24 Mar 2010 07:00
24 March 2010 Source BioScience plc ("Source BioScience" or "the Company" or "the Group") Preliminary results for the year ended 31 December 2009 The Board of Source BioScience plc , the provider of expert, qualityservices and products to the healthcare, pharma biotech and life sciencesresearch sectors announces its unaudited preliminary results for the year ended31 December 2009 prepared under International Financial Reporting Standards(`IFRS').
Increased revenues underpinned Source BioScience delivering strong cash generation and achieving profitability for the first time in its history. With significant cash reserves Source BioScience remains well placed to continue growth both organically and by acquisition.
During the year Source BioScience successfully continued the growth strategy implemented by the new Board three years ago. This has been achieved by broadening and expanding the business capability, increasing the product portfolio, a capital investment programme in cutting-edge technology and an acquisition strategy to complement and enhance the activities of the Group.
The Group remains focused on expanding and enhancing its portfolio of productsand services, with the aim of gaining access to new and expanding markets. Eachof the Group's divisions performed strongly and further investment is plannedwhere there is unmet demand for services.
Financial highlights
* Profitable and cash generative * Profit before tax of £0.2 million (2008: £0.3 million loss) * Revenue increased by 11% to £12.7 million (2008: £11.5 million) * Cash generated from operating activities of £0.9 million (2008: £0.4 million) * EBITDA increased by 119% to £1.1 million (2008: £0.5 million) * Cash of £7.0 million Key events
* Trebled next generation DNA sequencing capacity; established Source
BioScience as one of the leading commercial service providers of Illumina
technology in Europe
* Expansion of laboratory capability at University College London with launch
of new, enhanced technology platform for genotyping
* Extension to liquid based cytology agreement and FocalPoint automated
cytology agreement with Cervical Screening Wales; worth £0.9 million over
twelve months
* Agreement with the Northwest NHS Region to provide FocalPoint automated
imaging system for quality assurance; worth £0.5 million over two years
* CPA accreditation extended to include molecular genetics; underpins
provision of next generation of molecular testing and companion diagnostics
* Source BioScience is well placed to take advantage of the restructuring and
outsourcing that is currently taking place among large pharmaceutical
companies
Post period events
* DNA sequencing facility opened in Dublin; first commercial service provider
to establish a sequencing laboratory in Ireland * Illumina CSPro certification awarded for sequencing service quality
* Source BioScience is the first laboratory in the UK to order the Illumina
HiSeq 2000 high throughput sequencing platform
Laurie Turnbull, Executive Chairman of Source BioScience, said:
"This past year has been extremely significant for Source BioScience with theachievement of another important milestone for the Group. It was the short termobjective of the Board to deliver profitability and cash generation and I amdelighted to report that both these key objectives have now been achieved."As I noted in the Interim Report, it is a credit to the entire team at SourceBioScience that the Group has continued to deliver growth against thebackground of a difficult economic environment. This demonstrates the resolveof everyone involved with the business to constantly improve performance andhighlights the robustness of our business model."The Group is in a strong financial position reflecting the positive response to the changes made to the business. This places Source BioScience in an idealposition to exploit opportunities that may arise during the current year whilstalso providing financial stability and security for the business in the currenteconomic environment. There are significant growth opportunities across theGroup and we expect the markets for our services and products to continue togrow."Chairman's StatementIntroductionI am delighted to report that Source BioScience was both profitable and cashgenerative during 2009. The past twelve months have seen the ongoing growth anddevelopment of the business, with expansion in the operations of the Group andthe acquisition of new technologies and access to new markets.Summary results 2009 2008 % growth £'000 £'000 Revenue 12,735 11,520 11% Gross profit 5,626 4,869 16%
Pro forma operating profit/(loss) 224 (416) n/a(before non-recurring items and amortisation on
acquisitions) Operating profit/(loss) 20 (717) n/a Profit/(loss) after tax 267 (227) n/a EBITDA 1,075 490 119% Cash flow from operations 908 601 51% Year end cash 7,014 7,647 -
The headline numbers above demonstrate the progress that the Group has made during 2009. Revenue increased by 11% to £12.7 million (2008: £11.5 million) and the Group was both profitable and cash generative.
Each of the Group's operating divisions of Healthcare, Pharma Biotech and Life Science Research performed strongly, with revenues increased and operating profit achieved across all activities.
Whilst revenue increased, the cost base of the Group remained tightlycontrolled. Central costs have been reduced to 20% of revenue (2008: 22%)illustrating the steps that have been taken to effectively manage the Group'sinfrastructure costs. This improvement demonstrates the continued importancethe Board places on cost control whilst ensuring the business has anappropriate infrastructure to support existing and planned activities.Pro forma operating performance (after adjusting for non-recurring items andthe amortisation charge resulting from acquisition accounting under IFRS)improved by £0.6 million to a profit of £0.2 million (2008: £0.4 million loss).Profit after tax was £0.3 million (2008: £0.2 million loss). The movement intoprofitability represents the achievement of another important milestone for theCompany.Cash generated from operations was £0.9 million (2008: £0.6 million). Net cashoutflow was £0.6 million (2008: £4.6 million outflow) and this was afterpayment of deferred consideration for acquisitions and capital expendituretotalling £1.9 million. The Group's cash balance was £7.0 million (2008:
£7.6million).StaffOur highly skilled and qualified staff have responded positively anddynamically to the changes in the Group over the past three years. I would liketo take the opportunity to thank them for their hard work and dedication inanother year of substantial improvement in the performance of the business. Wenow look forward to the continued progression of the business and we areconfident that we have skilled and motivated staff which will be instrumentalin achieving our objectives of further expanding the Company's operations andrevenue.StrategyThe Group's strategy remains to enhance our product and service offering acrossour Healthcare, Pharma Biotech and Life Science Research divisions. This willbe achieved through both organic growth from our existing operations andthrough carefully selected acquisitions when the opportunities arise. We willseek to broaden our portfolio of products and services, enhancing our offeringwith greater market penetration and profitability.In our Healthcare division we see significant opportunities for growth in bothour Cytology business, with the phased introduction of automated cytologyscreening technologies, and in Diagnostic Pathology as we extend the provisionof our molecular diagnostic offering into the NHS.We hold a very strong position in the UK with respect to our liquid basedcytology (`LBC') business, with a significant market share of around 47% inEngland and Wales and considerable barriers to entry. Our Cytology business isprofitable and highly cash generative and offers opportunity for expansion withthe introduction of automated imaging.
We continue to support a number of clinical assessment trials on automated cytology screening in the UK and are working closely with screening laboratories and NHS Trusts in improving the efficiency of the cervical cancer screening programme.
