Oxford Biomedica Regulatory News (OXB)

OXFORD BIOMEDICA PLC

Preliminary results for the year ended 31 December 2022

ENHANCING OUR POSITION AS A GLOBAL

QUALITY AND INNOVATION-LED VIRAL VECTOR CDMO

Oxford, UK - 25 April 2023: Oxford Biomedica plc ("Oxford Biomedica" or "the Company") (LSE: OXB), a quality and innovation-led viral vector CDMO, announces its preliminary results for the year ended 31 December 2022.

Dr. Frank Mathias, Oxford Biomedica's Chief Executive Officer, said:

"I am honoured to present my inaugural set of financial results as CEO of Oxford Biomedica. Under the leadership of Roch and the Senior Executive Team, the Company has delivered another strong set of results from its growing international platform.

"In 2022, we have successfully grown our core business by expanding our global reach, establishing Oxford Biomedica Solutions in the US and broadening our expertise in key viral vector types, including AAV. The expansion of our development and manufacturing capabilities has enabled us to drive innovation whilst both attracting new international biopharma clients and expanding existing collaborations. We have also successfully right-sized our business and we are now in a robust financial situation to strengthen our position as a global quality and innovation-led viral vector CDMO.

"Our mission is centred on enabling our clients to deliver life-changing therapies to patients worldwide and in my brief tenure to date, I have been profoundly inspired by our team's unwavering commitment and exceptional talent, which serve as the driving force behind our success.

"With a clearly defined vision for the future, I look forward to working closely with our team, and our clients, and to making a lasting impact on the lives of patients worldwide."

FINANCIAL HIGHLIGHTS

OPERATIONAL HIGHLIGHTS DELIVERED IN 2022

CORPORATE HIGHLIGHTS

OUTLOOK

Analyst briefing

Oxford Biomedica's management team, led by new CEO, Dr. Frank Mathias and Stuart Paynter, CFO, will be hosting a briefing and Q&A session for analysts at 13:00 BST / 8:00 EST today, 25 April, at Etc. Venues St Paul's, 200 Aldersgate, London, EC1A 4HD.

A live webcast of the presentation will be available via this link. The presentation will be available on the Company's website at www.oxb.com

If you would like to dial in to the call and ask a question during the live Q&A, please email Oxfordbiomedica@consilium-comms.com

Notes

Unless otherwise defined, terms used in this announcement shall have the same meaning as those used in the Annual report and accounts.

Enquiries:

About Oxford Biomedica

Oxford Biomedica (LSE: OXB) is a quality and innovation-led viral vector CDMO with a mission to enable its clients to deliver life changing therapies to patients around the world.

One of the original pioneers in cell and gene therapy, the Company has more than 25 years of experience in viral vectors; the driving force behind the majority of gene therapies. The Company collaborates with some of the world's most innovative pharmaceutical and biotechnology companies, providing viral vector development and manufacturing expertise in lentivirus, adeno-associated virus (AAV) and adenoviral vectors. Oxford Biomedica's world-class capabilities span from early-stage development to commercialisation. These capabilities are supported by robust quality-assurance systems, analytical methods and depth of regulatory expertise.

Oxford Biomedica, a FTSE4Good constituent, is headquartered in Oxford, UK. It has locations across Oxfordshire, UK and a US-based subsidiary, Oxford Biomedica Solutions, based near Boston, MA, US. Learn more at www.oxb.com, www.oxbsolutions.com, and follow us on LinkedIn, Twitter and YouTube.

CHAIR'S STATEMENT

Commitment to our purpose of transforming lives through cell and gene therapy

In 2022, Oxford Biomedica made significant progress towards establishing a global leadership position in viral vector development and supply. We broadened our viral vector CDMO offering and expanded our business into the US, and into new viral vector types, building on our recognised expertise in lentiviral vectors. Our transformational deal with Homology Medicines, Inc. (Homology Medicines) allowed us to capitalise on our successful work developing and producing the adenovirus-based Oxford AstraZeneca COVID-19 vaccine and immediately took us into the fast-growing AAV market with our first US-based business, Oxford Biomedica Solutions. With this move we expanded our innovative development and manufacturing expertise, enabling more biotech and pharma clients to deliver life-saving therapies to patients.

Importantly, in November 2022, we announced that Dr. Frank Mathias would join us as our new Chief Executive Officer. Frank's experience and track record of success running both an innovative biopharma company and a high-performing CDMO will be key to the Group as we build on our leading position and cell and gene therapy continues on its rapid growth trajectory.

Enhancing our position as a global quality and innovation-led CDMO

Viral vectors are the most established and powerful delivery mechanism for cell and gene therapies. As the driving force behind the majority of approved gene therapy trials, viral vectors unlock the possibility of safe and targeted one-time treatments.

Over the last year, Oxford Biomedica has expanded its viral vector capabilities into all key viral vector types including lentivirus, adenovirus and AAV. Our AAV business has grown from strength to strength already, with five clients at the end of 2022, exceeding our initial expectations. In late 2022, we also significantly upgraded our commercial organisation with new key hires. The momentum we are seeing in business development activities across lentivirus, AAV and adenoviruses validates client confidence in the business, team, and our capabilities. With the lentiviral vector and AAV manufacturing markets poised for projected 27% and 28% CAGRs respectively from 2018-2026 (Source: Mordor Intelligence, 2021), our expansion into the US AAV market and the growing lentivirus segment will enable our success in our aim for market leadership in viral vector CDMO services. Despite the challenging macroeconomic backdrop, we have a strong and diversified business development pipeline, and our business has continued to thrive with new client agreements and expanded remits from existing clients. Our annual revenues and number of clients have more than doubled since 2017, with 18 clients (including three added post-period) now across multiple viral vector types.

Looking to the future, we have positioned ourselves to capitalise on the expected wave of cell and gene therapy approvals. It is estimated that there could be up to 14 cell and gene therapy regulatory decisions in 2023 in the US alone (Source: Alliance for Regenerative Medicine). Furthermore, favourable regulatory tailwinds with regard to efficiencies in underlying manufacturing processes lead us to believe there will be a step-up in appetite for cell and gene therapy approvals and a need to make the manufacturing process for gene therapies more efficient. To ensure that we are efficiently and properly resourced for future growth, we have right-sized our business while maintaining our financial strength. We are in a strong cash position, ending 2022 with our strongest ever year-end cash position, which allows us to respond effectively to the external environment and position ourselves for continued success, as we build our market share in anticipation of the expected demand for quality, innovation-led viral vector manufacturing capabilities.

Governance

Throughout the year, we made significant strides in strengthening and diversifying our leadership team and Board, ensuring that we are well-positioned to drive the Company through its next phase of growth. After more than 13 years of dedicated service and leadership to Oxford Biomedica, and following the announcement of our AAV acquisition in the US, John Dawson stepped down as Chief Executive Officer and I assumed the role of Interim CEO, in addition to my existing role as Chair, to ensure continuity.

