plc, joining in June 2014 as a non-executive director
§ Three more therapeutic antibody candidates derived from Antitope's Composite Human Antibody™ platform enter clinical development, bringing the total to eight
§ Completed 129 service projects for more than 80 customers and entered into eight agreements with potential to generate future milestones and/or royalty payments
Post-period highlights
§ In April, Gilead Sciences reported that it plans to move GS-5745 into a Phase III clinical study in gastric cancer in late 2015 based on promising safety and efficacy data. A Phase II study in moderate-to-severely active Crohn's disease has also been initiated.
§ In May, Abzena announced it would provide Apitope with analytical support for development of a novel treatment for haemophilia A patients with Factor VIII inhibitors
§ Licence agreement signed with Annexon Biosciences for ANX005, a Composite Human Antibody™ being developed for the treatment of neurodegenerative and autoimmune diseases
Financial summary
§ Revenues of £5.7 million (Year ended March 2014: £3.8 million)
§ Research and Development expenditure of £3.0 million (Year ended March 2014: £2.0 million)
§ Reported loss of £4.7 million (Year ended March 2014: £3.9 million)
§ Cash and cash equivalents of £15.8 million up from £2.8 million at 31 March 2014
Commenting on the results, John Burt, Abzena's CEO, said: "The last year has seen Abzena make significant progress towards its mission of enabling R&D companies to develop better biopharmaceutical products and we are looking forward to the future with confidence. Our service business continues to see good levels of repeat business and we are working with a growing international client base that includes many of the world's top pharmaceutical companies. We have seen exciting progress with products enhanced using our technologies with eight antibodies now being progressed through clinical development by our partners. Furthermore, we are gaining greater traction with our next generation technologies for antibody drug conjugates (ADCs), an area with significant medical and commercial potential. We can look forward with confidence to the coming years."
About Abzena
Abzena provides proprietary technologies and complementary services to enable the development of better biopharmaceuticals. The Group comprises PolyTherics and Antitope which have established a broad suite of services and technologies that are designed to improve the chances of successful development of antibodies and proteins with enhanced therapeutic benefits.
Antitope provides immunogenicity assessment, protein engineering to create humanized antibodies and deimmunised therapeutic proteins, and cell line development for manufacture.
PolyTherics specializes in proprietary site-specific conjugation technologies for antibody drug conjugate development and solutions for optimization of the therapeutic properties of biopharmaceuticals.
The Group has built a global customer base over the past decade which includes the majority of the top 20 biopharmaceutical companies, many large and small biotech companies, and academic groups.
Abzena is quoted on the AIM segment of the London Stock Exchange under the symbol ABZA.
www.abzena.com
For more information, please contact:
John Burt (Chief Executive Officer)
Julian Smith (Chief Financial Officer)
Abzena plc
Tel: +44 (0)1223 903498
Email: john.burt@abzena.com or julian.smith@abzena.com
Christopher Golden and Bobbie Hilliam
Cenkos Securities (Nominated Adviser and Broker)
Tel: +44 (0)20 7397 8900
Mark Swallow, Chris Gardner or Pip Batty
Citigate Dewe Rogerson (Corporate and Financial PR)
Tel: +44 (0)20 7638 9571
Email: abzena@citigatedr.co.uk
Chairman's statement
In this first annual statement to shareholders, I am pleased to report that the last year has been a transformational one for Abzena and has seen the Group emerge as a significant player in the resurgent life sciences industry in the UK.
The Group has taken important steps towards its mission of enabling R&D companies to develop better biopharmaceutical products - therapeutic antibodies or proteins. Seven of the world's top ten selling medicines are biopharmaceuticals and the market for biopharmaceuticals is growing.
At the start of 2014 we committed to pursuing an IPO on AIM and a concurrent financing to provide the capital to fund the Group's continued development, to provide funds as well as quoted shares as currency for future acquisitions, and to provide liquidity to our investors.
In preparation for the IPO, we created Abzena plc as the Group holding company that sits on top of our customer-focused brands, Antitope and PolyTherics. I was delighted that the Group's hard work was rewarded by the successful completion of the IPO on 10 July raising £20 million of new funding.
In addition, shortly after completing the IPO, the Group consolidated its operations and brought together its London and Cambridge based scientists on the Babraham Research Campus, near Cambridge, UK.
The Group's financial performance over the year to 31 March 2015 was solid with revenues in line with expectations outlined at the time of its interim results. We continue to see good levels of repeat business and work with a diverse international client base that includes many of the world's top pharmaceutical companies. During the year we also began to achieve greater commercial traction with our next generation technologies for antibody drug conjugates (ADCs), an area with significant medical and commercial potential.
Alongside our service business, we have seen exciting progress made with products enhanced using our technologies with the number of antibodies being developed by our partners rising from five in clinical development to eight during the year. Several products have made significant progress, including GS-5745, being developed by Gilead Sciences, which is being prepared to enter Phase III trials in gastric cancer in late 2015 and the expansion of Opsona's OPN-305 clinical development programme to include a second parallel Phase II study, in myelodysplastic syndrome.
These products come from an expanding portfolio of more than 30 licences and options to licences to partners to develop products that have been enhanced using Abzena's technologies. The Board believes that the successful development and commercialisation of products created using the Group's proprietary protein engineering and bioconjugation technologies has the potential to generate significant future long-term revenues for Abzena.
Board changes
In conjunction with the IPO, the Board was strengthened with the appointment of Peter Grant, CEO of Skyepharma plc, who joined in June as a non-executive Director, and who brings a wealth of commercial, financial and management experience to the Group. I would like to express my thanks to Mark Payton and Stephane Mery for their contributions to the Group in the years leading up to the IPO and who stepped down from the Board as Abzena completed its IPO.
Outlook
Abzena is well funded and, having consolidated and invested in its activities in Cambridge, the Company has a strong platform from which to drive its business towards sustainability and profitability, and to capitalise on the growth of the biopharmaceutical R&D market. In addition to growing our existing business, we see opportunities to strengthen it further through technology in-licensing and M&A with the key objective to retain the balanced business model focused on delivering high margin services and longer term revenue growth through technology licences. Working proactively with partners at the earlier stages of the biopharmaceutical R&D process, the Group also sees the opportunity to help accelerate its partners' product development through access to Abzena's expertise, technologies and capabilities. In so doing, Abzena would capture a greater share of the value arising through the process of enabling the development of better biopharmaceuticals.
I wish to thank our employees, management and board for their hard work and our shareholders and all other stakeholders for their support during the year and look forward to seeing the Group continue its growth after the transformational year just ended.
Ken Cunningham, Chairman
8 June 2015
Background information
Abzena provides services and proprietary technologies to enable the selection and development of better biopharmaceuticals. Biopharmaceuticals - which includes therapeutic antibodies and proteins - make up seven of the world's ten largest selling drugs and represent a market expected to grow to over $166 billion by 2017.
The Group has two revenue streams, one generated from the provision of services and the other through technology licences. These are provided to R&D companies via our customer-focused brands, Antitope and PolyTherics.
Antitope
Provides immunogenicity assessment, protein engineering and manufacturing cell line development. The Company's protein engineering technologies, Composite Human Antibodies™ and Composite Proteins™, are used to create novel products with less risk of producing an unwanted immune response in patients.
