TIDMABZA
RNS Number : 1168Q
Abzena PLC
04 June 2018
Abzena plc
Full year results: a year of transition - revenue growth driven
by investment programme
Cambridge, UK, 4 June 2018 - Abzena plc (AIM: ABZA, 'Abzena' or
the 'Group'), a life sciences group providing services and
technologies enabling the development and manufacture of
biopharmaceutical products, has published its full year results for
the year to 31 March 2018.
Corporate summary
-- FY18 was a year of transition; ambitious growth targets set
at start of year missed, but significant investment and progress
has been made to broaden and integrate the Group's offering
-- Increasing customer engagement with integrated discovery,
development and manufacturing service offering
-- Investment programme implemented to create state-of-the-art
biopharmaceutical manufacturing facilities
-- Consolidation of UK scientific operations into new purpose-built facility
-- Preferred supplier agreement with leading biomanufacturing
process solution provider has enabled upgrading of platform for
biopharmaceutical process development and manufacturing
-- ABZENA Inside licence deals secured with a US biotech
company, OBI Pharma and Telix Pharmaceuticals
-- ABZENA Inside product, BIVV009, progressed into Phase III clinical studies
Financial summary
-- Revenue increased 18% to GBP22.0 million (FY17: GBP18.7 million)
- 60% increase in biomanufacturing revenues (FY18: GBP8.5 million; FY17: GBP5.3 million)
- 15% increase in chemistry revenues (FY18: GBP8.0 million; FY17: GBP7.0 million)
- 14% decrease in biology research services revenue (FY18:
GBP4.9 million; FY17: GBP5.7 million)
- Second half revenue stronger (H2 18: GBP12.3 million; H1 18: GBP9.6 million)
-- Operating loss increased to GBP14.9 million (FY17: GBP9.7 million)
-- Adjusted EBITDA loss increased to GBP12.0 million (FY17: GBP7.5 million)
- Reduced adjusted EBITDA loss in second half (H2 18: GBP5.0 million; H1 18: GBP7.0 million)
-- Reported loss increased to GBP14.2 million (FY17: GBP9.1 million)
-- GBP23.9 million (net) additional funding raised in April 2017
-- GBP6.0 million property & equipment capital expenditure (FY17: GBP4.2 million)
-- Cash at year end of GBP6.8 million (FY17: GBP4.1 million)
Post-period events
-- Appointment of Interim Chief Operating Officer to drive
operational effectiveness as Group pursues path to
profitability
-- Implementation of cost reduction programme, anticipated to
reduce operating costs by circa GBP2.0 million (8%) on an
annualised basis.
-- J. Smith, CFO, will leave the Group during 2018, stepping down from the Board in July 2018.
John Burt, Abzena's CEO, commented:
"This year has been one of transition for Abzena. Although our
original ambitious growth targets for the year were not achieved,
we are starting to see the benefits of our capital investment
programme, the current phase of which has now been substantially
completed.
"With an experienced COO in place, we are actively driving
operational efficiencies and a planned reduction in capital
expenditure whilst focusing on aligning the Group's resources and
infrastructure to match customer demand.
"We have seen increased customer engagement in the second half
of the year with our expanded service offering which leaves us well
positioned for the coming year with a significant volume of
committed forward contracts. The strong revenue growth in our
manufacturing division is particularly encouraging and validates
our strategy to provide partners with seamless discovery,
development and manufacturing services.
"Momentum from the second half continuing into 2019, with growth
in this current year expected to be second half weighted as
projects mature through the Group's combined service offering.
"We are focused on driving revenue and margin growth to become a
sustainable service business. We are pleased to offer our combined
services to a fast-growing industry, creating an ever more varied
portfolio of biopharmaceutical products."
-Ends-
Enquiries:
Abzena plc
John Burt, Chief Executive Officer
Julian Smith, Chief Financial Officer
Michelle Neaves, Director of Planning
& Analysis +44 1223 903498
Numis (Nominated Adviser and Broker)
Clare Terlouw / James Black / Paul Gillam +44 20 7260 1000
N+1 Singer (Joint Broker)
Aubrey Powell / Liz Yong +44 20 7496 3000
Instinctif Partners +44 20 7457 2020
Melanie Toyne Sewell / Rozi Morris / abzena@instinctif.com
Alex Shaw
About Abzena
Abzena (AIM: ABZA) provides proprietary technologies and
complementary services to enable the development and manufacture of
biopharmaceutical products.