We have expanded our portfolio of diagnostic tests targeted at the diagnosisand treatment of cancer and we are working with a number of globalpharmaceutical companies to provide gene-based companion diagnostic testingservices for a range of cancer therapies. We continue to evaluate newtechnologies that can demonstrate utility in the clinical environment, orexisting research technologies that can be migrated to a healthcare setting andprovide us with growth in areas of scientific and clinical advancements.Key to the continued growth of the Pharma Biotech division is the demand frompharmaceutical companies for our enhanced one-stop shop service offering toinclude a full range of services from tissue pathology to genetic analysis. Thecombination of our established pathology expertise combined with ourbiomaterials resource of human tissue, DNA and RNA libraries represents apowerful offering. Increasingly pharmaceutical and biotechnology companies arelooking to target therapies to specific disease types within specific patientgroups. We anticipate the demand for our pharmacogenomic and genotypingservices, which identify the genetic differences between groups of patients andgroups of diseases, to increase and we have the facilities and skills to growin this important, rapidly expanding sector.There have been significant changes over the past year within thepharmaceutical industry, with many large companies undergoing significantrestructuring programmes. A number have embarked on a strategy of working moreextensively with functional service providers who act as outsource partners.Source BioScience is ideally placed to be a service partner for outsourceprojects and we are actively engaged in a number of opportunities.Our Life Science Research division presents significant opportunities forgrowth especially within the expanding market for next generation sequencingand genotyping services. Technologies within this sector are advancing rapidlyand we recognise the need to stay at the forefront of genomic services. We haveinvested in additional next generation sequencing technology to enhance ourcapacity and capability. We remain the only commercial service provider in theUK to offer these next generation sequencing and genotyping technologies and wecontinue to work in partnership with the supplier and end users to develop themarket and applications for this service. In tandem with these new technologiesthere is increasing demand for bioinformatics analysis and the Group has thestaff with the necessary expertise to deliver this supplementary service.We have seen the continued success of our model to embed our services withinacademic centres and provide them with core genomic services. Our facility atUniversity College London has proved very successful and we have enhanced ourservice capability there during the year with the introduction of a newgenotyping platform. Since the year end we have added a fifth sequencinglaboratory based at Trinity College Dublin's St James Hospital site in Ireland.This new facility extends the Company's geographical reach and establishesSource BioScience as the only commercial sequencing provider with facilities inIreland.The Group also has a significant portfolio of antibodies, DNA and RNA samplesand an extensive bank of human tissue. These products have applications in lifescience and clinical research, offering customers rapid access to high quality,leading-edge genomic products, antibodies and related research tools. Thisproducts business is highly complementary with the Group's existing activitiesand enhances our Life Science Research offering.
Prospects
The Board set out just over three years ago to reverse the extremely poorfinancial performance of the business and set short term objectives to deliverto shareholders. These were to create a company that generates, not consumes,cash and to deliver profitability. Importantly, in achieving those milestoneswe have built a business that has solid foundations and an exciting futurewhich will enhance shareholder value.We are delighted to report that during the year the Group generated £0.9million of cash from operating activities and profit after tax of £0.3 million.We have achieved our goal of having a vibrant and sustainable business on whichwe are building for the long term benefit of our shareholders, clients andemployees.
As highlighted above, we believe the growth opportunities across the Group remain strong and we will continue to drive value from the unique potential that exists for the Group where the expertise in each of our divisions interact and complement each other. In Healthcare, we will build on our strong foundations in cytology and continue to expand our molecular diagnostic services, offering a range of genetic tests designed to diagnose disease, predict the risk of disease and predict and monitor the response to therapies.
With our Life Science Research division we have forged a leading position inEurope for the provision of DNA sequencing services including next generationsequencing and there is a growing market, and growing demand, for oursequencing and genetic services.With our expertise in genomics we are able to offer a full range ofpharmacogenomic services to pharmaceutical and biotechnology companies. As drugdevelopment companies seek to develop increasingly targeted therapies, anunderstanding of an individual's genetic make up is necessary to predict howthey will respond to drug treatments and to determine and understand patientmetabolism of novel and existing therapies.At the same time, our Pharma Biotech Services can offer the diagnostictechniques, molecular analysis and biomarker development platforms required toidentify companion diagnostics for the targeted drug therapies. As the revenuesfrom this service activity are not dependent on the success of an individualdrug, the Group will benefit from increasing overall activity in this area.We expect demand for our services and products to grow and we will continue toenhance our portfolio to meet that demand. We are exploring new markets andwill continue to exploit the cross-selling opportunities we now have from ourbroad customer base and expanded portfolio.
We will continue to equip the Group with the necessary skills, expertise, technology and products to deliver controlled growth and value to shareholders.
Laurie TurnbullExecutive Chairman24 March 2010
Business Review (abbreviated)
Cautionary statement
This Business Review contains certain forward-looking statements with respectto the financial condition, results, operations and businesses of SourceBioScience plc. These statements and forecasts involve risk and uncertaintybecause they relate to events and depend upon circumstances that will occur inthe future. There are a number of factors that could cause actual results ordevelopments to differ materially from those expressed or implied by theseforward-looking statements. Nothing in this Business Review should be construedas a profit forecast.Overview
Source BioScience plc provides expert, quality services and products to thehealthcare, pharma biotech and life science research sectors. The Group has itsheadquarters in Nottingham, UK, where it operates state of the art referencelaboratories, with additional facilities in London, Cambridge, Oxford andDublin, Ireland.
The Group's activities are structured into the three divisions of Healthcare, Pharma Biotech Services and Life Science Research as described below.
Healthcare
Healthcare comprises Cytology and Diagnostic Pathology. The division provides the latest cytology screening equipment and techniques as well as reference laboratory diagnostic testing for cancer and other diseases, including predictive testing for treatment optimisation for clinicians and patients.
Our Cytology operation distributes and supports the SurePath liquid basedcytology (`LBC') system and FocalPoint automated cytology imaging platform onan exclusive basis in the UK. These systems are vital in the preparation andanalysis of cervical smear samples as part of the national cervical cancerscreening programmes. SurePath is one of only two systems approved by theNational Institute for Health and Clinical Excellence (`NICE') for use inEngland and Wales.The Diagnostic Pathology operation provides expert pathology and referencelaboratory services to public and private healthcare providers. Pathologyservices are an essential element of clinical services, making a contributionto the effective detection, diagnosis, treatment and management of disease,especially chronic disease, including cancer. The Group also offers a portfolioof diagnostic tests aimed at supporting clinicians and patients in determiningthe most appropriate treatment to achieve the best possible outcome for thepatient. A significant, and increasing, number of these diagnostic tests aregene-based molecular diagnostic tests being used as a companion diagnostic.Companion diagnostic tests provide information as to whether patients areunlikely to respond favourably to particular drug therapies for certain typesof cancer. As new drugs are approved for use, molecular diagnostic tests willbecome increasingly important in determining whether a patient should beoffered a particular drug and in assessing a patient's likely benefit from thetherapy.Source BioScience operates in a highly competitive market and competes forbusiness against other service based organisations often, as in the case oflarge clients such as the NHS, against core facilities from within the clientitself. Regulatory accreditation from relevant authorities is considered to becritical in ensuring the Group can offer its products and services to customersin a trusted manner. Source BioScience has maintained its Clinical PathologyAccreditation (`CPA') throughout 2009 and our Molecular Genetics services havealso been accredited in addition to our Pathology services.
Pharma Biotech Services
Pharma Biotech Services offers diagnostic, prognostic and predictive testingservices to support therapy discovery and development by pharmaceutical andbiotechnology companies, also assisting in identifying and validating markersclosely linked with response to therapy during clinical trials. SourceBioScience provides support for early and late stage therapeutic development,offering a one-stop shop from tissue pathology, immunohistochemistry (`IHC'),sophisticated image analysis, biomarker determination and assay development topharmacogenomics including genotyping and gene expression analysis.Appropriate laboratory accreditations are key to generating growth, especiallywhere services are provided in support of regulatory studies and clinicaltrials. We maintained our Good Laboratory Practice (`GLP') and Good ClinicalPractice (`GCP') status and Human Tissue Authority License throughout the year.