PolyTherics
Offers proprietary site-specific bioconjugation of drugs to therapeutic antibodies and other targeting proteins which deliver the drug to specific cells, including cancer cells. The Company's linker is also used to attach polymers, including a novel polymer developed by Warwick Effect Polymers which PolyTherics acquired in 2012, to therapeutic products to extend their duration of action and thereby reduce the frequency with which they need to be injected.
Abzena has a diverse international customer base including:
§ Major pharmaceutical companies
§ Public and private biotech companies
§ Universities and research institutes.
Abzena has its headquarters and main laboratories on the Babraham Research Campus, near Cambridge, UK, and a specialist chemistry laboratory on the University of Warwick Science Park in Coventry, UK. The Group employs more than 100 people, the vast majority of whom are scientists.
Abzena plc is quoted on the Alternative Investment Market (AIM), a segment of the London Stock Exchange, under the symbol ABZA.
A pdf copy of the results is available at: www.abzena.com/results-and-presentations
Strategic overview
Business model
Abzena is a revenue generating life sciences group with a range of complementary services and technologies that provide two sources of income:
§ Fee for service income from a diverse, international customer base
§ Licence revenues from the development and commercialisation of products enhanced with the Group's technologies.
Abzena's services and technologies are provided via its customer-focused brands, Antitope and PolyTherics.
The Group's customers engage with Abzena during the early stages of the biopharmaceutical development process in order to understand, define and enhance the safety, efficacy and manufacturing quality of their products. Service revenues arise from projects to assess the potential immunogenicity of proteins and antibodies prior to clinical development, the creation of manufacturing cell lines to enable manufacture in accordance with Good Manufacturing Practice (GMP), and the Group's protein engineering and bioconjugation capabilities. Access to the protein engineering and bioconjugation services precedes technology licences for these technologies.
The Group's range of proprietary technologies cover protein engineering (Composite Human Antibodies™ and Composite Proteins™), site-specific bioconjugation technologies (including ThioBridge™ and TheraPEG™) and its novel polymer (PolyPEG™). Licences granted to Abzena's partners for access to these technologies have the potential to generate significant licence revenues for the Group in the form of milestone payments and/or royalties as products enhanced with its technologies progress through development and are commercialised. The products are developed by Abzena's partners (or their licensees), and therefore Abzena will benefit from the successful commercialisation of the products without carrying the financial risk of their development.
Market opportunity
Within the overall biopharmaceutical sector, the global market for therapeutic antibodies1 was worth nearly $63.4bn in 2013 and is expected to grow at a compound annual growth rate (CAGR) of 12.2% between 2014 and 2019 resulting in total sales of $122.6bn globally in 2019. The total market for biopharmaceutical products is predicted to reach more than $166bn by 20172.
By the end of 2014, 47 therapeutic antibodies were marketed in the US and Europe for a wide range of diseases with new approvals running at about four to five products a year3. There are more than 300 therapeutic antibodies in development.
R&D investment in the discovery and early development of novel biopharmaceuticals is a multi-billion dollar activity with much of the work being outsourced to service providers and contract research organisations.
Strategy
Abzena's strategy is to increase both the service revenue and the opportunity for revenues from technology licences by:
§ Proactively working with early stage partners engaged in biopharmaceutical R&D to accelerate their development of products enhanced with Abzena's technology
§ Investing in internal R&D to expand its service and technology offering
§ In-licensing technologies that are complementary to or enhance its current offering
§ Undertaking M&A to add new revenue streams and provide additional services and/or technologies.
Proactive engagement with early-stage partners
Working with companies, such as Annexon Biosciences, at the earliest stages of their development, Abzena can apply its technologies to enhance the properties of their biopharmaceutical product candidates to help such companies secure institutional and venture capital investment to enable product development to progress.
Abzena will additionally pursue opportunities to add further value through co-investment in the adoption of the Group's technologies by its partners to create better biopharmaceutical products. Such activities could include investment in companies developing products based on the Group's technologies, such that further service and licence revenues can be secured as products are progressed and commercialised, in addition to any equity return on investment.
Internal R&D
To provide further opportunities for growth and to maintain the Group's competitive position, Abzena invests in internal R&D to expand its range of services and technologies.
In the previous 12 months internal investment in R&D into the ThioBridge™ bioconjugation technologies at PolyTherics has expanded the range of linkers available for conjugating drugs to antibodies and pursued the creation of novel compounds which could potentially be used as payloads for antibodies to treat cancer. This investment will enable PolyTherics to offer more options to its partners and provide them with a wider range of ADCs to evaluate so the best product candidate can be selected.
R&D investment in services and technologies offered by Antitope has resulted in an additional system for production of research grade proteins in yeast, increased capacity to develop manufacturing cell lines, and a new assay for understanding immunological responses to novel biopharmaceuticals.
In-licensing technologies
In-licensing of third party developed technologies can augment in-house R&D to increase the range of services and technologies Abzena can offer to companies and other organisations. Abzena is evaluating opportunities to expand its service and technology offering to its partners in the discovery and early development phases as well as to enhance the existing service offerings, such as improvements to the Group's Composite CHO™ cell line development service.
M&A
Abzena's strategy to further drive long-term revenue growth and the transition to cash generation embraces the potential step-changes that can be achieved through the acquisition. Acquisitions of technologies and/or businesses will be aligned with the key objective of retaining the Company's balanced business model of delivering high margin services and revenue growth through technology licences.
Chief Executive Officer's Review
The last 12 months have been a year of significant progress for Abzena. The Company unveiled its new Group name and brand, completed a successful IPO, raising £20 million, and consolidated the majority of its operations and R&D on the Babraham Research Campus, near Cambridge, in the heart of the UK's bioscience cluster.
Against this backdrop, Abzena generated £5.7 million in consolidated Group revenues in the year ended 31 March 2015. In the prior year, revenue was £3.8 million although this only reflects eight months revenue from Antitope following its acquisition in July 2013
Our mission is to create a leading provider of services and technologies to enable the development of better biopharmaceuticals. We have a clear and balanced business model to generate income and, in time, profit from:
§ High margin services provided to a diverse international customer base
§ Technology licences with biopharmaceutical partners that provide milestone payments and/or royalties as their products, which have been enhanced by Abzena's proprietary technologies, advance through development and are commercialised.
This model is designed to create a sustainable and profitable business with the potential for significant cash generation in the years ahead if these products reach the market.
The combination of Antitope (immunogenicity assessment, protein engineering, and cell line development) and PolyTherics (bioconjugation) provides a broad-based offering that combines biology, whether it is immunology or molecular biology, with a chemistry capability embracing synthetic chemistry and bioconjugation. The value of this combination and the consolidation of our R&D operations in Cambridge is being realised as we are successfully securing projects that leverage multiple facets of the Group's capabilities. I expect to see more of these integrated projects being delivered for our partners in the coming year and we anticipate such projects driving the further expansion of our portfolio of technology licence agreements.
Immunology
During the year, Abzena completed over 70 immunogenicity assessment studies for more than 35 different customers. Significant repeat business has come from major pharma companies utilising Antitope's EpiScreen™ immunogenicity assessment services as well as new business from emerging companies, such as Synthon. More broadly, the customer base for Antitope's services reflects the global life sciences industry with projects originating from companies and research institutions based in North America, Europe, China, Japan and South Korea.