Furthermore, we are proud of the progress we made to diversify the Board during the year, which now comprises 40% women, collectively possess a diverse range of skills and expertise, and come from a variety of ethnic and societal backgrounds.

Growing a sustainable business for our employees, clients and patients

At Oxford Biomedica, we are committed to upholding our values of integrity, inspiration, and innovation, embedded in everything we do. This includes a responsible and sustainable approach to our business, managing people, engaging with communities, protecting the environment and governing our operations. We are proud of our inclusion in the FTSE4Good index in 2022, in recognition of our commitment to responsible business practices.

We empower our diverse and inclusive workforce to find innovative solutions that benefit our business and the patients we serve. We are dedicated to continuously improving our processes to minimise our impact on the planet and engage with our communities to create partnerships that benefit everyone.

The future: delivering on our mission of enabling our clients to deliver life-changing therapies to patients

Having sharpened our strategic focus to be a quality and innovation-led CDMO, we have decided to fund our therapeutics portfolio externally, to realise the transformational potential of our gene therapeutics assets that have emanated from our lentiviral platform.

I am looking forward to continuing to work with Dr. Frank Mathias, our new CEO. Under Frank's leadership, we will make further investments in scalability and leverage automation to deliver even more innovative services to our biopharma clients enabling them to discover and deliver therapies that transform patients' lives. Our focus will remain on client acquisition, innovation, people, and most importantly, improving the lives of patients in need.

We have a clear strategy and vision for a successful, sustainable, long-term future at Oxford Biomedica as it continues to build as a world-leading quality and innovation-led viral vector CDMO. As we look forward, we are more excited than ever to continue delivering on our mission of enabling our clients to deliver life-changing therapies to patients around the world.

Dr. Roch Doliveux

Chair

2022 PERFORMANCE REVIEW

Introduction

2022 was a significant year for Oxford Biomedica, as the Group expanded internationally and made its first strategic acquisition, entering the larger and fast-growing adjacent AAV market. The core business performed strongly, validating the Group's position in the market as a leading quality and innovation-led CDMO. This success is testament to the Group's world-class capabilities spanning early-stage development through to commercialisation.

Oxford Biomedica Solutions: US-based AAV manufacturing and innovation business

In January 2022, Oxford Biomedica announced that it had entered into an agreement with Homology Medicines to establish Oxford Biomedica Solutions, an innovative service provider and AAV product developer with complete end-to-end chemistry, manufacturing, and controls capabilities and expertise, from pre-clinical development through to clinical drug supply. The 91,000 sq. ft. facility is located near Boston, US. The transaction completed on 10 March 2022 and was immediately accretive to the Group's revenues.

Under the agreement, Oxford Biomedica US, Inc. acquired an 80% ownership interest in the newly formed AAV-focused manufacturing and innovation business for a US$130 million (£97 million) cash consideration, and a US$50 million (£38.2 million) capital injection into Oxford Biomedica Solutions to fund the entity to break even.

Following the transaction, the Group immediately benefited from a three-year Manufacturing and Supply agreement with Homology Medicines as a preferred partner, which provided for minimum contracted revenue of c.US$25 million (£21 million) for Oxford Biomedica Solutions for the first twelve months post-completion. Oxford Biomedica Solutions is targeting double-digit growth in AAV manufacturing and clinical development revenues through services provided to Homology Medicines, as well as existing and new clients during 2023.

Oxford Biomedica Solutions is led by Tim Kelly, Chief Executive Officer and Chair of its Board of Directors. The business has a robust business development pipeline and in 2022 signed agreements with four new, undisclosed, U.S. based biotechnology companies, exceeding the previously stated target of two by the end of 2022.

Post-period end, in 2023, Oxford Biomedica Solutions signed additional agreements with three new clients.

Juno Therapeutics, Inc. (a wholly owned subsidiary of Bristol Myers Squibb Company)

Oxford Biomedica has continued to build on its partnership with Juno Therapeutics, Inc. (a wholly-owned subsidiary of Bristol Myers Squibb Company), which started in 2020. In July 2022, the Group announced it had amended and expanded the original License and Clinical Supply Agreement signed with Juno to include two new viral vector programmes. This latest agreement demonstrates the Group's ability to expand work with existing partners and took the total number of programmes that it is working on with Bristol Myers Squibb to six.

Novartis

The Group continues its strong and long-term relationship with Novartis as its sole global supplier of lentiviral vector for Kymriah® (tisagenlecleucel, formerly CTL019).

Kymriah®, which is designed to be a one-time treatment, was the first ever FDA-approved CAR-T cell therapy and in May 2022 expanded into a third indication, after its approval from the FDA and European Commission for the treatment of adult patients with relapsed or refractory follicular lymphoma , following two or more lines of systemic therapy. This is the third B-cell malignancy indication for Kymriah®, joining approvals in indications in children and young adults with r/r paediatric and young adult acute lymphoblastic leukaemia (ALL), and r/r adult diffuse large B-cell lymphoma. In June 2022, Novartis announced five-year Kymriah® data showing durable remission and long-term survival maintained in children and young adults with advanced B-cell ALL.

Kymriah® is available in more than 400 qualified treatment centres in 30 countries having coverage for at least one indication. The Group is currently working with Novartis on four partner programmes, in addition to Kymriah®.

Vaccine manufacturing

Oxford Biomedica continued to manufacture the Oxford AstraZeneca COVID-19 vaccine at the Group's Oxbox facility during 2022, with manufacture of COVID-19 vaccines completing in the last quarter of 2022. In July 2022, the Group announced the signing of a new three-year Master Services and Development Agreement (MSDA) with AstraZeneca to facilitate potential future vaccine manufacturing opportunities on an as needed basis beyond 2022.

Oxford Biomedica has signed a 10-year MSDA with Serum Life Sciences Ltd (Serum, a subsidiary of Serum Institute of India), for the manufacture of a variety of vaccine and protein-based therapeutic products. This agreement follows on from the Memorandum of Understanding agreed with Serum in 2021. The MSDA allows for Serum to access the Group's Oxbox facility to manufacture a variety of vaccines at scales of up to 1,000L.

Serum is also able to secure exclusive access to one of the two new large scale multi 2,000L facilities in the second phase of Oxbox facility expansion for a period of 10 years from facility readiness. Serum will be required to commit to a minimum order value over the relevant period in order to secure exclusive access to the new large-scale suite.

Cabaletta

In January 2022, Oxford Biomedica announced a License and Supply Agreement with Philadelphia, US-based Cabaletta Bio for their lead product candidate, DSG3-CAART. DSG3-CAART is being evaluated in the DesCAARTes™ Phase I clinical trial as a potential treatment for patients with Mucosal Pemphigus Vulgaris and is designed to selectively target and kill the B cells that produce DSG3 antibodies while preserving the healthy B cells critical to immune function. In late 2022, Cabaletta released six-month clinical and translation data from cohorts A1 through A4 and 28-day safety and persistence data from cohorts A1 through A5.