Life Science Research
Life Science Research provides core laboratory research support fromconceptualisation to implementation, calling upon a wide range of cutting-edgetechnology platforms including an online catalogue of biomolecular tools. Thisincorporates gene sequencing, genotyping, whole genome amplification and acomprehensive library of genomic reagents and clones including cDNA and RNAi,as well as facilitating rapid access to high quality antibodies, cell cultures,diagnostic assays for cancer and other genetic testing and related researchtools.Gene expression profiling determines how gene expression alters underexperimental or pathological conditions using microarray and real time PCRtechnology platforms. Genomic DNA extraction, quantitation, amplification andbiobanking are also provided for human DNA. In conjunction with whole genomeamplification, Source BioScience can now provide the requisite technologies forthe processing of minute quantities of DNA and RNA from difficult or raresamples which can subsequently be sequenced, genotyped or expression profiled.
Source BioScience is also an international distributor for a biological archive of more than 16 million DNA samples, antibodies and RNAi libraries. These resources represent essential tools for gene structure and function studies.
Business Segment Performance Review
Healthcare
Our Healthcare division generated revenue of £6.9 million, an increase of 9% onlast year (2008: £6.4 million) and divisional profit increased by 34% to £1.9million (2008: £1.4 million).
Cytology
Cytology continues to be a real success story for Source BioScience and 2009was an interesting year. There was a significant impact on demand for our LBCconsumables following the publicity surrounding the death of Jade Goody fromcervical cancer. Cervical cancer screening centres across the UK reportedincreased demand for cervical cancer screening, resulting in a 25% increase indemand for our LBC consumables during the first half of the year. It was acredit to everyone within our Healthcare team, especially in distribution andlogistics, that we were able to satisfy that demand whilst maintaining our highstandards of customer service. It was unclear at the time whether this peak inrequirement was from increased compliance with the screening programme, orwomen wishing to attend for their screening appointments earlier thanscheduled. As the year progressed and consumable volumes stabilised, it becameapparent that the majority of the peak in demand was attributable to earlyattendance rather than from increased compliance.We have identified the introduction of automated cervical cancer screening inthe UK as a significant opportunity for the Group. During the year we enteredinto an agreement with the Northwest NHS Region to provide our FocalPointautomated imaging platform for quality assurance applications for an initialperiod of two years. This agreement is worth £0.5 million over the two yearperiod and demonstrates the intent of the NHS to adopt this technology into thecervical cancer screening programme. To fulfil this agreement, we invested inadditional FocalPoint automated imaging systems, doubling our capacity of thisimportant technology.In addition to the above agreement, we announced an extension to our existingagreement to supply cytology services and automated imaging technology toCervical Screening Wales (`CSW'). The agreements with CSW are worth £0.9million over a twelve month period and underline the effectiveness and efficacyof the FocalPoint system.OpportunitiesWidespread introduction of automated cervical cancer screening in the UKremains a significant opportunity for the Group. The two year agreement withthe Northwest NHS Region represented an important milestone and demonstratesthe intent of the NHS to accept and adopt this technology into the cervicalscreening programme. FocalPoint is highly complementary with our existingCytology business and enables the automated screening of cytology slidesproduced using the SurePath LBC system. With over 3.5 million cytology slidesmanually screened for cervical cancer every year in the UK, cytology lendsitself to increased automation.During 2010 we will continue to collaborate with the NHS to demonstrate theutility of the FocalPoint system within the clinical setting and support theHealth Technology Assessment (`HTA') MAVERIC trial of automated cytologyscreening systems. We anticipate that the results of the MAVERIC trial will
bereported during 2010.Diagnostic PathologyDuring 2009 we strengthened our molecular diagnostic and companion diagnosticportfolio and leveraged our experience and credibility as a provider of expert,quality laboratory services as the foundation for the increased penetration ofour molecular diagnostic services into the NHS.Diagnostic Pathology saw increasing demand for our molecular diagnostic testsfor cancer. This included significant growth in demand for the K-RAS gene testwhich indicates whether patients are unlikely to respond favourably forparticular therapies for certain types of cancer, making treatment decisionsmore relevant and treatment regimes more cost effective. Current demand forK-RAS testing is mainly in relation to patients with colorectal cancer, wherethe presence of a mutated form of the K-RAS gene in the cancer cells mayindicate that a patient is unsuitable for new anti-EGFR drugs such as Erbituxand Vectibix.Source BioScience has a commitment to quality. We view quality management andquality assurance essential in delivering a credible and robust diagnosticservice to the NHS and private healthcare. Accordingly we take all appropriatesteps to ensure we have necessary accreditations in place from the appropriateregulatory authorities. During the year we were inspected by the ClinicalPathology Accreditation (`CPA') and demonstrated compliance with theirstringent requirements for approval. As a result we are now an accreditedlaboratory for molecular genetics, alongside our existing accreditations, whichunderpin the provision of our molecular diagnostic testing portfolio.
During the year we were asked to undertake a number of new "duty of care" reviews which demonstrates the faith NHS trusts have in our CPA accredited histopathology reporting service. Our reputation as an independent, fully-accredited high quality service provider is instrumental in securing this type of work.
OpportunitiesOur strategy is to expand the range of diagnostic tests we provide but also toextend the penetration of our molecular diagnostic offering into the NHS. Weare working closely with key opinion leaders in the oncology and pathologycommunity, and with a number of biotechnology and pharmaceutical companies, toincrease awareness and utilisation of molecular pathology techniques in publichealthcare.Molecular diagnostic tests, when used in conjunction with a therapy, arereferred to as companion diagnostic tests. Companion diagnostics indicate thelikely response, or non-response, of a patient to specific therapies. There isincreasing demand for targeted therapies as a means to improve treatmentsuccess and reduce costs. Accordingly there is increasing demand for companiondiagnostics to identify which patients are likely to respond and which are not.The K-RAS test highlighted above is just one example of such a companiondiagnostic.
We have also introduced a number of IT initiatives and solutions that will facilitate faster access to test results, generating real operational and clinical benefits for both the hospital and patient as diagnoses can be received, reviewed and acted upon more quickly.
Pharma Biotech Services
Our Pharma Biotech Services division delivered a much improved performance during 2009 with revenue of £0.9 million, an increase of 60% on last year (2008: £0.6 million), and the division reported a profit of £0.2 million (2008: £0.1 million loss).
We have seen increased interest from a broader spectrum of pharma biotech customers in our enhanced "one-stop shop" pathology to genomics offering, particularly from the top tier pharmaceutical companies. The combination of our established pathology expertise combined with our cutting-edge genomics capability represents a powerful offering, particularly with accelerating interest in targeted therapies and pharmacogenomics.
Pharmacogenomics is the study of how a patient may respond to a therapy basedupon their genetic make up. It is therefore a powerful tool in predicting how apatient may respond to an existing or novel therapy. Such an understanding candecrease the use of expensive therapies and invasive procedures. Additionally,knowledge of the likely effectiveness of a therapy makes it more reliable andrepresents progress towards targeted therapies for individual patients.Analysis with our Illumina next generation sequencing platform represents acutting-edge way of revealing those genetic variants that may influence drugresponse.We have also commenced a number of new projects with pharmaceutical companiesin support of ongoing clinical trials. The demand has been for a broad range ofour services including traditional pathology and immunohistochemistry (`IHC'),molecular testing for mutation status and circulating tumour cell (`CTC')enumeration. This remains consistent with the increased focus that pharmacompanies are placing on reducing the costs of therapy development by improvingthe efficiency with which potential drug targets can be identified; determiningways by which the potential patient population can be segmented to eliminatelikely non-responders; creating targeted therapies with a companion diagnosticand ensuring that the later phase clinical trials are as effective as possible.