The term 'ABZENA Inside' is used by Abzena to describe products
that have been created using its proprietary technologies and are
being developed by its partners, and include Composite Human
Antibodies(TM) and ThioBridge(TM) Antibody Drug Conjugates (ADCs).
Abzena has the potential to earn future licence fees, milestone
payments and/or royalties on 'ABZENA Inside' products.
Abzena offers the following services and technologies across its
principal sites in Cambridge (UK), San Diego, California (USA) and
Bristol, Pennsylvania (USA):
-- Biology research services, including immunogenicity
assessment of candidate biopharmaceutical products and bioassay
development;
-- Protein engineering to optimise biopharmaceutical product
candidates, including humanization and deimmunization of antibodies
and other therapeutic proteins;
-- Cell line development for the manufacture of recombinant proteins and antibodies;
-- Contract process development and GMP manufacture of
biopharmaceuticals, including monoclonal antibodies and other
recombinant proteins for preclinical and clinical studies;
-- Contract synthetic chemistry and bioconjugation research
services, focused on antibody-drug conjugates (ADCs);
-- Proprietary site-specific conjugation technologies and novel payloads for ADC development;
-- GMP manufacturer of ADC linkers, payloads & combined linker-payloads; and
-- GMP analytical services for biopharmaceutical manufacturing projects.
Chairman's statement
Introduction
Enabling better biopharmaceuticals is core to Abzena and its
long-term strategy. Abzena has therefore supported its organic
growth with a series of acquisitions over recent years - from the
combination of PolyTherics and Antitope in the UK to the
acquisition of PacificGMP and TCRS (The Chemistry Research
Solution) in the US - to create the shape and structure of the
business as it stands today.
FY18 has been a year of transition; where significant investment
and progress has been made to broaden and integrate the Group's
offering across the biopharmaceutical development pathway.
Ambitious growth targets were set at the start of the year, but as
outlined in the Company's trading update of 16 April 2018, although
overall double-digit revenue growth was achieved, it was not to the
level originally anticipated. At the divisional level,
manufacturing and chemistry research services grew, but this growth
was offset by weaker performance in the first half of the year from
biology research services.
Revenue growth for the Group started to come through in the
second half of the financial year and the way in which the business
is developing reflects the positive impact of the investment
programme. Remedial actions have also been taken with respect to
costs and optimising alignment of resources to match customer
demand. New business activities have generated a good pipeline of
forward contracts and the Board anticipates a slightly higher
annual revenue growth rate in FY19 to FY18. The Board remains
confident of the longer-term prospects for the business.
Good growth but a challenging year managing rapid expansion
Revenues increased by 18% to GBP22.0 million (FY17: GBP18.7
million), reflecting the growth in customer demand for Abzena's
integrated services, particularly manufacturing and chemistry -
these increased revenues by 60% and 15% respectively. At the same
time, some manufacturing contracts took longer than anticipated to
commence, and with higher operational expenses, the adjusted EBITDA
loss increased 61% to GBP12.0 million (FY17: GBP7.5 million). A
reconciliation of the adjusted EBITDA is set out in note 5.
In April 2017, the Company raised GBP23.9 million (net of
expenses) via a placing for a specific investment programme to
increase capacity and enhance capabilities across the Group's three
sites. As at 31 March 2018, Abzena had a cash position of GBP6.8
million (30 September 2017: GBP16.9 million) reflecting the Group's
continued investment in its facilities, equipment and services, and
its working capital requirements during the year.
Current trading and FY19 outlook
The focus for FY19 is to keep driving revenue growth through
expanding uptake of the Group's integrated services to new and
existing customers whilst at the same time, exerting firm
discipline around resource management and cost control. Following
the investment in laboratory and manufacturing facilities and
equipment the Group now has equipment and laboratory capacity to
generate revenue in excess of GBP60 million per annum, particularly
through the increased capacity in chemistry and
biomanufacturing.
There has been an increase in interest from customers in the
range of integrated products and services that Abzena offers,
validating the Group's strategy. The value of contracts secured in
the second half of FY18 was GBP15.4 million, up 42% from the first
half's total of GBP10.8 million, resulting in the Group starting
the current financial year with committed forward contracts of
GBP11.4 million. Revenue growth increased in the second half of
FY18 compared to the first half, and the Group is targeting annual
revenue growth in FY19 at a slightly higher rate to that seen for
FY18.
