27 Sep 2005 07:00
BioScience VCT plc27 September 2005 BioScience VCT plc 27 September 2005 Unaudited interim resultsfor the six months ended 30 June 2005 6 months to 6 months to 12 months toFinancial highlights 30 June 2005 30 June 2004 31 December 2004 • Net assets £6,065,000 £6,822,000 £6,299,000• Net asset value per share 79.8p 89.9p 82.9p• Revenue return per share* (0.9)p (0.1)p (0.1)p• Total return per share in period* (3.1)p (4.1)p (11.2)p *Based on weighted average of 7,596,393 (30 June 2004 - 7,474,398) shares inissue during the period For further information please contact: Chris HulattOctopus Asset Management 0207 710 2804 Chairman's statement I am pleased to present my first interim results since my appointment to theposition of Chairman following the resignation of Dr Paul Nicholson in August.The board would like to extend its thanks to Dr Nicholson for his considerablecontribution over the last three years. Market environment The general environment for UK-based bioscience companies has continued toremain difficult. The larger UK-based venture capitalists have been veryselective in the type of investments that they have been prepared to consider,and have been particularly wary of most drug development companies, which oftenhave long time-lines and high cash requirements. As a result of this, companieswithin the sector have had to ensure that they develop business models thatrequire less funding through having a swifter route to revenue generation. Inrecent months, the sector has also been characterised by a number of deals inwhich foreign companies have acquired UK biotech companies, which appears todemonstrate the inherent quality of the sector within the UK, despite thedifficulties the sector has experienced in accessing capital from VCs. As outlined in the annual report, the BioScience VCT has responded to theseconditions by favouring companies which are already generating sales and areunlikely to require significant further funding. Existing investments During 2005 we have invested further sums in several of our existinginvestments. Scancell, the biotechnology company that is developing a number of therapeuticantibodies targeted at cancer, raised a further £1m, of which we contributed£225,000. The company has continued to make progress in developing its productsand recently entered into a collaboration with GTC Biotherapeutics (an existinginvestee company of the fund), the US-based specialist in the production ofproteins in transgenic animals. This will allow the evaluation of theproduction of one of Scancell's antibodies using GTC's technology. Angel Biotechnology Ltd, the Northumberland-based contract manufacturer in whichwe had previously invested in 2004, has extended its range of customers and hasrecently signed a number of significant contracts. We have completed ourinvestment of a further £250,000 into Angel, as part of a larger round of £1mwhich was carried out at a lower share price than our first investment into thecompany. We also invested a further £100,000 at a share price of 140p alongside otherinvestors in a £9.5m follow-on placing for Evolutec, the AIM-listed company inwhich we first invested in 2004. Since our investment, the share price hasrisen to a level of approximately 180p. Evolutec is developing a range ofcompounds that may potentially have beneficial effects in treating certainallergic, inflammatory and auto-immune diseases. Evolutec announced in Augustthat Merial, a leading animal health company, has completed the initial testingof Evolutec's anti-tick vaccine in cattle and obtained encouraging results.Evolutec also recently announced positive results for its lead compound in a 112patient phase II study in the area of hay fever. The results show that thecompound has an effect within 45 minutes or less, which is quicker than steroidnasal sprays which have an onset of action of approximately 8 hours. During the period, we participated in a rights issue for Insense Ltd, the woundhealing company, and invested a further £48,000. The Insense team is led byProfessor Paul Davis, a former senior scientist at Unilever's R&D laboratoriesin Bedfordshire. During his time at Unilever, Professor Davis was responsiblefor discoveries that led to the granting of a number of patents, includinginventions that underpin the famous "Clearblue" pregnancy test. He is seekingto bring a similar level of innovation to the wound healing market through thetechnological discoveries that have been made by Insense. The company announcedearlier this year that the first clinical trial for its Oxyzyme product,conducted in Toronto by Professor Gary Sibbald, had shown encouraging