Opportunities
We will continue to promote our genomic capability to pharmaceutical companiesrequiring molecular analysis as part of their pre-clinical research anddevelopment programmes as well as emerging pharmacogenomic analysis supportingclinical development of therapeutics, especially targeted therapeutics. We arealso exploring opportunities with a number of pharmaceutical companies todetermine the genetics of diseases such as diabetes, neurological andcardiovascular disease. These are disease areas complementary to our expertisein oncology and are likely to be areas of focus for pharmaceutical companieslooking to make use of pharmacogenomic analysis.
Life Science Research
Life Science Research performed in line with expectations. Revenue increased by 7% to £4.9 million (2008: £4.6 million) and divisional operating profit increased by 19% to £0.5 million (2008: £0.4 million).
We saw significant growth in our DNA sequencing service. The Company's DNA sequencing solution is based on a combination of Sanger sequencing and next generation sequencing coupled with comprehensive bioinformatic support. This portfolio provides great flexibility and supports the development of new applications to meet individual customer requirements.
We have seen the continued success of our model to embed our services withinacademic centres and provide them with core genomic services. Throughout theyear we offered our conventional Sanger sequencing service from four UKlaboratories in Cambridge, Oxford, London and Nottingham. We have since added afifth sequencing laboratory in Ireland, based at Trinity College Dublin's StJames Hospital site. This new facility extends the Company's geographical reachand establishes Source BioScience as the only commercial sequencing providerwith facilities in Ireland.
Sanger sequencing revenues increased by more than 20% compared with last year. Whilst around half of that growth was attributable to our facility at University College London (`UCL') all of our sites sequenced higher volumes compared with 2008.
Our next generation DNA sequencing service, based around the Illumina GenomeAnalyzer IIx (GAIIx) platform, was a tremendous success during 2009. Thepipeline of projects was extensive and the platform operated at near capacity.In response to the immediate demand for our Illumina sequencing service, weinvested £0.7 million in a further two GAIIx platforms, trebling our capacityand significantly enhancing our sequencing service.Source BioScience was the first commercial service provider for GAIIxtechnology in the UK and this additional investment will ensure SourceBioScience's status as one of Europe's leading commercial service providers forthis cutting-edge technology. The Illumina technology platforms perfectlycomplement Source BioScience's extensive portfolio of genomic and diagnosticplatforms, with applications in life science research as well as molecularpathology and clinical diagnostics.We were also delighted to be awarded CSPro certified service provider status byIllumina, one of only ten laboratories in the world. Illumina CSPro is acollaborative service partnership dedicated to ensuring the delivery of thehighest quality data available for genetic analysis applications; in short itgives customers a `guarantee of excellence'. Source BioScience is the onlycommercial provider in the UK to have CSPro certification and underlines theCompany's commitment to deliver the highest possible level of service to itscustomers and Illumina's confidence in our offering.We expanded our laboratory capability at UCL with the launch of a new, enhancedtechnology platform for genotyping. The Fluidigm genotyping platform offers aflexible and cost effective solution to genotyping and completes our portfolioof genotyping services. This platform will attract new customers to SourceBioScience and enable us to satisfy all the genotyping requirements of ourcustomers.During the year we also relocated our Cambridge laboratory facility to a newsite locally to take advantage of reductions in commercial property leaserentals. The relocation has also enabled us to restructure the operations onthe site to further improve efficiencies and was conducted with minimalinterruption to our business.
Opportunities
There is an increasing requirement within academic and research laboratories,and pharmaceutical and biotechnology companies, for genomic services includingDNA sequencing and genotyping services to identify and quantify geneticdifferences between individuals or samples. As a result there is a growingmarket, and growing demand, for our sequencing and genetic services.
Source BioScience is ideally placed to meet this demand across our five laboratories in international centres of genomic research in London, Cambridge, Oxford, Nottingham and Dublin and our sequencing and genotyping platforms represent the latest cutting-edge technologies.
However, technologies continue to develop rapidly and we believe that within afew years next generation sequencing will radically reduce the cost of genesequencing, creating new markets for companies that offer this service. Growthcan be seen from a number of markets. Academic and charitably funded researchinstitutions will be looking to undertake large scale sequencing andre-sequencing projects, which will require high throughput sequencingtechnologies in order to deliver.In response, Source BioScience will be investing in Illumina's new HiSeq 2000high throughput sequencing platform, the first laboratory in the UK to do so.This investment will further strengthen Source BioScience's existing complementof three Illumina GAIIx sequencing platforms and will ensure our status as oneof Europe's leading commercial sequencing service providers.The HiSeq 2000 delivers the highest sequencing output and fastest datageneration rate that the industry currently offers. It uses the same sequencingby synthesis chemistry and ancillary equipment as the GAIIx but innovativeengineering has enabled sequencing output to be increased by around 300 percent. As the UK's only Illumina CSPro certified sequencing laboratory, theHiSeq 2000 platform perfectly complements our extensive portfolio of genomicand diagnostic platforms.One consequence of these new technologies is that whilst they increaseexponentially the speed with which genetic information can be determined, theygenerate vast amounts of data which need to be captured, stored, analysed andinterpreted. Source BioScience offers a bioinformatics service to provide dataanalysis for projects we undertake and we plan to enhance this service to meetthe demand for bioinformatics where sequencing has been conducted in-house. Wefind that in many genomics centres access to funding for capital investment canoutstrip funding for support services including bioinformatics. As the volumeof data generated increases we expect an increasing demand for a consultativebioinformatics service.There will be further opportunities to embed our services within academiccentres and provide them with core genomic services. Replication of this modelin other major genomic research centres can consolidate the existing serviceprovision and secure volumes for our embedded technology.Significantly, the market is already beginning to shift towards commercialapplications with pharmaceutical and biotechnology companies looking for anunderstanding of the genetics of disease and genetic biomarkers as predictorsof response by patients to new and existing therapies. There is also a growingawareness amongst private individuals of how an understanding of their geneticmake up may influence their health and predisposition to certain diseases.
Central resources
Central resources include facilities, key support services such as finance, HRand IT, together with related costs, and the plc Board costs. Other costs showncentrally include insurances, legal, professional and advisor fees in additionto investor relations.Central costs have increased by £0.1 million to £2.6 million (2008: £2.5million). However, over the same period, revenue has increased by more than £1.2 million to £12.7 million and central costs now represent 20% of revenuecompared with 22% in 2008. We will continue to monitor and control central
costs tightly.Financial reviewFinancial performance
Revenue increased by 11% to £12.7 million (2008: £11.5 million). Owing to theoperational gearing inherent in a laboratory services business, coupled withclose management of the cost base, gross margins have firmed slightly to 44%(2008: 42%).Our laboratory staff are highly qualified, experienced and adaptable, whichenables operational gearing as revenue grows and assists in dealing withfluctuations in workload. Our laboratory infrastructure now encompasses fivesites in London, Cambridge, Oxford and Dublin in addition to the main referencelaboratory at our head office site in Nottingham. The laboratory infrastructureis capable of handling increased volumes and is scalable with minimaladditional investment.Normal administrative expenses were £3.9 million, consistent with 2008.However, over the same period, revenue has increased by 11% and normaladministrative expenses represent 31% of revenue, compared with 34% of revenuein 2008. This relative reduction in expenses results from the focus on costcontrol that the Board and senior management have maintained throughout theyear and demonstrates the operational gearing inherent within the laboratoryoperations and within the support functions in the business.
In aggregate, total administrative expenses for the year were £4.1 million (2008: £4.2 million) representing 32% of revenue (2008: 37%).