Further client updates

In July 2022, Oxford Biomedica announced a new Licence and Supply Agreement with an undisclosed US-based private biotechnology company advancing a new generation of adoptive cell therapies. The Licence and Supply Agreement grants the new client a non-exclusive licence to utilise Oxford Biomedica's LentiVector® platform for its application in their lead CAR-T programme, and puts in place a three-year Clinical Supply Agreement.

In September 2022, Oxford Biomedica announced a further Licence and Supply Agreement with an undisclosed US-based late-stage cell and gene therapy company. The Licence and Supply Agreement grants the new client a non-exclusive licence to utilise Oxford Biomedica's LentiVector® platform for its application in their lead programme, a cell-based therapy targeting a rare indication, putting into place a five-year clinical supply arrangement.

The Group continues to actively progress its collaborations with Boehringer Ingelheim, Immatics, Arcellx, Orchard and Beam Therapeutics with the combined revenues from these client relationships expected to contribute meaningfully towards the total bioprocessing and commercial development revenues in the current financial year.

In December 2022, Arcellx announced a global strategic collaboration with Kite Pharma to co-develop and co-commercialise CART-ddBCMA, Arcellx's lead late-stage product candidate. CART-ddBCMA is currently being investigated in a pivotal Phase 2 study and has been granted Fast Track, Orphan Drug, and Regenerative Medicine Advanced Therapy Designations by the FDA.

Innovation and platform development

Innovation and the development of the platform are core to the Group's goal of industrialising viral vector manufacturing, not just with lentiviral vectors but across all viral vector classes. By industrialising viral vector production, reducing costs and improving quality through innovation, the Group seeks to broaden the therapeutic indications that are amenable to treatment with cell and gene therapy. It is expected that the reduction in cost per dose brought about through the Group's combined platform and process innovation will help drive more projects successfully through clinical development and ultimately adoption by payors into indications where there are a far greater number of patients, by bringing down the overall cost per patient treated.

Multiple elements of IP and innovation are relevant across all viral vector classes. Development of the Group's technologies such as TRiPSystem™, SecNuc™, LentiStable™ and U1 and U2, along with the corresponding IP, continue to move ahead. In addition, the Group is utilising automation and the use of robotics, artificial intelligence and machine learning to further drive productivity and capacity improvements. One example is the successful development and implementation of automated methods for both the replication competent lentivirus assay and the titre (TU/mL) assay, enhancing method robustness, providing additional capabilities to meet future capacity needs whilst ensuring continuous improvement of platform analytics. The Group is expecting to launch a fourth generation of lentiviral vectors in the second quarter of 2023 which will enable higher expression, have additional safety features and a larger capacity to deliver greater amounts of DNA.

Process C, which utilises perfusion-mode production, as opposed to the more typical batch-mode production, coupled with improvements in downstream processing into the manufacturing process has been proven and rolled out at 200L scale in GMP during 2022. Process C works together with production enhancers (such as U1, U2) and has resulted in process improvements by as much as tenfold, without the need for an increase in bioreactor size, and yielding significantly more lentiviral vector per batch. The Group has begun to offer Process C commercially, with several clients adopting or evaluating the next-generation lentiviral manufacturing platform due to the evident gains in vector quantity and quality it affords.

In July 2022, the Group announced that it had initiated a new project with Orchard utilising the Company's proprietary LentiStable™ technology. As part of the project, Oxford Biomedica's LentiStable™ technology platform will be used to develop a producer cell line capable of stably expressing lentiviral vectors. Orchard is exploring the technology to increase the manufacturing efficiency and scalability of their investigational haematopoietic stem cell (HSC) gene therapy in development for the potential treatment of mucopolysaccharidosis type I Hurler syndrome (MPS-IH).

The Group continues development work in the area of in vivo CAR-T, which the Group believes would offer greater patient access and superior efficacy compared to existing treatment options.

Business development and CDMO pipeline

Oxford Biomedica continues to have strong new business momentum and demand for its expertise and services, demonstrated by the addition of 11 new clients (majority in AAV) since the end of 2021, taking the Group's total number of clients to 18 (including three added post-period). This compares to six clients at the end of 2017, when the Group was solely focused on lentiviral vectors. The Group's CDMO portfolio currently comprises more than 30 programmes for its clients.

In November 2022, the Group welcomed a new Chief Commercial Officer, Dr. Sebastien Ribault, to lead the Commercial and Business Development team with a focus on the expansion of the Group's client base, complementing the nature of the Group's CDMO business. Dr. Ribault has over 25 years of experience across the biotechnology industry and CDMO space, and was previously at Merck Life Sciences, where he was Vice President & Head of Biologics and Viral Vector CDMO.

Under the leadership of Dr. Ribault, the Commercial team now consists of Commercial Operations, Business Development and Licensing specialists in multiple locations across the US, UK and Europe.

Gene therapeutics pipeline

Dr. Ravi Rao joined Oxford Biomedica as Chief Medical Officer in April 2022, with responsibility for assessing and developing the Group's therapeutic product strategy. The Group has reviewed strategic options and is now exploring external funding opportunities for its therapeutics portfolio to realise the potential of its innovative and differentiated programmes to address unmet medical needs. It is anticipated that this will allow the Group to maintain a long-term economic interest in a number of therapeutic products. No costs associated with the therapeutics portfolio are expected to be carried by the Group post 2023.

The global rights to AXO-Lenti-PD, which the Group had licensed to Sio Gene Therapies (Sio) were returned to the Group in March 2022, following Sio's decision to deprioritise the programme due to resourcing constraints. The Group continues to explore out-licensing opportunities for this asset.

Facilities and capacity expansion

As part of the transaction to establish Oxford Biomedica Solutions, the Group acquired the leasehold to a state-of-the-art AAV manufacturing facility based near Boston. The facility covers approximately 91,000 sq. ft including GMP space for drug substance, drug product, QC testing, quality and warehousing, with three 500L single-use bioreactors with proven scalability to 2,000L for commercial supply.

Oxbox, the Group's largest manufacturing facility spanning 84,000 sq. ft received MHRA approval for its fill finish suite in August 2022, bringing this previously outsourced function in-house. This high quality, state-of-the art value-added capability is now being rolled out to clients.

The second phase of Oxbox development is expected to provide additional flexible manufacturing capacity for a variety of viral vector-based products, including cell and gene therapy products, vaccines, and other advanced therapeutics up to 2,000L scale. Design work for this next phase of Oxbox development is progressing, with the proceeds from the £50 million investment from Serum funding the development.

With regard to the planned redevelopment of the Windrush Innovation Centre into next generation laboratory facilities, the Group is currently conducting a review of required capacity and alternative laboratory options.

In November 2022, the Group completed the sale and leaseback of its Windrush Court facility in Oxford to Kadans for £60 million, exceeding the £55 million which the Group was initially seeking. Kadans has granted Oxford Biomedica an occupational lease of the facility for 15 years.

To ensure the Group has sufficient warehouse capacity to meet expected near-term commercial development from both current and future potential clients, the Group has entered into a lease agreement in respect of a new 45,000 sq. ft warehouse in Wallingford, Oxfordshire to store ambient raw materials. The first phase of fit-out is complete, with the site expected to be ready for occupation in the second quarter of 2023.