Antitope's immunology group has an international reputation for the quality of its research services, enhanced by the correlation of the results of EpiScreen™ studies with reported clinical immunogenicity. Novartis presented EpiScreen™ study results for secukinumab, its anti-IL17 antibody for treating psoriasis in December 2014 showing that it had low immunogenic potential. Secukinamab was approved in January 2015 in Europe and the USA as Cosentyx™ for the treatment of moderate to severe plaque psoriasis.
The immunogenicity assessment field is increasingly active as companies attempt to identify and reduce the risk of their development candidates producing an unwanted immunogenic response before entering clinical development.
Antitope strives to be at the forefront of immunology research services and is increasingly conducting bespoke research studies for its clients as exemplified by the announcement in May 2015 that we will provide support for Apitope's development of a novel treatment for Factor VIII inhibitors in haemophilia A patients.
Protein engineering
A core strategic driver of Abzena's long-term revenue growth is the licensing of its technologies to partners, to create humanised or deimmunised biopharmaceuticals that the Group's partners then take forward into development with no additional financial expenditure by the Group.
At the time of the IPO, five products derived from the Group's Composite Human Antibody™ platform were disclosed as being in clinical development. These were the most advanced products enhanced using Abzena's technologies under development by its partners and are part of the portfolio of more than 30 licence and licence option agreements granted by the Group.
Since the IPO, three more partner products have advanced into clinical development. Of these eight candidates, four are in Phase I and four in Phase II studies for a broad range of diseases, with one (GS-5745) reported by Gilead Sciences to be advancing into Phase III trials in gastric cancer later in 2015. Further Composite Human Antibodies™ are expected to enter clinical development in the next 12 to 24 months.
During the year, we have worked on six new Composite Human Antibody™ projects and we are pleased to see previous Composite Human Antibody™ customers, such as Annexon Biosciences, secure significant venture capital investment to progress the development of their programmes. Owing to commercial confidentiality, the Group is unable to provide detail on many of the Composite Human Antibody projects, but we were pleased to announce in August 2014 a research and licence agreement for a project, completed in March 2015, for University College London to humanize an anti-LRG-1 antibody which has the potential to be developed for treatment of age-related macular degeneration.
Cell line development
Compared to other service offerings, cell line development contracts are higher value but less numerous. During the period, we initiated significant cell line development projects for US and European customers including Baylor Institute of Immunology Research (Dallas TX, USA), in June 2014 (cancer) and in January 2015 (HIV; in collaboration with INSERM and ANRS (France)), building on the relationship that was established through Antitope's immunology expertise and successful delivery of protein engineering projects.
To ensure that Abzena remains competitive, we are investing to broaden the range of cell lines available to our customers as well as process improvements to increase the efficiency of our cell line development offering. Looking to the future, investments in cell culture and purification process development and scale-up capability will provide greater continuity of our involvement with partners as they progress through the biopharmaceutical development process.
Bioconjugation
The bioconjugation and synthetic chemistry groups at PolyTherics have led the development of the Group's proprietary ThioBridge™ technology, a site-specific bioconjugation technology for the production of less heterogeneous and more stable antibody drug conjugates (ADCs). During the year more than 15 companies have received antibody drug conjugates (ADCs) and other novel conjugate products produced using our proprietary ThioBridge™ linker technology for evaluation.
Important progress has also been made with our ThioBridge™ technology, with in vivo studies, presented at the World ADC Summit in February 2015, demonstrating superior efficacy of ThioBridge™ ADCs using trastuzumab (as used for Kadcyla®) and brentuximab (as used for Adcetris®) over the marketed products.
Aligned with the Group's investment in the ThioBridge ADC linker technology, internal investment and external collaborations have pursued the development of novel payloads to be used in conjunction with ThioBridge to expand the offering to our partners.
The bioconjugation group offering is not limited to the ADC field and, a number of companies are currently evaluating the Group's TheraPEG™, HiPEG™ and PolyPEG™ technologies to optimise the pharmacokinetics and pharmacodynamics of protein therapeutics.
Utilising some of the proceeds of the IPO, Abzena has further invested in the analytical capability for characterisation of ADCs which is a key challenge for these complex products and the enhanced analytical capability also supports the cell line development group's projects for biosimilar development.
Intellectual property and regulatory licences
Abzena's services and technologies are built on many years of investment in the fields of immunogenicity assessment, protein engineering, cell line development and bioconjugation. The Group is committed to investing in its R&D to broaden and enhance its offering, and continues to build its patent portfolio, which has been reinforced with the grant or allowance of 20 patents over the year.
During the period the Human Tissue Authority granted a licence for the storage of blood samples for research purposes. The historical absence of a licence has been referred to the relevant authority for investigation as a potential breach of the Human Tissue Act. This process is not expected to have any material impact on the business.
Operations
During the summer of 2014, Abzena relocated its London-based team, primarily the corporate offices and PolyTherics' bioconjugation and synthetic chemistry groups, to the Babraham Research Campus, near Cambridge, UK. We now have more than 65 scientists based at Babraham in the heart of the UK's leading life sciences cluster and, following a period of integration, are beginning to see the benefits of their working more closely together. At the same time we have expanded our specialist chemistry team at the University of Warwick Science Park (Coventry), which has been part of PolyTherics' operations since January 2012.
Longer term, Imperial College London has committed to the development of a new facility on the Babraham Research Campus. This development will provide purpose-built labs and offices for growing companies such as Abzena and we are looking forward to being an anchor tenant. It is anticipated that construction will commence in mid-2015 and that we will be occupying this new facility in 2016.
In March 2015, we also strengthened our Executive Management Team with the addition of Jim Mills as Vice President, Technical Operations to provide additional technical support to Abzena's partners and the Group's technology development and commercial activities.
Outlook
Having combined the businesses of Antitope and PolyTherics in July 2013, which resulted in greater critical mass, we are beginning to see the benefit of our broader offering to our partners in the biopharmaceutical R&D community.
Picking up the momentum in the business after the IPO, performance in the second half of the year to March 2015 was stronger than in the first half and this increased level of activity across the business has continued into the current financial year.
In the longer term, the Board expects the Group's service revenues to grow, along with an increased level of licence revenues as new licensing agreements are secured, licence options are exercised and programmes under existing deals progress in development. The Board expects further antibodies to enter clinical development in the next 12 to 24 months to add to the eight Composite Human Antibodies™ already in the clinic.
Whilst we face competition from established peers and the emergence of new competitors, we are seeing business opportunities for each of our service and technology areas across the spectrum of customers from academic research institutions through private and public biotech companies to the major pharma companies. Increasingly, the Board believes that Abzena will not only provide services and technologies to its partners, but will seek to engage with them to enable their development programmes and leverage its capabilities and funding capacity to move projects from discovery to candidate selection and then on towards clinical development.
Looking ahead, we will continue to execute the strategy we set out at IPO to enhance our offering through R&D investment, collaboration, technology licensing, or strategic M&A, and achieve step changes in our growth trajectory. The Board and Executive Management team exercise rigorous discipline in pursuing M&A opportunities and will only pursue transactions that provide value to our shareholders with the objective of maintaining the balanced business model of service revenues and the upside value of technology licences.
We believe Abzena has made solid progress over the past year; our strong balance sheet and balanced, sustainable business model puts us in a good position to capitalise on the significant opportunities we see for enabling the development of better biopharmaceuticals and driving shareholder value. We can look forward with confidence to the coming years.