Operating profit for the year was £20,000 (2008: £0.7 million loss). Thecontinued year on year improvement in operating result is a testament to theattitude of all the staff in the Group who have focused on maintaining ourexceptionally high quality of service whilst managing costs in the business andincreasing the efficiency of our operations.After net finance income and taxation, the profit attributable to equityholders for 2009 was £0.3 million (2008: £0.2 million loss). The movement intoprofitability represents the achievement of another important milestone for theGroup.
Included in the income statement are non-cash items totalling £1.1 million (2008: £1.2 million). After accounting for these, net finance income and taxation, adjusted EBITDA were £1.1 million (2008: £0.5 million adjusted profit).
Financial position
At 31 December 2009 the Group had net assets of £15.2 million (31 December 2008: £14.8 million).
Non-current assets increased by a net £0.4 million to £10.0 million at 31December 2009 (31 December 2008: £9.6 million). The significant components ofthis increase are £0.7 million invested in Illumina next generation sequencingcapacity and £0.4 million in the FocalPoint automated cytology screeningsystem.Net current assets reduced by £0.9 million to £5.4 million (31 December 2008: £6.2 million). The main drivers of this change were the scheduled payments forthe deferred consideration on historic acquisitions and capital expendituretogether totalling £1.9 million. Within current liabilities, trade and otherpayables have increased by £0.9 million of which £0.7 million represents theinvestment in the additional Illumina GAIIx platforms.The Group has historically been funded primarily through equity although debthas been raised as and when appropriate for the needs of the business. As at 31December 2009 the Group had no debt other than a negligible balance of £4,000in respect of finance lease obligations.
Cash flows and liquidity
The Group generated cash from operating activities of £0.9 million (2008: £0.4 million).
After deferred payments for acquisitions, and other non-trading items, net cashoutflow was £0.6 million (2008: £4.6 million outflow). Deferred considerationfor Autogen Bioclear was £0.8 million and the final deferred considerationpayment for Geneservice was £0.3 million. In aggregate we invested £0.7 millionin our laboratory infrastructure including payment for the additionalFocalPoint automated cytology screening systems.Interest received was just £0.2 million (2008: £0.3 million) on an averagebalance of over £7.0 million, partly the result of reduced funds on deposit butmainly due to negligible rates of interest on deposits.
The Group's cash balance was £7.0 million as at 31 December 2009 (31 December 2008: £7.6 million).
ProspectsWe stated at the beginning of 2007 that it was the objective of the Board todeliver profitability and cash generation. The Group was cash generative forthe year ended 31 December 2008 and was both cash generative and profitable forthe year just ended 31 December 2009. This has been achieved through acombination of organic growth and prudent, appropriate investment inacquisition opportunities.There have been further significant and positive changes across the Groupduring 2009 and the business has continued the momentum generated over theprevious three years, with strong performance and profitability achieved acrossall three divisions. The Group has a closely knit team of Directors and seniormanagement who have demonstrated the right blend of skills, experience andexpertise to deliver the strategic objectives and move the business forwardfinancially and operationally.The focus of the Group remains on the provision of expert, quality services andproducts to the healthcare, pharma biotech and life science researchcommunities and the commercial and operational structure of the Group has beenconfigured to reflect this.The activities of the Group are clearly structured commercially into the threedivisions of Healthcare, Pharma Biotech Services and Life Science Research.This presents a "joined up" business built on common technology platforms,laboratory processes and intellectual capital. The commonality of technologyplatforms and expertise across the Group is key in driving the organic growthof the business and enables significant operational gearing without introducingfinancial or operational inefficiencies from duplication of platforms andprocesses.Opportunities for growth are apparent across all three divisions and these havebeen highlighted above. Additionally, significant opportunities for growth liein our ability to realise our unique potential that exists where the expertisein each of our divisions interact and complement each other.
Molecular diagnostics
The interaction between our diagnostic pathology expertise in Healthcare andgenomics capability in our Life Science Research division creates theopportunity to offer a range of gene-based tests designed to diagnose disease,predict the risk of disease and predict and monitor the response to therapies.Our strategy is to continue to build a portfolio of molecular diagnostic tests,with proven clinical utility and an unmet demand, which positions the Group asan essential service provider of diagnostic testing for healthcareapplications.We already offer a comprehensive range of molecular diagnostic tests. Theseinclude gene-based tests for breast cancer including BRCA1 and BRCA2 analysis;the K-RAS, EGFR and B-RAF gene mutation tests and the Roche Amplichip CYP450gene-based diagnostic test which can be used to predict a patient's response tocertain therapies.The molecular diagnostics service offering will extend our penetration into theNHS and private healthcare beyond histopathology and cytology into genetics andcytogenetics, increasing the size of our potential market. Our experience andcredibility as a provider of expert, quality reference laboratory services intothe NHS will be used as the platform for the introduction of our moleculardiagnostic services.
Pharmacogenomics
The genomic services we can provide with our Life Science Research technologyplatforms are particularly relevant to pharmaceutical companies which requiremolecular analysis as part of their pre-clinical research and developmentprogrammes as well as the emerging pharmacogenomic analysis supporting clinicaldevelopment of therapeutics. Pharmacogenomics is the study of how a patient'sgenetic make-up affects response to drug treatments and can be used todetermine and understand the patient's metabolism of novel and existing drugtherapies and therefore how their disease will respond to a drug treatment.Such an understanding can decrease the use of expensive therapies and invasiveprocedures. In addition, knowledge of the likely effectiveness of a drug makesit more reliable, improves its efficacy and therefore reduces its cost,improving the chances that the drug will gain regulatory approval. Currentinformation on the genetics of diseases suggests that cancer, diabetes andcardiovascular disease are likely to be the areas of focus for pharmaceuticalcompanies looking to employ pharmacogenomic analyses.Pharmacogenomics will have a major impact on the future of healthcare and thecornerstone of the analysis is the ability to identify genetic variations thatalter an individual's response to a drug. The Group already operates a numberof cutting-edge genotyping platforms including the Illumina next generationsequencing and genotyping platforms. This places Source BioScience in an idealposition to be the service provider of choice to pharmaceutical andbiotechnology companies looking to undertake pharmacogenomic analysis and thoselooking to develop and commercialise pharmacogenomics applications.
Companion diagnostics and personalised medicine
Personalised medicine and companion diagnostics will result from an ability touse pharmacogenomic and other analyses to identify biomarkers in patientpopulations and disease types that indicate likely response, or non-response,to therapies and manufacture targeted therapies for these stratified patientgroups. Ultimately, the result of personalised medicine will be the developmentof therapies by pharma biotech companies that are tailored for each individualpatient. We aim to exploit our diagnostic pathology expertise in Healthcare andbiomarker development platforms within Pharma Biotech Services to work withpharmaceutical and biotechnology companies to provide fee for servicelaboratory support for the identification and development of companiondiagnostics.Companion diagnostics are simply biomarkers which, when tested for alongside atherapy, can be used to predict response to that therapy. As demand increasesfor targeted therapies which will improve treatment success and reduce costs,there is increasing demand for companion diagnostics to accompany thosetherapies.Source BioScience is in a prime position to provide the diagnostic techniques,molecular analyses and biomarker development platforms required to identify anddevelop companion diagnostics. We are currently working with a number ofleading pharmaceutical companies to assess genetic biomarkers for a range ofcancer therapies. As the revenues from this service activity are not dependenton the success of individual drug programmes, the Group will benefit fromincreasing overall activity in this area.The Group's strategy is to grow its Healthcare, Pharma Biotech and Life ScienceResearch businesses through organic growth from existing operations combinedwith selected appropriate investment and acquisitions to broaden the Group'sportfolio of products and services, expanding our core expertise intocomplementary areas.