Brian Johnson, former CEO of Metropolitan Housing Partnership,
has been appointed as interim Chief Operating Officer to work with
management to identify and implement initiatives to increase the
Group's efficiency and effectiveness through increasing performance
accountability and realignment of the Group's business development
function to the service offerings delivered from the Group's three
locations.
As reported in the trading update, the current phase of capital
expenditure for the investment programme is complete, except for
phase two of the Lusk Blvd facility (San Diego) build-out for the
manufacturing operations discussed below. As a result, capital
expenditure in the first half of FY19 will be significantly lower
than during the second half of FY18.
The implementation of the cost efficiency actions is
progressing, which will reduce the Group's operating expenses by
c.GBP2 million (8%) on an annualised basis. Along with the
reduction in capital expenditure, these actions have extended the
Group's cash runway significantly. However, as stated in the
trading update of 16 April 2018, additional working capital will be
required to support the Group within the next twelve months for
funding manufacturing operations as revenues grow from projects
progressing along the cell line development, process development,
scale-up and GMP manufacturing pathway as well as for the general
working capital requirements for chemistry and biology research
services. In due course, the Group will separately explore further
funding (equity, debt and/or royalty monetisation) for the second
phase of the build-out of the biomanufacturing facility at Lusk
Blvd, San Diego.
Board
At Board level, Lotta Ljungqvist was appointed as a
non-executive director, bringing her extensive biopharmaceutical
development and manufacturing experience to the Group. Tony
Brampton has decided to step down from the Board at the forthcoming
annual general meeting. On behalf of the Board, I would like to
thank Tony for sharing his wisdom and experience over the last
eleven years.
Julian Smith, Abzena's CFO, will be leaving the Group in July to
pursue other opportunities. I would like to thank Julian for the
significant contribution he has made to the Group starting with the
financing to enable the combination of PolyTherics and Antitope in
2013 and subsequently through the IPO and further acquisitions and
organic growth of Abzena.
Whilst the evolution of the business and the journey to
establish Abzena as a successful, sustainable biopharmaceutical
development services business continues, I would like to thank the
staff for their contribution to the business and their continued
loyalty. It is through their intellect, rigour and dedication that
Abzena enables our customers to achieve their biopharmaceutical
development objectives, and in so doing, to bring innovative
products to patients.
K. Cunningham
Chairman
3 June 2018
Strategic report
Introduction
Abzena's aim is to provide an integrated offering of biology,
chemistry and manufacturing services to support the discovery and
development of its customers' biopharmaceutical drug candidates. As
customers are engaging with Abzena at more points along the drug
discovery and development journey, the quality of customer
engagement is higher, bringing higher value and longer duration
contracts. As revenues grow and utilisation increases, the Group
can manage its staff and resources more effectively, thereby
improving margins. By providing a broad offering to a range of
customers across many projects, Abzena aims to build a diverse
income base and reduce the risk of revenue volatility arising from
the successful progression of a small number of projects.
The Group has been building up its capabilities and capacity to
operate within the $10 billion biopharmaceutical R&D services
industry (which is growing at c.10% per annum). This industry
supports the development of innovative new biopharmaceutical
therapies through to a market which is forecast to reach $580
billion by 2026.
Over the last four years, the Group has expanded substantially
across three sites, San Diego and Bristol, Pennsylvania (PA), USA
and Cambridge, UK. In San Diego, the focus is on process
development and GMP manufacture of biopharmaceuticals; in Bristol,
on chemistry services and manufacture of antibody drug conjugates
(ADCs) and, in Cambridge, on biology and chemistry research
services.
The aim for the past financial year has been to attract new and
existing customers across more points of their drug discovery and
development pathway. At the same time, management has been
executing a substantial investment programme across all three sites
to be able to deliver these services more efficiently and to extend
capacity to meet customers' requirements.
The Group's investment programme has progressed well, with
GBP6.0 million invested across the Group in facilities and
equipment through the past year, and is mostly complete at the
Cambridge and Bristol PA facilities. Having decided against
pursuing further significant investment into the existing San Diego
facility that had been home to the PacificGMP manufacturing
operations, a lease has been secured on a new 50,000 sq. ft
building in the same area.