[1] Antibody Drugs: Technologies & Global Markets; BCC Research, Jan 2015
[2] IMARC’s ‘Research and Markets: Global Biopharmaceutical Market Report & Forecast (2012-2017)
[3] Ecker et al. mAbs. 2015; 7(1):9-14
John Burt, Chief Executive Officer
8 June 2015
Financial report
The following section should be read in conjunction with the Summary Financial Information and related notes.
Accounting Periods
The Group's prior period financial comparative information in the Summary Financial Information is for the 15 month period ended March 2014. However, to aid comparison between the financial performances for the year ended March 2015, additional comparison with the year ended 31 March 2014 is set out below.
Summary Proforma Consolidated Statement of Comprehensive Income
|
|
|
|
| Year ended | Year ended | 15 months |
| 31 March | 31 March | 31 March |
| 2015 | 2014 | 2014 |
| £'000 | £'000 | £'000 |
|
|
|
|
Revenue | 5,667 | 3,780 | 5,261 |
Cost of sales | (2,532) | (1,735) | (1,697) |
Gross profit | 3,135 | 2,045 | 3,564 |
Other operating income | 189 | 141 | 126 |
Research & development costs | (2,989) | (2,028) | (2,601) |
Administrative expenses |
|
|
|
- Other | (5,634) | (4,196) | (4,787) |
- Exceptional items | - | (413) | (426) |
Operating loss | (5,299) | (4,451) | (4,124) |
Finance income | 88 | 21 | 33 |
Finance expense | (9) | (6) | (6) |
Loss before income tax | (5,220) | (4,436) | (4,097) |
Taxation | 498 | 534 | 548 |
Loss for the period | (4,722) | (3,902) | (3,549) |
Both the comparative statements covering the year and the 15 months ended March 2014 are prepared on a consolidated basis reflecting eight months trading activity arising from the acquisition of Antitope Limited on 25 July 2013 as described more fully in note 1 Accounting Policies set out herein.
Overview
The period for the 12 months ended 31 March 2015 is dominated by the impact of the funds raised at the admission to AIM in July 2014 which raised £20.0 million for the Company, enabling the Group to end the year with a cash balance of £15.8 million.
Revenues remained steady on a comparable basis at £5.7 million for the full year with the second half of the year showing growth of £0.8 million over the first half of the year. The reported increase year on year is primarily a factor of the acquisition of Antitope Limited occurring part way through the prior year.
R&D investment to broaden and enhance the services and technologies offered by the Group increased to £3.0 million and is expected to drive future growth in service and licence revenues.
The consolidated operating loss for the Group for the year ended 31 March 2015 increased to £5.3 million, compared with £4.5 million in the previous 12 month period reflecting increased investment ahead of the growth anticipated over the coming years. Operating loss for the year ended 31 March 2014, includes £0.4 million of exceptional administrative expenses, which related to costs incurred to acquire Antitope Limited. No such comparable costs were incurred in the year ended 31 March 2015.
Revenues
Total revenues for the year ended 31 March 2015 were £5.7 million, compared to £3.8 million in the 12 months ended 31 March 2014. Total Revenues include both service and licences revenues.
|
| Restated | Restated |
| Year ended | Year ended | 15 months |
| 31 March | 31 March | 31 March |
| 2015 | 2014 | 2014 |
| £'000 | £'000 | £'000 |
|
|
|
|
Service revenue |
|
|
|
Immunology | 2,940 | 2,196 | 2,196 |
Protein engineering | 1,218 | 932 | 932 |
Cell line development | 594 | 419 | 419 |
Bioconjugation | 657 | 154 | 165 |
Total service revenue | 5,409 | 3,701 | 3,712 |
|
|
|
|
Licence revenue | 258 | 79 | 1,549 |
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|
|
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Total | 5,667 | 3,780 | 5,261 |
Substantially all the service income arising in the 12 month period ending March 2014 arose subsequent to the acquisition of Antitope Limited with £0.1 million arising from service income in connection with PolyTherics' bioconjugation technologies. In the year ended March 2015, bioconjugation-related service income in PolyTherics had risen to £0.7 million. This increased bioconjugation revenue includes a number of evaluation studies of the ThioBridge™ bioconjugation technology which are a precursor to further studies and eventual licence agreements as the technology is incorporated into the customer's products.
Licence revenue includes amounts received under licences to the technologies of both Antitope Limited and PolyTherics Limited, in both the current and previous financial years.
Key to the ongoing success of the Group and providing an indicator on the view of the services provided and its technology is reflected in the number of repeat customers buying additional services from the Group. The Group has historically retained a high level of repeat customers particularly for the Episcreen™ immunogenicity assessment studies. Revenue generated from repeat customers for the year ended 31 March 2015 was £3.8 million, compared with £2.9 million in the year ended 31 March 2014.
Additionally the Group contracted with 99 customers during the year ended March 2015, the top 10 represent £2.4 million in revenue (43%), compared with the prior period where the top 10 represented £3.1 million (59%) demonstrating the spread of the customer base and the lack of reliance on a few significant customers.
Gross Profit
Cost of sales rose to £2.5 million in line with the increase in revenue, and the gross profit margin generated from service revenues remains at about 53%. In the prior year, cost of sales were £1.7 million although this only reflects eight months of Antitope's trading from its acquisition in July 2013.
Operating income and expenditure
Total Research and Development and Administrative Expenses, rose to £8.6 million. In the prior year, total Research and Development and Administrative Expenses were £6.6 million although this only reflects eight months expenditure by Antitope following its acquisition in July 2013.
The Group reported a pre-tax loss of £5.2 million (year ended 31 March 2014 2014: £4.4 million).
Basic loss per share was 7p for the year ended 31 March 2015 (year ended 31 March 2014: 278p). This significant movement is primarily due to the reclassification of all classes of share as ordinary shares during the year, plus the issue of additional ordinary shares, when the Group was admitted to AIM in July 2014.
Taxation
The Group is entitled to receive R&D tax credits and as such the Group does not pay corporation tax. The R&D tax credit is first used to offset any tax payable in the year and any excess is surrendered for a repayable tax credit. The Group received income from taxation in the year amounting to £0.5 million (year ended 31 March 2014: £0.5 million).
The Group also receives a Research and Development Expenditure Credit (RDEC). This is shown within Other Operating Income, in both the current and the prior year.
Cash and cash equivalents
The Group ended the year with £15.8 million in cash or cash equivalents up from £2.8 million at the start of the year reflecting the impact of the funds raised at the IPO less costs of the funding and trading losses incurred in the year.
The Group invests cash surplus to working capital requirements in short-term deposits, across a number of banks with a focus on capital preservation rather than interest earned. The Group has no foreign currency deposits, other than foreign currency held in instant access accounts for working capital purposes.
Financial Position
The Group made an investment in capital equipment during the year ended 31 March 2015, with additions of short-term leasehold property and fixtures, fittings and equipment totalling £1.1 million (2014: £0.3 million). This investment has been made to enable the Group to continue to provide a wide range of services to its customers and to support R&D into broadening the application of the technologies of the Group.
Total current liabilities increased to £2.4 million (2014: £1.2 million), largely as a result of the timing of payments around the respective year ends, plus increased trade payables as at 31 March 2015, as a result of a number of invoices for capital items being outstanding at the year end, but being within their agreed payment terms. It is the policy of the Group to settle all trade payables, within the agreed payment terms, wherever possible, whilst adhering to documented approval policies.