Over the medium to long term, the Board remains confident that the opportunities for growth are strong and we expect the markets for our services and products to grow significantly. We continue to equip the Group with the breadth and depth of service offering, technology platforms, expertise and products to deliver controlled growth and value to shareholders.
Dr Nick AshManaging Director24 March 2010Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2009 Year Year ended ended 31 December 31 December 2009 2008 Note £'000 £'000 Revenue 2 12,735 11,520 Cost of sales (7,109) (6,651) Gross profit 5,626 4,869 Selling and distribution expenses (1,321) (1,165) Administrative expenses: - normal (3,892) (3,924) - amortisation of intangibles arising from (204) (226)acquisitions - restructuring costs - (75) Administrative expenses (4,096) (4,225) Research and development (189) (196) Operating profit/(loss) 20 (717) Finance income 147 363 Finance costs (2) (19)
Share of results of associate 43
27
Profit/(loss) on ordinary activities before 208 (346)tax Taxation 59 119 Profit/(loss) attributable to equity 267 (227)holders of the Company Total comprehensive income/(expense) 267
(227)
attributable to equity holders of the
Company Earnings/(loss) per share: 3 Basic profit/(loss) per ordinary share 0.13p
(0.11)p
Diluted profit/(loss) per ordinary share 0.13p
(0.11)p
There are no other items of comprehensive income. All results derive from continuing operations.
Consolidated Statement of Changes in Shareholders' Equity For the year ended 31 December 2009
Attributable to equity holders of the Parent Company Share Share Merger Special Profit Total capital premium and other reserve and loss equity reserves reserve Group £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2008 4,075 32,284 2,408 - (23,803) 14,964 Loss for the year - - - - (227) (227) Total comprehensive - - - - (227) (227)expense for the year Employee share option scheme: - value of services - - - - 103 103provided Capital reorganisation - (32,284) - 10,788 21,496 - Balance at 31 December 4,075 - 2,408 10,788 (2,431) 14,8402008 Balance at 1 January 2009 4,075 - 2,408 10,788 (2,431) 14,840 Profit for the year - - - - 267 267 Total comprehensive - - - - 267 267income for the year Employee share option scheme: - value of services - - - - 92 92provided Balance at 31 December 4,075 - 2,408 10,788 (2,072) 15,1992009 Consolidated Statement of Financial PositionAs at 31 December 2009 As at As at 31 December 31 December 2009 2008 £'000 £'000 Non-current assets Goodwill 6,617 6,602 Other intangible assets 638 812 Investment in associate 223 180 Loan to associate - 127 Property, plant and equipment 2,492 1,835 9,970 9,556 Current assets Inventories 509 478 Trade and other receivables 2,633 2,373 Cash and cash equivalents 7,014 7,647 10,156 10,498 Current liabilities Trade and other payables 4,033 3,154 Financial liabilities - borrowings 3 32 - loan notes - 315 Deferred consideration 750 750 4,786 4,251 Net current assets 5,370 6,247 Total assets less current liabilities 15,340 15,803 Non-current liabilities Financial liabilities - borrowings 1 4 Deferred consideration - 750 Deferred tax 140 209 141 963 Net assets 15,199 14,840 Equity Issued share capital 4,075 4,075 Special reserve 10,788 10,788 Other reserves 2,408 2,408 Profit and loss reserve (2,072) (2,431) Total equity 15,199 14,840Consolidated Statement of Cash FlowsFor the year ended 31 December 2009 Year Year ended ended 31 December 31 December 2009 2008 Note £'000 £'000
Cash flows from operating activities Cash generated from operations 4 908
601 Interest paid (2) (19)
Tax received on behalf of acquired 40
-subsidiaries Tax paid on behalf of acquired subsidiaries (29)
(144)
Net cash generated from operating activities 917
438
Cash flows from investing activities
Acquisition of subsidiaries (1,080) (5,978) Cash acquired with subsidiaries -
1,474
Transaction costs in relation to acquisitions - (342) Investment in associate - (25) Receipts from associate 127 7 Purchases of property, plant and equipment (713)
(895)
Proceeds from sale of property, plant and 31
553equipment
Purchases of intangible assets (61)
-
Proceeds from sale of investments -
17 Interest received 178 312 Net cash used in investing activities (1,518)
(4,877)
Cash flows from financing activities
Repayment of borrowings - (105)
Finance lease principal repayments (32)
(76)
Net cash used in financing activities (32)
(181)
Net decrease in cash and cash equivalents (633)
(4,620)
Net decrease in cash and cash equivalents (633)
(4,620)
Cash and cash equivalents at beginning of 7,647 12,267year Cash and cash equivalents at end of year 7,014
7,647
Notes to the Consolidated Preliminary Financial Statements For the year ended 31 December 2009
143. Basis of preparation
From 1 January 2005 Source BioScience plc has been required to prepareconsolidated financial statements, including comparative data, in accordancewith IFRS as adopted by the European Union (`EU'). Accordingly, financialinformation for the year 2009, and comparative information, has been preparedon this basis.The financial information contained in this announcement of preliminaryfinancial statements does not constitute the company's statutory financialstatements for the years ended 31 December 2009 or 2008. Neither the Directorsof the Company, nor our auditor, have as yet approved the statutory financialstatements for the financial year ended 31 December 2009. These financialstatements are therefore unaudited. The financial information for 2008 isderived from the statutory financial statements for 2008 which have beendelivered to the Registrar of Companies. The auditor has reported on the 2008accounts and that report was (i) unqualified, (ii) did not include a referenceto any matters to which the auditor drew attention by way of emphasis withoutqualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2009 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies in due course.The IFRS adopted by the EU applied by the Group in the preparation of thisfinancial information are those that were effective at 31 December 2009. TheGroup has adopted for the first time the following new IFRS and amendments toInternational Accounting Standards (`IAS') which became effective during theyear:
* IAS 23 Borrowing Costs (revised) (effective for accounting periods
beginning on or after 1 January 2009). The main change from the previous
version is the removal of the option of immediately recognising as an
expense borrowing costs that relate to qualifying assets, broadly being
assets that take a substantial period of time to get ready for use or sale.
There is currently no impact of this revision on the financial information.
* Amendments to IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary,
Jointly-controlled Entity or Associate (effective for accounting periods
beginning on or after 1 January 2009). The revised IFRS 1 and amendments to
IAS 27 arise from a joint project with the Financial Accounting Standards
Board (FASB), the US standards setter, and result in IFRS being largely converged with the related, recently issued, US requirements. There is currently no impact of this revision on the financial information. * Amendment to IFRS 2 Share-based Payments: Vesting Conditions and Cancellations (effective for accounting periods beginning on or after 1 January 2009). The amendment to IFRS 2 is of particular relevance to companies that operate employee share save schemes. This is because it results in an immediate acceleration of the IFRS 2 expense that would
otherwise have been recognised in future periods should an employee decide
to stop contributing to the savings plan, as well as a potential revision
to the fair value of the awards granted, to factor in the probability of
employees withdrawing from such a plan. This amendment has not had a significant impact on the current year results. * Amendment to IAS 1 Presentation of Financial Statements (effective for
accounting periods beginning on or after 1 January 2009). The adoption of
the provisions of this standard has led to changes in presentation but has
had no impact on the Group's net results or net assets.