resultsand a further trial is now underway in the UK. New investments When evaluating new investment opportunities, we have continued to follow thestrategy that was outlined in the last Annual Report. In particular, we havesought to focus our attention on companies that are revenue generating, or whichhave already made good progress in developing their businesses and are at apre-IPO stage. During the period we completed an investment of £250,000 in BioAnaLab Ltd, anOxford-based contract research organisation, as part of a total round of£440,000. BioAnaLab is a leader in the provision of certain specialistanalytical services to pharmaceutical and biotechnology companies. More than30% of all pharmaceutical products in development are made from proteins, whichpresent particular analytical challenges in measuring drug levels, patientresponses, and product efficacy in order to provide product validation andsatisfy the requirements of the regulatory authorities. BioAnaLab was foundedto provide pharmaceutical and biotechnology companies with contract analysisservices based on the substantial experience of its founders. The CEO andfounder of BioAnaLab is Professor Geoff Hale, who has worked in the antibodyfield for many years and is Professor of Therapeutic Immunology at the SirWilliam Dunn School of Pathology, University of Oxford. Since the period end, we have made a number of further investments. Inparticular, we have invested £500,000 in Hallmarq Veterinary Imaging Ltd, anunquoted Guildford-based company that has developed a scanning system for use byvets that is based on magnetic resonance imaging (MRI). This technology allowsvets to diagnose problems that can cause lameness in horses that are notidentifiable by any other method. Hallmarq has already installed a number ofunits at leading equine veterinary practices and research centres around theworld, including the Department of Clinical Veterinary Medicine at theUniversity of Cambridge, and is in discussions with a number of other potentialusers of the system. Hallmarq's business model is based on the generation offees per scan, rather than only relying on the sale of the MRI equipment. We have also invested just over £350,000 in NeutraHealth plc, an AIM-listedcompany that was established to acquire businesses operating in theneutraceutical sector. Our investment in NeutraHealth was part of a £10mfundraising that was carried out at a share price of 10.5p (compared with thecurrent share price of 15.75p) in order to finance the acquisition of BiocareLtd, an established business in the neutraceutical sector. Biocare, whichemploys almost 50 people, generated an operating profit of just over £2m onturnover of approximately £7.5m in 2004. The company has a range of more than170 products, which are primarily sold to customers such as healthcarepractitioners and nutritionists. In addition, we invested a sum of £150,000 in the AIM flotation of ReNeuron plc,a leading company in the field of cell therapies derived from stem cells. Thecompany's lead product, for use in treating patients with chronic strokedisability, has moved into late stage pre-clinical development, and the companyaims to file for approval to start human clinical trials in the first half of2006. The company is also working on stem cell therapies to address otherconditions such as Huntington's disease, Parkinson's disease and diabetes. Net asset value As at 30 June 2005, the net asset value (NAV) per share was 79.8p, a reductionof 3.1p compared with the figure at the end of December 2004. The NAV does notinclude the cumulative dividends paid since inception of 1.25p. The reductionin NAV in the first six months of this year was primarily caused by thereduction in the carrying value of our holding in Purely Proteins Ltd and theimpact of the cost base of the VCT at a time when the fund's investments are notgenerating a significant level of income. Dividend As in previous years, the directors do not propose to pay an interim dividend.In the short-term, dividend payments will be restricted by the limited incomethat is generated by the Company's portfolio of investments. However, in duecourse, we expect to realise capital gains on the disposal of successfulinvestments and distribute these to shareholders. VCT status I am pleased to be able to report that HM Revenue & Customs has confirmed thatthe Company's provisional VCT approval has been maintained. Prospects We have now invested a total of approximately £4m into bioscience companies. Inaddition, we are in negotiations with a number of other companies and anticipateinvesting significant further sums before the end of 2005. Although