Short-term loan facility

In March 2022, the Group entered into an US$85 million (£64.9 million) secured short-term loan facility with Oaktree. The proceeds were used by the Group, together with the Group's existing cash, to finance a portion of the transaction with Homology Medicines to establish Oxford Biomedica Solutions. The loan carried an interest rate of 8.5% with the principal amount due at the facility's maturity date in March 2023.

In October 2022, the Group refinanced this US$85 million (£64.9 million) loan facility and the Company partially repaid the outstanding amounts and amended the facility into a new senior secured US$50 million (£42.9 million) four-year term loan facility provided by Oaktree. The loan carries a variable interest rate, which is capped at 10.25% per annum. The refinanced facility also carries the option for Oxford Biomedica, subject to customary conditions and available for a three-year period, to drawdown a further US$25 million (£21.5 million) from Oaktree to fund certain permitted acquisitions.

Corporate and organisational development

During the period, new appointments were made across the Board and the Senior Executive Team, adding further expertise to ensure that the Group's leadership is well positioned to drive the next phase of growth.

In January 2022, John Dawson stepped down as CEO after 13 years and simultaneously Dr. Roch Doliveux assumed the role of Interim CEO, in addition to his existing role as Chair. John Dawson stepped down from the Board at the AGM in May 2022 and remained an adviser to the Company throughout the year. Post-period end, in March 2023, the Group welcomed Dr. Frank Mathias as CEO and Dr. Roch Doliveux stepped down as Interim CEO and resumed as Chair. Dr. Mathias brings world-class innovation and CDMO experience to Oxford Biomedica, and joined the Group from Rentschler Biopharma SE, where he had served as CEO since 2016.

In April 2022, Namrata Patel was appointed to the Board as an Independent Non-Executive Director. Ms. Patel brings a wealth of international experience in manufacturing and end-to-end supply chain management with experience in the commercialised regulated industry as well as a wealth of sustainability experience.

Post period-end, Dr. Siyamak (Sam) Rasty informed the Board that he will not be standing for re-election at the Company's AGM in June 2023. Dr. Rasty joined the Board in December 2020 and is a member of the Scientific and Technology Advisory Committee and was a member of the Audit Committee until December 2021.

FINANCIAL REVIEW

Setting firm foundations for growth

In 2022, the Group expanded its capabilities beyond lentiviral vectors and evolved into a multi-vector, quality and innovation-led CDMO. Oxford Biomedica is incredibly proud of its work in producing the Oxford AstraZeneca COVID-19 vaccine and the lives that were saved in this effort, which afforded the Group the opportunity to broaden its viral vector CDMO offering and expand the business into the US. During 2022, the Group continued to focus on growing the underlying business by attracting new clients, expanding offerings with existing clients and expansion through acquisition of technologies, capabilities and clients.

In March 2022, the Group acquired an 80% ownership interest in Oxford Biomedica Solutions, an AAV-focused manufacturing and innovation business for US$180 million (£137.4 million), with Homology Medicines retaining a 20% ownership stake. Concurrently with the Oxford Biomedica Solutions transaction, the Group entered into a manufacturing and supply agreement with Homology Medicines. Subsequently four new AAV client agreements were signed in 2022, exceeding the previously stated target of two for the year, which are expected to generate further revenues in the future. Oxford Biomedica Solutions generated revenues of £23.7 million in the year since completion of the transaction in March 2022.

Throughout 2022 the Group continued to form new client relationships whilst also expanding existing client agreements. The Group is currently working with 18 clients (including three added post-period) compared to 10 clients at the end of 2021. Lentiviral vector manufacturing volumes have continued their post-pandemic upward trajectory, with revenues from the core LentiVector® business achieving strong double-digit revenue growth compared to 2021. As expected, COVID-19 vaccine bioprocessing volumes were lower reflecting the exceptional results achieved in 2021 when vaccine manufacturing was at full pace during the pandemic. 

During the period, the Group announced new or expanded licence and supply agreements with Cabaletta, Juno, two undisclosed US-based private biotechnology companies and four new AAV clients, in addition to Homology Medicines. These agreements are expected to bolster the Group's development and manufacturing pipeline over the coming years. In June, the Group also expanded its original supply and development agreement with AstraZeneca to facilitate potential future manufacturing opportunities for the AstraZeneca COVID-19 vaccine on an as-needed basis beyond 2022.

The Group achieved total revenues of £140.0 million and an Operating EBITDA profit of £1.6 million in 2022 compared to revenues of £142.8 million and an Operating EBITDA profit of £35.9 million in the prior year. Total revenues were broadly flat compared to the prior year despite lower COVID-19 vaccine bioprocessing volumes, due to revenues achieved by Oxford Biomedica Solutions in 2022. At a cost level, there was an increase in operating expenditure as a result of increased personnel and other operational expenditure incurred due to the consolidation of Oxford Biomedica Solutions, acquisition-related due diligence costs of £5.1 million and inflationary operational cost increases including employee salary increases to help ensure the Group continues to attract and retain high quality employees. Oxford Biomedica Solutions' operating expenditure continues to be fully funded from the US$50.0 million (£38.2 million) capital injection into the new business.

In order to fund the Oxford Biomedica Solutions transaction, the Group raised gross proceeds of £80.0 million through a placing of shares, and secured a short-term loan facility of US$85.0 million (£64.9 million) which was repayable 12 months after the closing date. In October, the Group repaid US$35 million of the US$85 million short term loan facility as part of extending the relationship with Oaktree via a new four-year term loan facility of US$50 million. Interest is payable quarterly and the principal outstanding amount is repayable at the end of the four-year term. The Group also secured the option to draw down a further US$25 million from Oaktree to fund certain permitted acquisitions.

The Group ended the year with its strongest-ever year end-cash position. Throughout the year, the Group has been strategically investing in the future growth of the business while also taking proactive steps to manage operating costs, particularly given the easing of the COVID-19 pandemic, which had required the Group to increase employee numbers significantly to help meet demand. This included right-sizing its employee base, which was successfully completed without the need for compulsory redundancies, as well as a headcount freeze for non-critical hires, further supporting the Group's cost management efforts.

In November, the Group completed a sale and leaseback of its Windrush Court facility for £60 million to Kadans Science Partner. The sale proceeds of £60 million exceeded the target offer figure of £55 million that the Group previously announced it was seeking. Under the agreement, Kadans have granted the Group an occupational lease of the property for 15 years at a rent of £3.5 million per annum rising to £4.7 million per annum after five years, with a market rent review at 10 years. In the year, the Group has recognised a profit on the sale of £21.4 million, a right of use asset of £5.9 million and a lease liability of £35.6 million.