* IFRS 8 Operating Segments (effective for accounting periods beginning on or
after 1 January 2009). This standard replaces IAS 14 in respect of the
disclosure of segmental information. The introduction of this accounting
standard has resulted in a change in the financial information presented by
the Group with regards to its segments but has had no impact on the Group's
net results or net assets.
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting periods beginning on or after 1 January 2010 or later periods and which the Group has decided not to adopt early. Those standards, amendments and interpretations expected to be relevant to the Group are set out below:
* IFRS 3 Business Combinations (revised) (effective for the year ending 31
December 2010). The Group incurs direct costs as part of the acquisition
process. Currently such direct costs are included as a cost of acquisition.
On adoption of IFRS 3 (revised) such costs will be expensed in the income
statement. This is considered to be a significant change to the accounting
treatment currently adopted by the Group. The impact on the consolidated
financial statements will depend on the number, size and complexity of
acquisitions completed in the relevant period.
2. Operating segments
Information about reporting segments
At 31 December 2009, the Group's trading operations were organised into three main operating divisions:
* Healthcare (comprising the business units of Cytology and Diagnostic Pathology) * Pharma Biotech Services * Life Science Research
During the year there were immaterial sales between business segments (2008: immaterial) and, where these do occur, they are at arm's length pricing.
Unallocated costs represent corporate expenses and common operating costs. Segment assets include intangible assets including goodwill, plant and equipment, stocks and debtors. Unallocated assets include property, central debtors and prepayments and operating cash. Segment liabilities comprise operating liabilities and exclude borrowings. Segment capital expenditure comprises additions to plant and equipment and capitalised development costs.
Year ended 31 December 2009
Healthcare Pharma Life Unallocated Group Biotech Science Services Research £'000 £'000 £'000 £'000 £'000 Revenue 6,934 892 4,909 - 12,735 Segment result 1,937 216 495 (2,585) 63 Finance income 147 147 Finance costs (2) (2) (Loss)/profit before tax (2,440) 208 Taxation 59 59 Profit/(loss) for the 1,937 216 495 (2,381) 267year Segment assets 2,803 299 8,770 - 11,872 Unallocated assets - property, plant and 497 497equipment - debtors and prepayments 743 743 - cash and cash 7,014 7,014equivalents Total assets 2,803 299 8,770 8,254 20,126 Segment liabilities 799 61 1,979 - 2,839 Unallocated liabilities - creditors and accruals - - - 2,088 2,088 Total liabilities 799 61 1,979 2,088 4,927 Other segment items Capital expenditure - tangible assets 426 - 854 79 1,359 - intangible assets 61 - - - 61 Depreciation 247 12 286 140 685 Amortisation of - 21 214 - 235intangible assets Other non-cash expenses - share option scheme - - - 92 92Year ended 31 December 2008 Healthcare Pharma Life Unallocated Group Biotech Science Services Research £'000 £'000 £'000 £'000 £'000 Revenue 6,354 558 4,608 - 11,520 Segment result 1,448 (65) 415 (2,488) (690) Finance income 363 363 Finance costs (19) (19) Loss before tax (2,144) (346) Taxation 119 119 Profit/(loss) for the year 1,448 (65) 415 (2,025) (227) Segment assets 2,457 199 8,602 - 11,258 Unallocated assets - property, plant and 561 561equipment - debtors and prepayments 588 588 - cash and cash 7,647 7,647equivalents Total assets 2,457 199 8,602 8,796 20,054 Segment liabilities 910 142 2,245 - 3,297 Unallocated liabilities - creditors and accruals - - - 1,917 1,917 Total liabilities 910 142 2,245 1,917 5,214 Other segment items Capital expenditure - tangible assets 239 5 564 87 895 - intangible assets - - 3,594 - 3,594 Depreciation 394 66 227 134 821 Amortisation of intangible - 21 235 - 256assets Other non-cash expenses - share option scheme - - - 103 1033. Earnings/(loss) per shareBasic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity shareholders of the ParentCompany by the weighted average number of shares outstanding during the year.Diluted earnings/(loss) per share amounts are calculated by dividing the netprofit/(loss) attributable to ordinary equity shareholders by the weightedaverage number of ordinary shares outstanding during the year adjusted for theeffects of dilutive options.
The calculation of basic earnings per share for the year was based on the profit attributable to ordinary shareholders of £267,000 (2008: loss of £ 227,000) on 203,765,232 ordinary shares (2008: 203,765,232 ordinary shares) being the weighted average number of ordinary shares in issue.
The calculation of diluted earnings per share for the year is based on the profit attributable to ordinary shareholders of £267,000 (2008: loss of £ 227,000) and on the weighted average number of ordinary shares in issue, adjusted for 3,119,110 dilutive options, of 206,884,342 (2008: no dilutive options).
IAS 33 Earnings per share requires presentation of diluted earnings per sharewhen a company could be called upon to issue shares that would decrease netprofit or increase net loss per share. Net loss per share in a loss-makingcompany would only be increased by the exercise of share options, which wereout of the money. Assuming that option holders will not exercise out of themoney options, no adjustment has been made to the diluted earnings/(loss) pershare for out of the money share options.
4. Reconciliation of operating cash flows
Year Year ended ended 31 31 December December 2009 2008 £'000 £'000 Profit/(loss) for the year 267 (227)
Depreciation of tangible fixed assets 685
821 Recognition of grant income (13) (29)
Amortisation of capitalised development costs 29
29
Amortisation of other intangibles 206
227 Share of associate's result (43) (27)
Profit on sale of property, plant and equipment (14)
(30) Profit on sale of investments - (3) Impairment of investments - - Interest payable 2 19 Interest receivable (147) (363)
Share based payments - value of employee service 92
103
(Increase)/decrease in inventories (31)
70
(Increase)/decrease in trade and other receivables (331)
154
Increase/(decrease) in creditors 206
(143)
Cash generated from operations 908
601
About Source BioScience:
Source BioScience is a highly focused healthcare and biotechnologycompany providing diagnostic and screening services to the healthcare communityand genetic analyses and biomolecular tools and products to the life scienceresearch and pharma biotech sectors.Its Healthcare operations provide screening and reference laboratory diagnostictesting for cancer and other diseases and additional predictive testing fortreatment optimisation for clinicians and patients. Pharma Biotech Servicesoffers support for early stage therapeutic development, offering a one-stopshop from tissue pathology, immunohistochemistry, sophisticated image analysis,biomarker determination and assay development to pharmacogenomics includinggenotyping and gene expression analysis. Life Science Research services providecore laboratory research support from conceptualization to implementation,calling upon a wide range of cutting-edge technology platforms including anonline catalogue of biomolecular tools. This incorporates DNA sequencing, wholegenome amplification and a comprehensive library of genomic reagents and clonesincluding cDNA and RNAi, as well as facilitating rapid access to high qualityantibodies, cell cultures, diagnostic assays for cancer and other genetictesting, and related research tools.The Group has its headquarters in Nottingham, UK where it operates state of theart reference laboratory facilities, with additional laboratory facilities inLondon, Cambridge, Oxford and Dublin, Ireland. Source BioScience is CPA, GLPand GCP accredited and is licensed by the Human Tissue Authority.Further information about Source BioScience can be found at www.sourcebioscience.com Glossary
The following terms are used in this document:
Antibodies Antibodies are proteins that are found in blood or other bodily fluids; they are used by the immune system to identify and neutralise foreign objects, such as bacteria and viruses. A wide range of antibodies with a large variety of cellular targets are available to research scientists through distributors such as Source BioScience. Bioinformatics The application of information technology, and computer science, to the field of molecular biology. Common activities in bioinformatics include mapping and analysing DNA and protein sequences, aligning different DNA sequences to compare them and handling and analysing huge data sets generated by the latest sequencing technologies. Biomarker Biomarkers often refer to substances found in blood, urine or tissue, changes in which may be used to indicate presence of disease or response to treatment. More generally the term biomarker refers to any molecule that can be used to monitor a particular cellular process and may be a protein, DNA or RNA molecule.