The first phase of the investment programme at this new site to
create a state-of-the-art process and analytical development
facility is almost complete. Planning for the second phase of the
fit out of the facility for manufacturing operations is now
underway, and subject to confirmation of customer demand and
availability of further funding, will then be progressed.
In the meantime, manufacturing operations continue at the
existing facility and, with the installation of a 500L Sartorius
stirred tank bioreactor, sufficient capacity is available to meet
current contracted demand, to achieve the Group's manufacturing
revenue objectives for the current year and provides sufficient
capacity for the Group to achieve profitability.
As has been previously stated, sales in FY18 started more slowly
than expected, which impacted the full year results. However, the
sales pipeline and contract conversion was stronger in the second
half. Overall revenues for the year were lower than originally
expected, which impacted the immediate revenue growth trajectory.
As a result, the Board has taken actions to reduce capital
expenditure and operational costs are being closely monitored and
managed actively.
FY18 has been a challenging, 'transitional' year. The Group has
seen an encouraging uplift in performance in H2 18 and is
anticipating the changes made as part of the investment programme
to contribute further to the growth in FY19.
Financial & investment summary
Group revenues increased 18% to GBP22.0 million (FY17: GBP18.7
million) compared with proforma aggregated revenue growth of 40%
for the prior year, as outlined in the trading update in April
2018. The increase was driven by growth in the biomanufacturing and
chemistry research services divisions which together grew by 34%,
partially offset by the disappointing performance of the biology
research services division which contracted by 14% although biology
research services revenues were stronger in the second half of the
year (H2 18: GBP2.6 million; H1 18 GBP2.3 million). Despite
percentage revenue growth in the double digits, it was not as
significant as anticipated at the start of the year. 60% growth in
manufacturing revenues was lower than anticipated due to delays and
cancellation of manufacturing contracts compounded by delayed
installation of the stirred tank bioreactor equipment reducing the
pull-through of contracts in the business development pipeline.
The Group's revenue continued to be dominated by customers in
North America, contributing 68% (GBP14.8 million) of the overall
total, which as a percentage was down from the prior year's 76%
(GBP14.3 million). This decrease reflects a doubling of
UK-generated revenue to 7% (GBP1.5 million) from 4% (GBP0.8
million). The proportion of business from non-UK European customers
remained broadly flat at 15% (GBP3.3 million) compared with the
prior year, contributing 14% of Group's revenues (GBP2.7 million).
Revenue derived from customers across the rest of the world,
predominately Asia, increased significantly to 11% (GBP2.3 million)
from 5% (GBP1.0 million) in the prior year.
Gross margin on service revenues was 43% (FY17: 42%). Gross
margin on chemistry services increased to 58% (FY17: 36%), whilst
gross margins for biology research services and manufacturing
decreased to 46% and 26% respectively (FY17: 54% and 35%
respectively).
R&D investment to broaden and enhance the services and
technologies offered by the Group increased 24% to GBP3.6 million
(2017: GBP2.9 million). This reflects the time and resource
requirement to establish the Group's GMP synthetic chemistry
capabilities at the Bristol facility as well as gaining experience
with the stirred tank bioreactor manufacturing platform in San
Diego, R&D expenditure is expected to decline in future years
with the increased focus on the service business, although R&D
investment will be required to maintain cutting edge technical
services in the drive towards future growth in service and licence
revenues and on to sustainable profitability.
Laboratory operating costs increased to GBP2.6 million (FY17:
GBP1.6 million) due to the lease costs associated with the San
Diego Torrey Pines facility (vacated in April 2018), and lease
costs commencing for the new Babraham Research Campus (Cambridge)
and Lusk Blvd (San Diego) facilities from December. Sales and
marketing costs increased by GBP0.5 million to GBP2.9 million
(FY17: GBP2.4 million) due to expansion of the business development
and marketing teams. Other administrative expenses were GBP15.7
million, (FY17: GBP11.6 million), due to increases in
non-scientific staff costs and non-laboratory property costs.
The adjusted EBITDA loss for the year was GBP12.0 million (FY17:
GBP7.5 million) due to the reduced contribution from research and
manufacturing services, as well as lower licence revenue and
reduced other income, combined with the increased overhead expense.