The Group's balance sheet expanded with the establishment of Oxford Biomedica Solutions through the recognition of identifiable net assets of £133.2 million. The transaction was funded through a combination of £77.0 million of net equity raised in two tranches, and drawing down the Oaktree loan of US$85.0 million (£64.9 million). The transaction also involved the recognition of a put option liability of US$51.1 million (£39.0 million) that, if exercised, requires the Group to acquire the remaining 20% of Oxford Biomedica Solutions from Homology Medicines. Further, as a result of the sale and leaseback of the Windrush Court facility, the Group's cash position strengthened to £141.3 million at the end of December 2022.

Key Financial and Non-Financial Performance Indicators

The Group evaluates its performance by making use of alternative performance measures as part of its Key Financial Performance Indicators (refer to the table below). The Group believes that these Non-GAAP measures, together with the relevant GAAP measures, provide a comprehensive, accurate reflection of the Group's performance over time. The Board has taken the decision that the Key Financial Performance Indicators against which the business will be assessed are Revenue, Operating EBITDA and Operating profit/(loss). The figures presented within this section for prior years are those reported in the Annual report and accounts for those years and have not been restated where a change in accounting standards may have required this.

1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share based payments. However, deferred bonus share option charges are not added back to operating profits in the determination of Operating EBITDA as they may be paid in cash upon the instruction of the Remuneration Committee.A reconciliation to GAAP measures is provided on page 14.

2 This is Purchases of property, plant and equipment as per the cash flow statement which excludes additions to Right-of-use assets. A reconciliation to GAAP measures is provided on page 16.

3 Cash burn/(inflow) is net cash generated from operations plus net interest paid plus capital expenditure. A reconciliation to GAAP measures is provided on page 16.

Revenue

The Group's revenues decreased by 2% to £140.0 million (2021 £142.8 million). Revenues generated from bioprocessing/commercial development were maintained at £128.1 million (2021: £128.4 million) despite a decrease in the volume of vaccine batches manufactured for AstraZeneca. This was partially offset by an increase in revenues from lentiviral vector and AAV commercial development and manufacturing activities. Bioprocessing and commercial development activities performed on behalf of the Group's other clients have increased due to increased development and manufacturing activities performed on behalf of Boehringer Ingelheim, Juno, Arcellx, Homology Medicines and other new clients.

Revenues from licence fees, milestones and royalties of £11.9 million (2021: £14.4 million), decreased by 17% when compared to the prior year. In 2021 a licence fee from Boehringer Ingelheim of £4.0 million was recognised.

1. Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share based payments. However, deferred bonus share option charges are not added back to operating profits in the determination of Operating EBITDA as they may be paid in cash upon the instruction of the Remuneration Committee.A reconciliation to GAAP measures is provided on page 14.

2. Non-cash items include depreciation, amortisation, revaluation of investments, fair value adjustments of available-for-sale assets and the share based payment charge. A reconciliation to GAAP measures is provided on page 13.

3. Total expenses are operational expenses including cost of goods incurred by the Group. A reconciliation to GAAP measures is provided on page 13.

Revenue decreased by 2% in 2022 whilst the Group's cost base grew by 50% to £162.0 million due to an increase in operational spend due to the consolidation of the results of Oxford Biomedica Solutions, as well as inflationary increases and acquisition-related due diligence costs of £5.1 million. The Group benefited from a profit on the sale of its Windrush Court facility of £21.4 million in a sale and lease back transaction. The Operating EBITDA profit of £1.6 million is therefore £34.3 million lower than the £35.9 million Operating EBITDA profit generated in 2021 as a result of the decrease in revenues, profit on sale of building and an increased cost base.

Total Expenses

In order to provide the users of the accounts with a more detailed explanation of the reasons for the year on year movements of the Group's operational expenses included within Operating EBITDA, the Group has added together research and development, bioprocessing and administrative costs and has removed depreciation, amortisation and the share option charge as these are non-cash items which do not form part of the Operating EBITDA alternative performance measure. As Operating profit/(loss) is assessed separately as a key financial performance measure, the year on year movement in these non-cash items is then individually analysed and explained specifically in the Operating and Net profit/(loss) section. Expense items included within Total Expenses are then categorised according to their relevant nature with the year on year movement explained in the second table below.

1 Includes the RDEC tax credit.

2 Research, development, bioprocessing and administrative expenses excluding depreciation, amortisation and the share option charge.

3 Cost of goods plus research, development, bioprocessing and administrative expenses excluding depreciation, amortisation and the share option charge.

4 Includes operational expenditure for Oxford Biomedica Solutions from March 2022 onwards.

5 Included £5.1 million in one-off acquisition-related due diligence costs relating to the transaction to acquire Oxford Biomedica Solutions.

1 Total expenses are operational expenses including cost of goods incurred by the Group. A reconciliation to GAAP measures is provided on page 13.

1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share based payments. However, deferred bonus share option charges are not added back to operating profits in the determination of Operating EBITDA as they may be paid in cash upon the instruction of the Remuneration Committee.A reconciliation to GAAP measures is provided on page 14 .

In arriving at Operating (loss)/profit it is necessary to deduct from Operating EBITDA the non-cash items referred to above. The depreciation (£20.3 million) and amortisation (£6.1 million) charge was higher in 2022 due to the acquisition of the fixed assets of Oxford Biomedica Solutions, as well as amortisation of intangible assets recognised as a result of the acquisition of Oxford Biomedica Solutions in March 2022. The share option charge increased by £2.9 million due to the increased employee headcount of the Group, mainly as a result of the Oxford Biomedica Solutions acquisition.

The impact of these charges resulted in an operating loss of £30.2 million in 2022 compared to a profit of £20.8 million in the prior year.

The interest charge increased by £6.9 million largely due to interest charges on the Oaktree loan, as well as IFRS 16 interest on the lease liability related to the Oxford Biomedica Solutions Boston facility. Forex increased by £8.0 million due to foreign exchange movements on the Oaktree loan. The corporation tax expense in 2022 decreased as the corporation tax charge in 2022 is limited to the notional tax charge on the RDEC tax credit included within research and development costs and the release of the deferred tax on the Oxford Biomedica Solutions intangible assets arising on acquisition.

Other Comprehensive Income

The Group recognised other comprehensive income in 2022 of £10.6 million (2021: nil) in relation to movements on the foreign currency translation reserve.

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, including gains arising from monetary items that, in substance, form part of the net investment in foreign operations.

Segmental analysis

The Group reports its results within two segments, namely:

1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share based payments. However, deferred bonus share option charges are not added back to operating profits in the determination of Operating EBITDA as they may be paid in cash upon the instruction of the Remuneration Committee.A reconciliation to GAAP measures is provided on page 14..

In 2022 the Platform segment experienced a decrease in revenue of 2% from £142.7 million to £139.9 million due to the lower volumes of vaccine batches manufactured for AstraZeneca partly offset by increased manufacturing volumes for lentiviral vector and AAV clients. Commercial development revenues increased due to activities performed on behalf of existing clients Arcellx, Boehringer Ingelheim, Homology Medicines and other clients. Operating results were negatively impacted by the lower revenues as well as Oxford Biomedica Solutions' operational expenditure in the period since they were acquired, but positively impacted by a gain of £21.4 million on the sale and lease back of the Windrush Court facility.