it is clearthat the general funding environment for UK-based unquoted bioscience companiesis likely to remain challenging, we will continue to seek investmentopportunities into those businesses that we believe have the rightcharacteristics to deliver attractive returns for investors. I look forward toupdating you on our progress in due course. James OtterChairman The unaudited interim financial statements for the period from 1 January 2005 to30 June 2005 are set out below. Statement of total return (incorporating the revenue account) 6 Months 6 Months 12 Months to 30 June 2005 to 30 June 2004 to 31 December 2004 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unrealised gain/(loss) on - (84) (84) - (224) (224) - (677) (677)investments Income 20 - 20 111 - 111 222 - 222 Investment management fees (26) (80) (106) (26) (77) (103) (52) (157) (209)Other expenses (65) - (65) (95) - (95) (176) - (176) Return on ordinary activities (71) (164) (235) (10) (301) (311) (6) (834) (840)before tax Tax - - - - - - - - - Return on ordinary activities (71) (164) (235) (10) (301) (311) (6) (834) (840)after tax Dividends - - - - - - - - - Transfer to reserves (71) (164) (235) (10) (301) (311) (6) (834) (840) Return per share (0.9)p (2.2)p (3.1)p (0.1)p (4.0)p (4.1)p (0.1)p (11.1)p (11.2)p The revenue column above is the profit and loss account of the company. Allrevenue and capital items on the above statements derive from continuingoperations. Balance sheet as at 30 June 2005 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Fixed asset investments 2,126 1,415 1,387 Net current assets 3,939 5,407 4,912 Net assets 6,065 6,822 6,299 Capital and ReservesShare capital 3,798 3,795 3,798Share premium 3,422 3,420 3,422Capital redemption reserve 5 5 5Capital reserve realised (444) (286) (365) unrealised (637) (100) (553)Revenue reserve (79) (12) (8) Total equity share holders' funds 6,065 6,822 6,299 Net asset value per share 79.8p 89.9p 82.9p Cash flow statement 6 Months to 6 Months to 12 Months tofor the 6 months to 30 June 2005 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 49 (263) (454) Financial investment :Purchase of investments (823) (782) (1,207) Net cash outflow from financial investment (823) (782) (1,207) Management of liquid resources :(Purchase)/return of cash deposits (425) 771 5,969 Equity dividends paid - (37) (37) Financing :Issue of own shares - 227 244Share issue expenses - 0 (12)Purchase of own shares - (4) (4) Total financing - 223 228 (Decrease)/increase in cash resources (1,199) (88) 4,499 Reconciliation of operating profit to net cash inflow from operating activities 6 Months to 30 June 2005 £'000Loss on ordinary activities before Tax (71)Decrease in debtors 200Management fees charged to capital account (80)Net cash inflow from operating activities 49 Investment portfolio as at 30 June 2005 Cost Valuation £'000 £'000 Unlisted Investments Angel Biotechnology Ltd 650 319 BioAnaLab Ltd 250 250 DxS Ltd 263 263 Insense Ltd 149 181 Purely Proteins Ltd 300 150 Scancell Ltd 725 600 AIM listed investments Cobra Biomanufacturing Plc 136 79 Dawmed Systems Plc 101 88 Evolutec Group Plc 175 174 Listed investments GTC Biotherapeutics Inc 14 22 ======== ======== TOTAL 2,763 2,126 NOTES 1. The unaudited financial statements for the 6 months to 30 June 2005 donot constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985 and have not been delivered to the Registrar of Companies.The results have been drawn up in accordance with applicable accountingstandards and adopting the accounting policies set out in the statutory accountsfor the year ended 31 December 2004. The comparative figures for the financialyear ended 31 December 2004 are not the Company's statutory accounts for thatfinancial year. Those accounts have been reported on by the Company's auditorsand delivered to the Registrar of Companies. The report of the auditor wasunqualified and did not contain a statement under section 257(2) or (3) of theCompanies Act 1985. 2. The calculation of the revenue and capital return per share is based onthe return on ordinary activities after tax for the period and on 7,596,393 (30June 2004 - 7,474,398) ordinary shares, being the weighted average number ofshares in issue during the period from 1 January 2005 to 30 June 2005. Thenumber of shares in issue at 30 June 2005 amounted to 7,596,393 (30 June 2004 -7,590,393). 3. Copies of the interim report are being sent to all shareholders.Further copies are available free of charge from Octopus Asset Management Ltd at8 Angel Court, London EC2R 7HP. This information is provided by RNS The company news service from the London Stock Exchange