The total current assets of the Group increased to £20.9 million (2014: £5.9 million). The most significant increase was to cash and cash equivalents which rose to £15.8 million (2014: £2.8 million) as a result of the IPO and concurrent financing for the Group. Inventories, trade and other receivables and current income tax assets also all increased as at 31 March 2015, compared with 31 March 2014.
Summary Financial Information
Consolidated Statement of Comprehensive Income
|
| Year ended | 15 months to |
|
| 31 March | 31 March |
|
| 2015 | 2014 |
| Note | £'000 | £'000 |
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
Revenue | 2 | 5,667 | 5,261 |
Cost of sales |
| (2,532) | (1,697) |
|
|
|
|
Gross profit |
| 3,135 | 3,564 |
|
|
|
|
Other operating income |
| 189 | 126 |
Research and development costs |
| (2,989) | (2,601) |
Administrative expenses - Other |
| (5,634) | (4,787) |
Administrative expenses - Exceptional items |
| - | (426) |
|
|
|
|
Operating loss |
| (5,299) | (4,124) |
|
|
|
|
Finance income | 3 | 88 | 33 |
Finance expense | 3 | (9) | (6) |
|
|
|
|
Loss before income tax | 4 | (5,220) | (4,097) |
|
|
|
|
Income tax | 6 | 498 | 548 |
|
|
|
|
Loss and total comprehensive loss for the period |
| (4,722) | (3,549) |
|
|
|
|
Basic and diluted losses per Ordinary Share | 7 | (7)p | (253)p |
Consolidated Statement of Financial Position
|
| At 31 March | At 31 March |
|
| 2015 | 2014 |
| Note | £'000 | £'000 |
Assets |
|
|
|
Non-Current Assets |
|
|
|
Goodwill |
| 2,032 | 2,032 |
Other intangible assets |
| 6,910 | 7,414 |
Property, plant and equipment |
| 1,490 | 693 |
Total Non-Current Assets |
| 10,432 | 10,139 |
|
|
|
|
Current Assets |
|
|
|
Inventories |
| 817 | 295 |
Trade and other receivables |
| 3,161 | 2,263 |
Current income tax assets |
| 1,147 | 541 |
Cash and cash equivalents |
| 15,799 | 2,757 |
Total Current Assets |
| 20,924 | 5,856 |
|
|
|
|
Total Assets |
| 31,356 | 15,995 |
|
|
|
|
Equity and Liabilities |
|
|
|
Equity |
|
|
|
Issued share capital | 8 | 195 | 13 |
Share premium |
| 18,982 | 22,416 |
Profit and loss account |
| 8,672 | (8,895) |
Total Equity |
| 27,849 | 13,534 |
|
|
|
|
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Deferred tax | 6 | 1,153 | 1,183 |
Total Non-Current Liabilities |
| 1,153 | 1,183 |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
| 2,354 | 1,160 |
Provisions |
| - | 118 |
Total Current Liabilities |
| 2,354 | 1,278 |
|
|
|
|
Total Liabilities |
| 3,507 | 2,461 |
|
|
|
|
Total Equity and Liabilities |
| 31,356 | 15,995 |
Consolidated Cash Flow Statement
|
| Year ended | 15 months to |
|
| 31 March | 31 March |
|
| 2015 | 2014 |
| Note | £'000 | £'000 |
Cash flows from operating activities |
|
|
|
|
|
|
|
Loss before income tax |
| (5,220) | (4,097) |
|
|
|
|
Adjustments to reconcile operating (loss) to net cash flows used in operating activities: |
|
|
|
Depreciation of property, plant and equipment |
| 285 | 278 |
Amortisation of intangible assets |
| 504 | 304 |
(Decrease) / increase in provisions |
| (118) | 118 |
Net finance income |
| (79) | (27) |
|
| (4,628) | (3,424) |
|
|
|
|
Working Capital Adjustments |
|
|
|
(Increase) in trade and other receivables |
| (898) | (566) |
(Increase) in inventories |
| (522) | (109) |
Increase / (decrease) in trade and other payables |
| 1,189 | (229) |
Net working capital movements |
| (231) | (904) |
|
|
|
|
Cash (used in) operating activities |
| (4,859) | (4,328) |
Taxation (paid) / received |
| (133) | 251 |
Net cash (used in) operating activities |
| (4,992) | (4,077) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Acquisitions (net of cash acquired) |
| - | (6,133) |
Purchase of property, plant and equipment |
| (1,082) | (275) |
Proceeds from sale of property, plant and equipment |
| - | 11 |
Interest received |
| 88 | 33 |
Net cash used in investing activities |
| (994) | (6,364) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Cash proceeds from share issues |
| 20,627 | 11,000 |
Issue costs |
| (1,590) | (330) |
Interest paid |
| (9) | (6) |
Net cash generated from financing activities |
| 19,028 | 10,664 |
|
|
|
|
Net increase in cash and cash equivalents |
| 13,042 | 223 |
Cash and cash equivalents at beginning of the year / period |
| 2,757 | 2,534 |
Cash and cash equivalents at end of the year / period |
| 15,799 | 2,757 |
Consolidated Statement of Changes in Equity
For the year ended 31 March 2015
|
Note | Issued Share Capital | Share Premium | Retained Earnings |
Total |
|
| £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
Balance at 1 April 2014 |
| 13 | 22,416 | (8,895) | 13,534 |
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
Total comprehensive income for the year | - | - | (4,722) | (4,722) | |
|
|
|
|
|
|
Transactions with Owners |
|
|
|
|
|
Bonus share issue | 8 | 118 | - | (127) | (9) |
E Class share conversion | 8 | 3 | - | - | 3 |
Recapitalisation | 8 | - | (22,416) | 22,416 | - |
Share capital issued | 8 | 61 | 20,572 | - | 20,633 |
Issue costs | 8 | - | (1,590) | - | (1,590) |
|
|
|
|
|
|
Balance at 31 March 2015 |
| 195 | 18,982 | 8,672 | 27,849 |
|
|
|
|
|
|
For the period ended 31 March 2014
| Issued Share Capital | Share Premium | Retained Earnings |
Total |
| £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
Balance at 1 January 2013 | 8 | 9,251 | (5,346) | 3,913 |
|
|
|
|
|
Comprehensive income |
|
|
|
|
Total comprehensive loss for the period | - | - | (3,549) | (3,549) |
|
|
|
|
|
Transactions with Owners |
|
|
|
|
Share capital issued(1) | 5 | 13,495 | - | 13,500 |
Issue costs | - | (330) | - | (330) |
|
|
|
|
|
Balance at 31 March 2014 | 13 | 22,416 | (8,895) | 13,534 |
|
|
|
|
|
(1) £11.0 million of this amount was issued for cash with a further £2.5 million issued to the owners of Antitope Limited as partial consideration for its acquisition.
Notes to the Summary Financial Information.
The summary financial information set out above, which was approved by the Board on 5 June 2015, is derived from the Consolidated Financial Statements for the year ended 31 March 2015 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The Consolidated Financial Statements on which the auditors have given an unqualified report, and which does not contain a statement under section 498(2) or (3) of the Companies Act 2006, will be delivered to the Registrar of Companies in due course.
Copies of the Company's Annual Report will be available on the Company's website at www.abzena.com/results-and-presentations shortly.
1. Summary of significant accounting policies
General information
Abzena plc is a public limited company incorporated and domiciled in England and Wales with registered number 08957107. The Company's registered office is Babraham Research Campus, Babraham, Cambridge CB22 3AT.