Capillary Electrophoresis DNA sequences are determined using a chemical
DNA Sequencing reaction that results in an array of products that terminate in a different fluorescent coloured dye, (also known as Sanger which vary in size by one nucleotide. The products sequencing or are separated, like the rungs of a ladder, by passingconventional sequencing) them through a capillary with an electric current and determining the order in which they emerge. This method was used for the large DNA sequencing projects of the last 15 years and remains the only way of inexpensively analysing large numbers of small sets of samples (see also Next Generation DNA Sequencing - below) CYP2D6 Breast cancer patients with certain genetic variations in the CYP2D6 gene may be slow metabolisers of the drug tamoxifen to its active metabolite endoxifen. In this case changes to the treatment regime may be indicated because the efficacy of the drug is reduced. Circulating Tumour Cells The identification of small numbers of cancer cells (`CTC') circulating in the blood has been shown to be of potential prognostic significance in breast cancer, colorectal or prostate cancer, and useful for monitoring response to drug therapy. Clinical Pathology CPA is the accreditation body for clinical pathology Accreditation services. Accreditation involves an external audit of(`CPA') the ability of a laboratory to provide a service of high quality by declaring a defined standard of practice, which is confirmed by peer review. Companion Diagnostic A test based on a biomarker (which might be a protein, DNA or RNA molecule), the presence or absence of which is associated with the likely efficacy of a drug or other treatment. Companion diagnostics are useful in stratifying patients into groups which are known to respond in a particular way to a drug. A good example of such a test from the Source BioScience breast cancer portfolio is the HER2 test, which assesses levels of the HER2 protein, expression of which is correlated with response to Herceptin. DNA and cDNA DNA (DeoxyriboNucleic Acid) is a large, complex molecule which, by virtue of a unique sequence of building blocks, contains all the genetic information required to create a cell or organism. cDNA (complementary DNA) can be made from all the genes in a genome or just a single gene, or part of a gene. cDNA is DNA that has been synthesised artificially using an RNA template (see below) from the gene(s) selected. FocalPoint (`FP') An automated imaging system for screening SurePath liquid based cytology slides. It uses complex algorithms to interpret the images of each slide and decide the 10 `fields of view' most likely to have any abnormal cells. It can archive up to 25% as `no further review' which then do not need to be manually screened. Fluorescence In Situ In situ hybridisation (`ISH') is a powerful Hybridisation technique, not unlike immunohistochemistry (below), (`FISH') for visualising the presence of specific sequences of DNA and RNA in tissue sections. The technique uses short synthetic sequences of DNA or RNA which will bind, or hybridise, to the tissue with high specificity for the DNA or RNA of interest. Fluorescent "tags" are attached to these synthetic sequences, allowing them to be visualised with a special microscope, even when present at very low levels (FISH) Genomics Genomics is the study of an organism's entire genome, where the genome of an organism is its whole hereditary information and is encoded in the DNA (see above) and RNA (see below). This includes both the genes and the non-coding sequences of the DNA. Genomic clone libraries A clone library is a collection of clones containing complementary DNA (`cDNA') (see above) and is often intended to represent the genes that are expressed within a given cell or tissue type at a given period. Genomic products and In this instance, DNA or RNA extracted and purified reagents from a range of species and provided in a variety of forms for research purposes. Genotyping & sequencing DNA sequencing is the process of precisely ordering the building blocks, or nucleotides, of an organism's DNA. The method can be used to determine short sequences of DNA or, in larger experiments, to sequence the entire genome of an organism. Genotyping, in turn, is the process whereby DNA is characterised and then compared to reference data or, if large numbers of samples are genotyped, the data can be examined for patterns which might lead to discoveries of the fundamental causes of inherited diseases. Genotyping is commonly performed by PCR (below) or DNA sequencing. Good Clinical Practice GCP accreditation provides further assurance beyond (`GCP') GLP (see below) that all regulatory studies involving human tissue are conforming to the principles of good clinical practice. GCP and GLP compliance is monitored by the Medicines and Healthcare products Regulatory Agency (`MHRA'), a governmental agency. Good Laboratory Practice A set of principles that provides a framework within (`GLP') which laboratory studies are planned, performed, monitored, recorded and reported. Guided Screener A microscope with an automated stage linked to a Workstation (`GSW') computer which takes data from the FocalPoint automated imaging system to guide the screener to areas on the slide where there are likely to be abnormal cells. This cuts the number of `fields of view' which need to be screened from 60 down to 10. HER2 Human Epidermal growth factor Receptor 2 is a protein whose over-expression within a breast tumour sample may indicate a patient is suitable for treatment with Herceptin. A test for such over-expression is carried out on all new breast cancer patients. Histopathology The study of changes in tissues and cells as a consequence of some disease or toxic processes. Immunohistochemistry Immunohistochemistry is a technique for visualising (`IHC') proteins and other molecules in thin sections of tissue. This technique uses antibodies raised in other species against the protein of interest as a tool, and exploits their exquisite sensitivity and specificity for binding to that protein. K-RAS The presence of a mutated form of the K-RAS gene in colorectal cancer may indicate that a patient is unsuitable for new anti-EGFR drugs such as Erbitux and Vectibix. Liquid based cytology Liquid based cytology is a process for collecting and(`LBC') processing cytology samples from epithelial tissues such as the cervix. It produces a cleaner preparation of cells, without the other materials which frequently contaminate the sample such as blood or mucus. Next Generation DNA Next Generation DNA Sequencing refers generically to Sequencing (`NGS'), set of recent technologies, in our case Illumina Illumina GAIIx and GAIIx and Illumina HiSeq 2000 in which massive Illumina HiSeq 2000 numbers of short sequences can be determined in a single experiment; for example the Illumina HiSeq 2000 selected by Source BioScience can sequence two human genomes in approximately one week. PCR The Polymerase Chain Reaction is a laboratory technique which specifically and exponentially amplifies a single or a few copies of a segment of DNA. The resulting product can be used as the material for further experiments, for example genotyping or DNA sequencing. RNA RNA (RiboNucleic Acid) is a molecule similar to DNA, but is an intermediate product between the DNA of the gene, and the ultimate protein product of that gene. The level of expression of a gene can be gauged by the amount of RNA synthesised from that gene, a process usually measured by quantitative real-time polymerase chain reaction (`Q-PCR').
RNA expression analysis RNA expression analysis measures the activity of
genes at once generating a global picture of cellular function. The expression analyses, or profiles, can distinguish between cells that are actively dividing, for example, or show how the cells react to a particular treatment. -- ENDS --
For further information, please contact:
Source BioScience plcNick AshManaging DirectorTel: +44 (0) 115 973 9010www.sourcebioscience.comBishopsgate Communications (Financial PR)Nick Rome/Gemma O'HaraTel: +44 (0) 207 562 3350www.bishopsgatecommunications.comSinger Capital Markets Limited (Financial Advisor and Joint Broker)Shaun Dobson/Claes Sp¥ngTel: +44 (0) 203 205 7500www.singercm.comDaniel Stewart Securities (Joint Broker)Martin LampshireTel: +44 (0) 207 776 6550www.danielstewart.co.uk
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