The Product segment has generated revenues of £0.1 million (2021: £0.1 million) and an Operating EBITDA loss and operating loss of £10.0 million and £12.3 million respectively (2021: loss of £9.4 million and £10.6 million respectively). Product operating expenses were higher due to increased research, development and pre-clinical product expenditure, but also increased manpower costs.

In the first quarter of 2023, the Senior Executive Team has re-assessed the reporting segments to reflect the way the business will be managed in future. Management reporting is currently being reworked to align with these new segments going forward and the Group expects to be able to report on these new segments during 2023 and thereafter. No changes from the current basis has been reflected in the 2022 Annual report and accounts.

Cash flow

The Group held £141.3 million of cash at 31 December 2022, having begun the year with £108.9 million. Significant movements across the year are explained below.

1 Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments.

2 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets at fair value through profit and loss, and Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share based payments. However, deferred bonus share option charges are not added back to operating profits in the determination of Operating EBITDA as they may be paid in cash upon the instruction of the Remuneration Committee.A reconciliation to GAAP measures is provided on page 14

3 The working capital movement includes the movement in trade and other receivables (-£17.9 million), trade and other payables (+£17.0 million), deferred income (-£0.7 million), contract liabilities (+£5.9 million), inventory (+£0.7 million), as well as adding the amortisation of loan fees (+£0.6 million), the deferred bonus portion of the share option charge (+£1.0 million), and the gain on sale and leaseback (+21.4 million) as outlined on page 39.

4 This is Purchases of property, plant and equipment as per the cash flow statement which excludes additions to Right-of-use assets. A reconciliation to GAAP measures is provided on page 16.

5 Cash (burn)/inflow is net cash generated from operations plus net interest paid plus capital expenditure.

6 Net proceeds from financing consists of Proceeds from issue of ordinary share capital, Costs of share issues, Payment of lease liabilities, Loans received and Loan arrangement fees as outlined on page 22.

7 The movement in the year is made up out of the net increase in cash and cash equivalents of £29.5 million and the effect of movements in exchange rates on cash held of £2.8 million.

Statement of financial position review

The most notable items on the Statement of financial position, including changes from 31 December 2021, are as follows:

Financial outlook

The Group is building a quality and innovation-led, high growth, global viral vector leader, operating across all viral vector types. To achieve this, the Group is targeting new client relationships for lentiviral vector and AAV while also broadening existing client relationships. Oxford Biomedica has a strong, diversified and growing business development pipeline and has seen a strong increase in pipeline opportunities in the last quarter, giving the Group confidence in growth prospects.

In 2023, the Group is targeting double-digit growth in lentiviral vector manufacturing and commercial development revenues driven by the successful progression, development and expansion of existing client programmes. Further, the Group is expecting to secure multiple new agreements across both lentiviral vector and AAV.

Oxford Biomedica Solutions is targeting double-digit growth in AAV manufacturing and clinical development revenues through services provided to existing and new clients. 

Overall, the Group expects total revenues to be marginally lower in 2023 than 2022 due to the cessation of COVID-19 vaccine manufacturing which generated in excess of £40 million of revenues in 2022. However, the Group expects to deliver strong double-digit growth in both lentiviral vector and AAV related revenues in 2023.

Cost of goods, which includes material costs and the transfer of bioprocessing manpower and overheads, is expected to be at similar levels to 2022, with the impact of marginally lower revenues offset by ongoing inflationary pressures. Bioprocessing and research and development costs are expected to increase due to the full year impact of Oxford Biomedica Solutions. Administrative expenditure is expected to decrease due to one-off costs related to the Oxford Biomedica Solutions transaction not recurring and successful cost containment measures.

Oxford Biomedica Solutions continues to be funded through the Group's US$50 million (£38.2 million) capital injection into the business in March 2022 and is expected to break even on an Operating EBITDA basis during 2025 as previously indicated. As a result of the financial consolidation of this initially loss-making part of the Group, the Group expects to deliver an Operating EBITDA loss in 2023.

With the significant revenue growth targeted in the Group's viral vector business, the cost base has been right-sized to anticipate future growth and the Group maintains a strong balance sheet. Progress is being made on potential external funding for the therapeutics portfolio. No costs associated with the therapeutics portfolio are expected to be carried by the Group after 2023.

Capex levels are expected to be similar to those incurred in 2022 with the Group taking a suitably cautious approach to planning significant new projects. The Group will continue to invest in new technologies in order to maintain its competitive edge in lentiviral vectors, and to continue to build a leading position in AAV.

Building on its leading position in lentiviral vectors, the Group aims to ultimately have a market leading position in the viral vector outsourced supply market across all key vector types, with long term revenue growth rates exceeding the broader market.

Going concern

The financial position of the Group, its cash flows and liquidity position are described in the strategic report, primary statements and notes to these financial statements.

The Group made a loss for the year ended 31 December 2022 of £45.2 million and consumed net cash flows from operating activities for the year of £12.6 million. The Group also:

In considering the basis of preparation of the Annual report and accounts, the Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of these financial statements, based in the first instance on the Group's 2023 annual budget and forecasts for 2024. The Directors have undertaken a rigorous assessment of this base case forecast and have also assessed the potential impact from the principal risks and uncertainties outlined in the strategic report of the Group's Annual report and accounts, taking into consideration the magnitude and likelihood of these risks and uncertainties occurring to prepare a downside scenario with associated mitigated actions.

The cash flow forecast prepared for the severe but plausible downside scenario with mitigating actions assumes the following:

Under both the base case and mitigated downside scenario, the Group and parent company has sufficient cash resources to continue in operation for a period of at least 12 months from the date of approval of these financial statements.

In the event of the downside scenarios crystallising, the Group would continue to meet its existing loan covenants until June 2024 without taking any mitigating actions, but the Board has mitigating actions in place that are entirely within its control that would enable the Group to reduce its spend within a reasonably short time-frame to increase its cash covenant headroom as required by the loan facility with Oaktree Capital Management.

The Board has confidence in the Group's ability to continue as a going concern for the following reasons:

Taking account of the matters described above, the Directors are confident that the Group and parent company will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Stuart Paynter

Chief Financial Officer

Consolidated statement of comprehensive income

for the year ended 31 December 2022

Statement of financial position

as at 31 December 2022

The notes on pages 24 to 41 form part of this preliminary information.

Statement of cash flows

for the year ended 31 December 2022

The notes on pages 24 to 41 form part of this preliminary information.

Statement of changes in equity attributable to owners of the parent company

for the year ended 31 December 2022

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

for the year ended 31 December 2022

1 Basis of accounting

This preliminary announcement was approved by the Board of Directors on 25 April 2023.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 2022 but is derived from those accounts.

Statutory accounts for 2021 have been delivered to the registrar of companies, and those for 2022 will be delivered in due course.

The auditor has reported on the 2022 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Going concern

The financial position of the Group, its cash flows and liquidity position are described in the strategic report, primary statements and notes to these financial statements.