The principal activity of the Group is that of life science research and development and the provision of services and technology licensing to the biopharmaceutical industry.
The consolidated Financial Information comprises a consolidation of the Company and the following subsidiary companies:
Company | Nature of operations | Country of Incorporation |
Antitope Limited | Services & technology licensing to the biopharmaceutical industry | England & Wales |
PolyTherics Limited | Services & technology licensing to the biopharmaceutical industry | England & Wales |
Warwick Effect Polymers Limited | Services & technology licensing to the biopharmaceutical industry | England & Wales |
All the subsidiaries of the Group are 100% owned by the Group and have been included in the consolidated Financial Information from the date of acquisition.
The Group's Financial Information presented is as at 31 March 2015 and 31 March 2014 and for the year ended 31 March 2015 and the fifteen months ended 31 March 2014.
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the financial periods presented, unless otherwise stated.
Basis of preparation
The consolidated Financial Statements have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs), the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for certain financial instruments that have been measured at fair value.
The preparation of the Financial Statements in conformity with IFRS as endorsed by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements are as follows:
Merger accounting
On 23 May 2014 Abzena plc acquired the entire issued share capital of PolyTherics Limited in a share for share exchange, in an exact replication of the pre-existing share capital. Reorganisations involving entities under common control are outside the scope of IFRS 3, and there is no other specific IFRS guidance that applies in these circumstances. Accordingly, the Directors have used their judgement to develop an accounting policy that is relevant and reliable and therefore the group reconstruction has been accounted for using the merger method of accounting in accordance with FRS 6, which treats the merged entities as if they had been combined throughout the current and comparative accounting periods. Under merger accounting, the results for the group have been reported as if the group had been in existence in its current form through the current and previous financial years. No purchased goodwill was created in the transaction and the assets and liabilities of PolyTherics Limited were not adjusted to reflect their fair value.
Revenue recognition
Revenue, which excludes value added tax, represents the income generated by the Group from services provided to external parties, licensing activities and grants. Revenue is recognised only when it is reasonably certain that the economic benefits associated with the transaction will flow to the Group.
Revenue in respect of service contracts, where the Group's contractual obligations are performed gradually over time, is recognised as the contracted activity progresses, to reflect the Group's partial performance of its contractual obligations. The stage of completion requires a degree of estimation and judgement by management, although typically obligations are discharged evenly over the performance period and revenue is therefore typically recognised on a straight-line basis. This is not necessarily in line with the stage payments specified within contractual agreements, resulting in accrued and deferred revenue, as appropriate. Where the substance of a contract is that a right to consideration does not arise until the occurrence of a critical event, revenue is not recognised until the event occurs. Consideration for options and similar contingent receipts are recognised when the contingency is resolved or from the point the option is exercised.
Revenue in respect of licensing activities typically comprises an initial up-front fee receivable on signature of the agreement, followed by subsequent payments when certain milestone conditions are met. In addition, future sales royalties may also be due under licence agreements. The initial up-front fee receivable on the signature of a licence agreement is generally recognised in full on the date the agreement is executed, as long as all of the Group's obligations required to enter into the licence have been completed and at the point that the up-front fee becomes non-refundable. Milestone payments are recognised only when all the conditions stipulated in the agreement are satisfied for the particular milestone payment and all the Group's obligations have been met. Future sales royalties receivable under a licence would generally be recognised on receipt of a royalty statement unless accurate sales information is available to accrue revenue for royalty over the financial period. To date, the Group has not received nor recognised any royalty income.
Grant income is typically claimed quarterly in arrears and is recognised on a straight line basis throughout each quarter. Where a grant claim has not been made, grant income is accrued on a straight line basis. Grant income is disclosed as Other Operating Income on the face of the Consolidated Statement of Comprehensive Income. Government grants received relating to property, plant and equipment are treated as deferred income and released to the Consolidated Statement of Comprehensive Income over the shorter of the period of the grant, or the life of the asset.
Goodwill and intangible assets arising on business combinations
IFRS 3 (revised) "Business Combinations" requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other intangible assets at acquisition. The assumptions involved in valuing these intangible assets requires the use of estimates and judgements which may differ from the actual outcome. These estimates and judgements cover future growth rates, expected inflation rates and the discount rate used. Changing the assumptions selected by management could significantly affect the allocation of the purchase price paid between goodwill and other acquired intangibles.
Impairment of goodwill and acquired intangibles
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit ("CGU") to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows of the CGU, and a suitable discount rate, in order to calculate present value. Similar calculations are required in respect of other acquired intangibles. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group's impairment evaluation.
Share-based payments
Employees (and Directors) receive remuneration in the form of equity-settled share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed on a straight line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets).
The share options are valued using the Black-Scholes option pricing model. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each Balance Sheet date to allow for forecast leaving employees and the difference is charged or credited to the Consolidated Statement of Comprehensive Income, with a corresponding adjustment to reserves.
Classification of IPO costs
Due to the nature of an initial public offering (IPO) new shares are issued to raise additional capital and, along with existing shares, subsequently become listed on a stock exchange. Judgement is required in assessing whether the associated expenditure is directly attributable to the issue of shares and whether it meets the criteria to be offset against the share premium account.
Recent accounting developments
New standards, amendments and interpretations(a) Standards, amendments and interpretations effective in 2015 and applied by the Group:
The Company has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the period beginning 1 January 2013 and 1 April 2014.
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 19 Employee Benefits (Amendment)
IAS 27 Separate Financial Statements
IAS 28 Investments in Associate and Joint Ventures
IAS 32 Offsetting Financial Assets and Financial Liabilities
IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27
Presentation of Items of Other Comprehensive Income - Amendments to IAS 1
Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7
Annual Improvements to IFRSs 2009-2011 Cycle
IFRIC 21 Levies (effective 17 June 2014)
The Directors have assessed that the adoption of these revisions and amendments did not have an impact on the financial position or performance of the Company.
(b) Standards, amendments and interpretations that are not yet effective and have not been early adopted:
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:-
IFRS 9 Financial Instruments (effective 1 January 2017)
IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Company.
Basis of consolidation
The Group's consolidated Financial Information consists of Abzena plc and all of its subsidiaries.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of more than half of the voting rights, or by way of contractual agreement. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.
Antitope Limited was acquired on 25 July 2013. The results of Antitope Limited are consolidated from 1 August 2013 as the Directors of the Group believe this is the most practical date for consolidating the financial information and that it does not have a material impact on the financial statements. Warwick Effect Polymers Limited was acquired on 19 January 2012, the financial statements are consolidated from this date.
The cost of acquisition is measured at fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed, in a business combination are initially measured at their fair values at acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiary undertakings have been changed where necessary to ensure consistency with the policies adopted by the Group.
Foreign currency translation
The consolidated Financial Statements are presented in pounds sterling, which is the Group's presentational currency. The Group determines the functional currency of each entity and items included in the Financial Information of each entity are measured using that functional currency. Transactions denominated in foreign currencies are translated into sterling at the actual rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the Balance Sheet date. Exchange differences are included in the Consolidated Statement of Comprehensive Income within administrative expenses.
Financial instruments
The Group uses financial instruments comprising cash and cash equivalents and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the Group.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Consolidated Statement of Comprehensive Income within administrative expenses.
Trade payables
Trade payables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held with banks, bank overdrafts and other short-term highly liquid investments with original maturities of less than 3 months. Short term liquid investments with a maturity of over three months would be included in a separate category, 'Short term liquidity investments'.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less accumulated depreciation, together with any incidental costs of acquisition. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight line basis over its expected useful life, as follows:
Leasehold property improvements - over the life of the lease
Fixtures, fittings and equipment -25%-33% straight line
The assets' residual lives are reviewed annually and adjusted as appropriate.
Research and development
Research costs are written off to the Consolidated Statement of Comprehensive Income in the year in which they are incurred. All research costs, whether funded by grant or not, are included within research and development costs on the face of the statement of comprehensive income.
All ongoing development expenditure is currently expensed in the year in which it is incurred. Due to the regulatory and other uncertainties inherent in the development of the Group's programmes, the criteria for development costs to be recognised as an asset, as prescribed by IAS 38, "Intangible assets", are not met until the product has been submitted for regulatory approval, such approval has been received and it is probable that future economic benefits will flow to the Group. The Group does not currently have any such internal development costs that qualify for capitalisation as intangible assets.
Pensions
The Group makes payments to defined contribution schemes. The assets of the schemes are held separately from the Group in independently administered funds. Contributions made by the Group are charged to the Consolidated Statement of Comprehensive Income in the period to which they relate.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all expenditure directly attributable to bringing each product to its present location and condition on a first in first out basis, unless separately identified. Net realisable value is based on estimated selling price, or value in use less further costs expected to be incurred to completion and disposal. Where necessary, provision is made for obsolete, slow moving and defective inventories.
The Group has changed the estimation technique in relation to certain items held as Inventories. The Directors have considered the basis for recognition and on review have identified that it is more appropriate for a lower minimum economic quantity to be valued, and for additional items to be included in costs recorded as Inventories. The Directors do not consider the overall effect of the change in estimation technique to be material to the Group.
Current and deferred income tax
Income tax on the result for the year comprises current and deferred tax. Income tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Operating leases
Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the period of the lease.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period of the lease.
Warrants
Where the Company issues shares and equity-classified warrants in the same transaction, the Group estimates the fair value of the warrant instruments. If material, the fair value of the warrants is recorded as a separate component of equity.
Acquired intangible assets
At the date of acquisition of a subsidiary, intangible assets that are separately identifiable and that arise from contractual or other legal rights are capitalised and included within net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic benefits embodied in the asset will flow to the entity, and are amortised as follows:
Licence portfolio | Over the residual life of the underlying patents, once royalties begin to be paid in respect of the underlying licences |
Existing customer relationships | Straight line over expected useful economic life estimated to be 8 years |
Trade names | Straight line over expected useful economic life estimated to be 8 years |
Current technology | Straight line over expected useful economic life estimated to be 10 years |
They are subsequently measured at cost less accumulated amortisation and impairment. At each balance sheet date, these assets are assessed for indicators of impairment and, in the event that an asset's carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately through the Consolidated Statement of Comprehensive Income.
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate potential impairment. The carrying value of goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense, separately disclosed in the intangible fixed asset note to the financial statements, and is not subsequently reversed.
Impairment
The carrying value of non-current assets is reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Intangible assets initially recognised during the current annual period which are not yet available for use are also tested for impairment by reference to the asset's recoverable amount at the balance sheet date.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows over the remaining useful economic life of the asset in question are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Restructuring provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Exceptional ItemsThe Group discloses separately items of income or expenditure which are by nature not expected to recur as part of the normal operational activity of the business. Such items are shown separately on the face of the Consolidated Statement of Comprehensive Income.
Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics.
Equity instruments
All the classes of the Group's share capital are classified as equity. Incremental costs directly attributable to the issue of new share capital are shown as a deduction, net of tax, from the proceeds.
2. Segmental reporting
The Group has adopted IFRS 8, "Operating Segments". IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, being the provision of services and technology licensing to the biopharmaceutical industry through short-term service contracts and long-term licensing income. The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the Financial Statements.
The Group had no single significant customer which alone contributed more than 10% of Group revenue in 2015 (2014: largest customer contributed 27%). An analysis of the revenue from all sources is as given below:
Analysis of revenue by location of customer:
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
North America | 3,027 | 2,046 |
Europe (excluding United Kingdom) | 1,944 | 2,291 |
United Kingdom | 522 | 605 |
Other | 174 | 319 |
|
|
|
Total | 5,667 | 5,261 |
Analysis of revenue by category:
|
| Restated |
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Service revenue |
|
|
Immunology | 2,940 | 2,196 |
Protein engineering | 1,218 | 932 |
Cell line development | 594 | 419 |
Bioconjugation | 657 | 165 |
|
|
|
Licence revenue | 258 | 1,549 |
|
|
|
Total | 5,667 | 5,261 |
Regarding the restatement for the 15 months ended 31 March 2014, the Directors have corrected the figures for the period, to the numbers restated above.
3. Finance income
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Interest received | 88 | 33 |
Interest expense | (9) | (6) |
|
|
|
Net interest received and other finance income | 79 | 27 |
4. Loss before income tax
Loss before income tax is stated after charging / (crediting): | Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Depreciation of property, plant and equipment | 285 | 278 |
Amortisation of intangible fixed assets | 504 | 304 |
Operating lease costs (land and buildings) | 408 | 633 |
Cost of inventories recognised as an expense | - | 109 |
Foreign exchange losses / (gains) | (4) | 85 |
|
|
|
Auditors' remuneration: |
|
|
Fees payable to the Group's auditors for the audit of the parent Company and consolidated accounts |
16 | 45 |
Fees payable to the Group's auditors for other services: |
|
|
- The auditing of accounts of subsidiaries of the Company pursuant to legislation |
44 | 19 |
- Other services supplied including services for taxation compliance | 13 | 10 |
- All other non-audit services | 78 | 5 |
|
|
|
Total auditors' remuneration | 151 | 79 |
Exceptional costs in the year amounted to £nil (15 Months Ended March 2014: £426,000). The costs in the prior period, include those relating to the Antitope acquisition and restructuring costs.
5. Employees and Directors
| Analysis of payroll costs by category: | Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Wages and salaries | 4,390 | 3,511 |
Social security costs | 470 | 398 |
Other pension costs | 370 | 268 |
|
|
|
Total | 5,230 | 4,177 |
Average monthly number of persons (including Executive Directors but excluding non-executive Directors) employed:
| By Activity |
| Restated |
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Laboratory staff | 67 | 49 |
Sales, marketing, business development, administration and management | 24 | 16 |
|
|
|
Total | 91 | 65 |
Regarding the restatement for the 15 months ended 31 March 2014, the Directors have corrected the figures to the numbers restated above. The numbers above reflect the number of employees and are not reduced to a full time equivalent number in respect of the part time employees of the Group.
Key Management Compensation
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Salaries and short-term employee benefits | 950 | 754 |
Post-employment benefits | 44 | 48 |
|
|
|
Total | 994 | 802 |
The Group considers all members of the Board (including non-executive Directors) to be key management, as well as the Senior Vice President of Corporate Development and the Chief Scientific Officer.
Directors' emoluments are as follows:
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Aggregate Emoluments | 610 | 438 |
Company contributions to defined contribution pension schemes | 26 | 18 |
Sums paid to third parties for Directors' services | 37 | 78 |
|
|
|
Total | 673 | 534 |
The Group contributes to defined contribution money purchase pension schemes for its Executive Directors and employees. Contributions of £2,000 (included in other payables) were payable to pension funds for the benefit of Directors at the year end (15 months ended March 2014: £1,000).