The Group made a loss for the year ended 31 December 2022 of £45.2 million and consumed net cash flows from operating activities for the year of £12.6 million. The Group also:

In considering the basis of preparation of the Annual report and accounts, the Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of these financial statements, based in the first instance on the Group's 2023 annual budget and forecasts for 2024. The Directors have undertaken a rigorous assessment of this base case forecast and have also assessed the potential impact from the principal risks and uncertainties outlined in the strategic report of the Group's Annual report and accounts, taking into consideration the magnitude and likelihood of these risks and uncertainties occurring to prepare a downside scenario with associated mitigated actions.

The cash flow forecast prepared for the severe but plausible downside scenario with mitigating actions assumes the following:

Under both the base case and mitigated downside scenario, the Group and parent company has sufficient cash resources to continue in operation for a period of at least 12 months from the date of approval of these financial statements.

In the event of the downside scenarios crystallising, the Group would continue to meet its existing loan covenants until June 2024 without taking any mitigating actions, but the Board has mitigating actions in place that are entirely within its control that would enable the Group to reduce its spend within a reasonably short time-frame to increase its cash covenant headroom as required by the loan facility with Oaktree Capital Management.

The Board has confidence in the Group's ability to continue as a going concern for the following reasons:

Taking account of the matters described above, the Directors are confident that the Group and parent company will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

2 Critical accounting judgements and estimates

In applying the Group's accounting policies, management is required to make judgements and assumptions concerning the future in a number of areas. Actual results may be different from those estimated using these judgements and assumptions. The key sources of estimation uncertainty and the critical accounting judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Key accounting matters

Judgements

Contract revenues: Identification of performance obligations, allocation of revenue and timing of revenue recognition

The Group has identified three key areas of judgement within the collaboration agreements entered into during the period. Firstly, in relation to the number of distinct performance obligations contained within each collaboration agreement; secondly the fair value allocation of revenue to each performance obligation; and thirdly the timing of revenue recognition based on the achievement of the relevant performance obligation. The sales royalties contained within the collaboration agreements qualify for the royalty exemption available under IFRS 15 and will only be recognised as the underlying sales are made even though the performance obligation, in terms of the technology license, has already been met.

The judgements with regards to the number of distinct performance obligations and the fair value allocation of revenue to each performance obligation takes place on a contract-by-contract basis across numerous contracts entered into by the Group. As these judgements take place across numerous contracts, each with different characteristics, it is not practical to provide a quantitative analysis of the impact of applying different judgements, and the Directors do not believe that disclosing a range of outcomes resulting from applying different judgements provides meaningful information to the reader of the financial statements. Consequently, no quantitative analysis has been provided for these judgements.

Number of distinct performance obligations

Upon review of certain customer contracts and preparation of accounting papers setting out the accounting treatment as per IFRS 15, the Group is required to exercise judgement in identifying the distinct performance obligations contained within the contract. These have been identified as being:

· The granting of technology licences

· Milestones relating to bioprocessing or process development activities

The fair value allocation of revenue to each performance obligation

Because there is no readily available market price for many of the performance obligations contained in the customer contracts, the Group exercises judgment in estimating the stand alone selling price of each of these performance obligations. Key areas of judgement are assessed to be:

Timing of revenue recognition: technology licence revenues

One of the key judgemental areas identified within the collaboration agreements is the timing of recognition of licence revenue based on the achievement of the relevant performance obligation. The individual factors and aspects relating to licence revenue are assessed as part of the IFRS 15 accounting paper prepared for each agreement and a judgement is made as to whether the licence fee performance obligation related to the granting of the licence to the customer has been achieved. If it was judged that the performance obligations on licences granted in 2022 had not been met, revenues would have been £3,385,000 lower with the revenue expected to be recognised in future when the performance obligations were deemed to have been met.

Modification of Oaktree loan agreement

When a loan agreement with an existing lender is modified, a determination has to be made as to whether the modification is treated as the extinguishment of the existing financial liability and the recognition of a new liability, or accounting for the modification of the agreement as a modification to the existing financial liability.

On 10 March 2022, the Group entered into and drew down an US$85 million loan facility agreement with Oaktree Capital Management under a 1 year facility agreement maturing in 2023 with a nominal interest rate on the loan of 8.5%. On 7 October 2022, the Loan Agreement was amended, US$35 million was repaid and the term extended to October 2026, with a variable interest rate which is capped at 10.25% per annum.

A substantial modification under IFRS 9 is deemed to have occurred if the net present value of the cash flows under the new terms, including any fees, differs by at least 10% from the present value of the remaining cashflows under the original terms.

Management has determined that the modification of the Oaktree loan agreement on 7 October 2022 does not meet the substantial modification criteria and therefore will be recognised as a non-substantial modification to the existing loan, with the loan being restated to its present value and subsequently at amortised cost under the effective interest rate method.

This was determined on the basis of the quanititative test performed as required by IFRS 9 resulting in a 3% change to the net present value of the remaining cash flows when comapred to the original cash flows under the original terms. Management has also performed a qualitative assessment to identify substantial differences in terms that by nature were not captured by the quantitative assessment. In considering the qualitative factors, Management has considered the payment terms, options, change in other terms and collaterals. Based on the quantitative and qualitative assessment, Management has determined that the modification of the loan does not meet the substantial modification criteria.

If the Group had concluded that the amendment consititutes a significant modification, this accounting treatment would have resulted in the recognition of a loss on extinguisment of £1,391,000, recognition of legal fees of £439,000, and an increase in the loan balance of £409,000 on the 7th of October 2022.

Estimations

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The nature of estimation means that actual outcomes could differ from those estimates.

Percentage of completion of bioprocessing batch revenues

Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the bioprocessing process. Revenues are recognised on a percentage of completion basis and as such require estimation in terms of the assessment of the correct stage of completion including the expected costs to completion for that specific bioprocessing batch. The value of the revenue recognised with regard to the bioprocessing batches which remain in progress at year end is £32,051,000. If the assessed percentage of completion was 10 percentage points higher or lower, revenue recognised in the period would have been £3,866,000 higher or lower.

Percentage of completion of fixed price process development revenues

As it satisfies its performance obligations the Group recognises revenue and the related contract asset with regard to fixed price process development work packages. Revenues are recognised on a percentage of completion basis and as such require estimation in terms of the assessment of the correct percentage of completion for that specific process development work package. The value of the revenue recognised raised with regard to the work packages which remain in progress at year end is £8,179,000. If the assessed percentage of completion was 10 percentage points higher or lower, revenue recognised in the period would have been £818,000 higher or lower.

Provision for out of specification bioprocessing batches

Bioprocessing of clinical/commercial product for clients is recognised on a percentage of completion basis over time as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the process.

As the Group has now been bioprocessing product across a number of years, and also in a commercial capacity, the Group has assessed the need to include an estimate of bioprocessed product for which revenue has previously been recognised and which may be reversed should the product go out of specification during the remaining period over which the product is bioprocessed. In calculating this estimate, the Group has looked at historical rates of out of specification batches across the last four years, and has applied the percentage of out of specification batches to total batches produced across the assessed period to the revenue recognised on batches which have not yet completed the bioprocessing process at year end. This estimate, based on the historical percentage, may be significantly higher or lower depending on the number of bioprocessing batches actually going out of specification in future. If the historical percentage had been 10% higher or lower, the estimate would be £259,000 higher or lower. The estimate will increase or decrease based on the number of bioprocessing batches undertaken, the percentage of completion of those bioprocessing batches, and the number of batches which go out of specification over the assessment period.

Consequently, bioprocessing revenue of £2,592,000 (2021: £769,000) has not been recognised during 2022, with the corresponding credit to contract liabilities (note 12). This revenue will be recognised as the batches complete bioprocessing.

Amortisation of intangibles assets (developed technology)

The estimated useful life of developed technology acquired by the Group is 15 years as the Group expects the technology to generate cash flows for a total of 15 years. The estimate of 15 years is based on management's experience of the time period over which the technology acquired as part of the acquisition of Oxford Biomedica Solutions will become fully obsolete. Over time as the platform technology is improved, parts of the technology become obsolete as they are superseded by new technology until after 15 years the original technology is expected to have been fully replaced by newer/improved technology.

If the estimated useful life of the assets had been 10 years, the estimated amortisation for the year ended 31 December 2022 would be £3,036,000 higher (2021: nil); whilst, if the estimated useful life of the assets had been 20 years, the estimated amortisation for the year ended 31 December 2022 would be £1,518,000 lower (2021:nil).

Sale and leaseback - Lease liability discount rate

During November 2022 the Group sold its Windrush Court facility property to Kadans for a cash consideration of £60 million in a sale and leaseback transaction (refer note 7). A key estimate identified by the Group within the sale and leaseback agreement is the incremental borrowing rate used to discount the lease liability cash flows back to their present value to determine the lease liability at year end.

Since the rate implicity in the lease is not readily determinable, the Group's incremental borrowing rate has been used (the rate of interest that would have to be paid to borrow on a collateralised basis over a similar term for an amount equal to the lease payments in a similar economic environment) based on the information available at commencement date in determining the discount rate used to calculate the present value of lease payments. The rates have been determined using previously available information on borrowing rates as well as indicative borrowing rates that would be available based on the value, currency and borrowing term provided by financial institutions, adjusted for company and market specific factors. Estimation of uncertainty is involved in selecting an appropriate rate, and the rate selected for each lease will have an impact on the value of the lease liability and corresponding right-of-use (ROU) asset in the Consolidated Statement of financial positions.

If the estimated lease liability discount rate had been one percentage higher or lower, the gain recognised on the sale of Windrush court would have been £1,775,000 higher or lower (2021: £nil) with the other side of the entry decreasing or increasing the lease liability by a £2,027,000 (2021: £nil) and decreasing and increasing right of use assets by a £253,000 (2021: £nil).

Valuation of put option liability

Where a put option with non-controlling shareholders exists on their equity interests, a liability for the fair value of the exercise price of the option is recognised. On 10th March 2022, the Group recognised a put option liability to acquire the remaining 20% of Oxford Biomedica Solutions that it doesn't already own, from Homology Medicines. The fair value of the option at the date of acquisition was assessed to be £39.0 million. At 31st December 2022 the fair value of the put option liability was £38.2 million (Dec 2021: £nil).

The Group estimates the value of the put option liability using a Monte Carlo simulation which calculates the expected future exercise value of the put option, taking into consideration Oxford Biomedica Solutions' forecasted revenues over the period up until the expected exercise date along with the expected volatility of those revenues over that same period. The expected future exercise value is then discounted to the present using a discount rate in order to capture the counter party risk of the expected payment.

Key estimation uncertainty inputs which directly impact the valuation of the put option liability are assessed to be:

Valuation of acquired intangible assets

As part of the acquisition accounting for the acquisition of Oxford Biomedica Solutions LLC in 2022, we have performed an assessment on the identification, fair value, and expected useful economic lives of acquired intangible assets such as developed technology assets at the date of acquisition. The fair value attributed to intangible assets arising on acquisition is recognised in accordance with IAS 38 Intangible assets and is based on a number of estimates.

The acquired identifiable assets and liabilities have been recognised at their fair values at acquisition date and in accordance with the Group's accounting policies. The fair value of the developed technologies intangible asset is considered a key estimate subject to estimation uncertainty. Below are the details for the valuation methodologies used for the intangible assets.

Acquired developed technology has been valued using the multi-period excess earnings method (MPEEM) method, valued at £102.8 million, The MPEEM method considers the present value of net cash flows expected to be generated by the client relationships, by excluding any cash flows related to contributory assets.

Management considers the weighted average return on assets and discount rates as critical estimates as a reasonably possible change to these assumptions in aggregation, or in isolation, will have an impact on the consolidated financial statements. The weighted average return on assets and discount rate used by management in the valuation of the developed technology is 17.3% and 20.0% respectively. Below are the various sensitivities of weighted average return on assets and discount rates and their impact on the related intangible assets.

3 Taxation

During 2020 the Group ceased being eligible to claim a research and development tax credits under the Government's small company scheme.

The amount of £1,282,000 included as part of the taxation charge within the statement of comprehensive income for the year ended 31 December 2022 comprises the corporation tax payable on the amount claimed as a Large Company Tax credit (RDEC) within research and development expenses in the statement of comprehensive income.

The adjustment of current tax in respect of the prior year of £307,000 (2021: £558,000) relates to a lower (2021: higher) than anticipated tax receipt.

The United Kingdom corporation tax research and development (RDEC) credit which is included in research and development expenses, is paid in arrears once tax returns have been filed and agreed. The tax credit recognised in the financial statements but not yet received is included in current tax assets in the Statement of financial position.

During 2022 the Group recognised £125,000 (2021: £458,000) of current tax relating to tax relief obtained on exercise of share options directly within equity.

4 Basic and diluted profit/(loss) per ordinary share

The basic loss per share of 41.29p (2021: profit 22.77p) has been calculated by dividing the (loss)/profit for the period by the weighted average number of shares in issue during the year ended 31 December 2022 being, 94,829,892 (2021: 83,484,173).

As the Group made a loss this year, there is therefore no difference between the basic loss per ordinary share and the diluted loss per ordinary share in the prior period. The Group made a profit in the prior period and the diluted earnings per share in the year was (22.20p), which was calculated by dividing the earnings for the period by the weighted average number of shares in issue during the period after adjusting for the dilutive effect of the share options outstanding at 31 December 2021 (2,134,494).

5 Finance Costs

Finance costs of £16.7 million (2021: £0.9 million) consists of loan interest (£5.6 million), foreign exchange losses relating to loans (£8.0 million) and lease liability interest recognised in accordance with IFRS 16 (Leases) (£3.1million). 

6 Intangibles

Intangible assets comprise Goodwill, Developed Technology and Patents for intellectual property rights. The Group has not capitalised any internally generated intangible assets.

7 Property, plant and equipment