6. Taxation
Analysis of taxation (credit) in the year
The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure. The amount included in the financial information represents the credit receivable by the Group for the year. The 2015 amounts have not yet been agreed with the relevant tax authorities.
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Analysis of credit in the period: |
|
|
United Kingdom corporation tax | (440) | (516) |
Adjustment in respect of prior period | (33) | (2) |
|
|
|
Total Current Tax | (473) | (518) |
|
|
|
Deferred Tax |
|
|
Origination and reversal or temporary differences | (22) | (30) |
Effect of rate change on opening balance | (3) | - |
|
|
|
Total Tax in the Consolidated Statement of Comprehensive Income | (498) | (548) |
Additionally, included in other operating income is £132,000 (2014: £120,000) in respect of a research and development expenditure credit.
There is no current tax charge in the year as the Group has utilised losses brought forward and is entitled to a cash tax credit in the United Kingdom for certain research and development expenditure. The repayable tax credit for the year is lower (2014: lower) than the credit that would be repayable at the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are explained in the following table:
Tax reconciliation
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Loss before income tax | (5,220) | (4,097) |
|
|
|
Loss before income tax multiplied by the standard rate of corporation tax in the UK of 21% (2014: 23%) | (1,096)
| (942) |
Tax effect of: |
|
|
Non-taxable and non-deductible items | 35 | 55 |
Additional deduction for R&D expenditure | (537) | (637) |
Surrendered losses for R&D tax credit | 222 | 562 |
Utilisation of tax losses | 62 | - |
Adjustments in respect of prior periods | (33) | (2) |
Changes in tax rates | (6) | - |
Adjustments to deferred tax | 16 | 38 |
Current year losses for which no deferred tax asset has been recognised | 771 | 394 |
Other temporary differences | 68 | (16) |
|
|
|
Total Tax Credit | (498) | (548) |
The Finance Act which provided for reductions in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the 31 March 2015 balance sheet date.
Deferred tax liability
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Balance at 1 April | 1,183 | 140 |
Deferred tax liability acquired with subsidiary undertakings | - | 57 |
Deferred tax liability arising on intangible fixed assets recognised in business combination |
- |
1,016 |
Unwinding of deferred tax during the period | (95) | (33) |
Movement in fixed asset temporary differences | 68 | 5 |
Movement in short term temporary differences | (3) | (2) |
|
|
|
Total deferred tax liability | 1,153 | 1,183 |
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Fixed asset temporary differences | 1,156 | 1,185 |
Short term temporary differences | (3) | (2) |
|
|
|
Total deferred tax liability | 1,153 | 1,183 |
As at 31 March 2015, the unrecognised deferred tax asset amounted to £2,348,000 (2014: £1,211,000). This deferred tax asset is in respect of cumulative losses incurred to date. The Directors have not recognised this asset, as they are not sufficiently certain, with regard to the recoverability of the asset.
7. Losses per share
Basic losses per share is calculated by dividing the loss for the financial year by the weighted average number of Ordinary Shares in issue during the period. The losses and weighted average number of shares used in the calculations are set out below:
| Year ended | 15 months to |
| 31 March | 31 March |
| 2015 | 2014 |
| £'000 | £'000 |
|
|
|
Loss for the financial period (£000) | (4,722) | (3,549) |
Weighted average number of Ordinary Shares (basic) (thousands) | 71,615 | 1,405 |
Losses per Ordinary Share basic (pence) | (7)p | (253)p |
As net losses were recorded in 2015 and 2014, the potentially dilutive share options are anti-dilutive for the purposes of the losses per share calculation and their effect is therefore not considered.
The comparative figures for the 15 months ended 31 March 2014, reflect the Ordinary Share Capital of the Group at the period end at which time the ultimate parent company of the Group was PolyTherics Limited. They have not been changed to reflect the share capital bonus issue, share consolidation and re-designation, all of which took place after 1 April 2014. As such, other classes of ordinary shares, along with preference shares have been excluded from the comparative figures.
A share conversion took place during the year ended 31 March 2015, whereby the holders of A Preferred, B Ordinary, B Preferred, C Preferred, D Ordinary, D Preferred, E Ordinary and E Preferred in Abzena plc, each received an equal number of Abzena plc ordinary share in exchange for their previous shareholding following the share capital bonus issue and share consolidation.
8. Issued share capital
A schedule of the issued share capital of the Company at the period ends was as follows.
| 31 March | 31 March |
| 2015 | 2014 |
| Number | Number |
|
|
|
Ordinary shares of £0.002 each (2014: £0.001 each) | 97,468,858 | 1,550,235 |
A Preferred shares of £0.002 each (2014: £0.001 each) | - | 734,110 |
B Ordinary shares of £0.002 each (2014: £0.001 each) | - | 1,799,468 |
B Preferred shares of £0.002 each (2014: £0.001 each) | - | 625,048 |
C Preferred shares of £0.002 each (2014: £0.001 each) | - | 1,274,013 |
D Ordinary shares of £0.002 each (2014: £0.001 each) | - | 62,318 |
D Preferred shares of £0.002 each (2014: £0.001 each) | - | 1,706,433 |
E Ordinary shares of £0.002 each (2014: £0.001 each) | - | 154,066 |
E Preferred shares of £0.002 each (2014: £0.001 each) | - | 5,245,934 |
|
|
|
Total | 97,468,858 | 13,151,625 |
Share Reorganisation during the year ended 31 March 2015
Where a "share re-organisation" is referred to throughout the Annual Report, this refers to the following items:
A) On 23 May 2014, the Company acquired the entire share capital of PolyTherics Limited on a share for share exchange basis.
B) A bonus issue followed on 30 June 2014, whereby each shareholder in the Company, received nine additional shares of the same class in the Company.
C) On admission every two issued shares of £0.001 were consolidated into one share each of £0.002 with the same rights and restrictions.
D) A total of 1,255,903 £0.002 Ordinary shares were then issued to the holders of E Ordinary Shares and E Preferred shares in settlement of the 8% per annum return on the subscription investment. This resulted in an increase to share capital of £2,511.
E) On Admission each A Preferred, B Ordinary, B Preferred, C Preferred, D Ordinary, D Preferred, E Ordinary and E Preferred in the Company, were re-designated as Ordinary £0.002 shares.
On admission 25,000,000 new Ordinary £0.002 shares were issued as a result of the IPO and financing on 10 July 2014.
During the year ended 31 March 2015 1,877,778 Ordinary shares were issued as a result of warrants being exercised.
During the year ended 31 March 2015 a total of 3,445,860 (2014: 147,362) Ordinary shares were issued in consideration for the exercise of share options, for cash consideration amounting to £688 (2014: £147).
Total consideration for shares issued in the year ended 31 March 2015 was £20,633,000, with issue costs of £1,590,000.
During the period ended 31 March 2014, the Company raised net proceeds of £13.2 million from the issuance of equity. This amount comprised 154,066 E Ordinary shares with cash consideration of £385,165, 5,245,934 E Preferred shares with cash consideration of £10,614,835 and 1,000,000 E Preferred shares with value of £2,500,000 as partial consideration for the acquisition of Antitope. Total issue costs were £330,000. The Company also issued 20,565 C Preferred shares for cash consideration of £21 upon the exercise of C Preferred warrants.
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