The EBITDA loss was lower in the second half of the year (H2 18:
GBP5.0 million) compared to the first half (H1 18: GBP7.0 million)
due to revenue growth, increased gross margin and reduced
non-property overheads. However, to achieve positive EBITDA, half
year revenue for the Group of c. GBP19 million would be
required.
The adjusted consolidated loss for the year, before charging
non-recurring exceptional items for the Group for the year ended 31
March 2018 was GBP14.1 million (2017: GBP9.1 million).
As at 31 March 2018, Abzena had a cash position of GBP6.8
million (30 September 2017: GBP16.9 million). In April 2017 the
Group raised GBP23.9 million (net of expenses) through a share
placing for the investment programme. In addition to GBP14.9
million used in funding the Group's operations during the year,
GBP6.0 million was invested into the Group's facilities and on
scientific, manufacturing and office equipment. The majority of the
equipment investment was in San Diego to upgrade the manufacturing
platform and enhance the process development capability.
At the Bristol PA facility, an investment programme has been
pursued to increase the capacity of the GMP synthetic chemistry
suite, establish additional process chemistry capacity and create a
GMP bioconjugation suite to complete the Group's ADC manufacturing
offering. During the year a total of GBP2.6 million was invested
and the physical construction of the laboratories and cleanroom
suite was completed. Qualification of the GMP conjugation suite is
expected to be completed in the early summer 2018, which will
substantially complete the investment programme in Bristol. Two
significant contracts, for delivery in FY2019, are already
committed to this facility and the Group anticipates significant
future contracts to utilise this integrated ADC manufacturing
capability.
In December 2017, a lease was secured for a 50,000 sq. ft.
facility in San Diego at Lusk Blvd to house the larger stirred tank
bioreactors and an optimally designed two train facility bringing
all process development and manufacturing operations into a single
building. The first stage of this consolidation of the Group's San
Diego biomanufacturing operation is on track, with the transfer of
the Group's biomanufacturing process and analytical development
group to the new facility completed in May 2018 following a $1.3
million (GBP1.0 million) construction programme, of which GBP0.3
million falls into FY19.
The Group has commissioned the design work for stage two of the
manufacturing operation at the Lusk Blvd facility. The initial
design phase has been completed and the detailed design phase will,
in due course, determine the additional funding requirement to
complete the build-out which is anticipated to cost approximately
$10 million. The funding for the Lusk Blvd facility build-out will
be in addition to the working capital required for the Group.
Landlord contribution towards development of the Lusk Blvd facility
and further equipment financing options are being explored to
reduce the balance of additional funding, beyond the Group's
working capital requirements. This additional funding could be
sourced via equity, debt or partial monetisation of the ABZENA
Inside portfolio, all of which will be explored by the Board.
Following the substantive investments made in FY18, the
Directors believe that the Group's current infrastructure is
sufficient for its current needs and no further substantial capital
commitments are envisaged in the remainder of the 2018 calendar
year. In April 2018, the Board has taken actions to implement a
cost reduction programme to reduce operating costs. Under this
programme, total operating costs (including R&D) are expected
to be approximately GBP2 million (8%) lower on an annualised basis.
This programme has been designed to ensure that Abzena's resource
base and infrastructure are optimised to meet customers' needs.
Operational overview - investment driven growth and expanded
capability validating long term strategy
Biomanufacturing
Abzena's biomanufacturing division comprises the cell line
development and early process development group in Cambridge as
well as the further process development and GMP manufacturing
services facilities in San Diego.
Biomanufacturing was the fastest growing division, with revenues
growing by 60% to GBP8.5 million (FY17: GBP5.3 million). Gross
margin earned across manufacturing contracts was down 26% (FY17:
34%) due to the resource intensity required for large-scale
manufacturing perfusion runs utilising WAVE bioreactors, which are
now being superseded by the Sartorius stirred tank reactors
installed over the last year. With the transformation of the
Group's biomanufacturing platform, the Board sees a strong pipeline
of contract opportunities for this division.
Success in driving growth in this division has been helped by
the expansion of the Group's bioassay and bioanalytical services
capabilities. However, an important factor for growth in the coming
year will be the integrated plan for GMP analytical services across
the three sites, to leverage the centres of excellence within the
Group.
Cell line development revenues were flat compared to the prior
year at GBP1.2 million, but are expected to grow over the coming
year because of additional capacity now available following the
relocation of the group into the new Babraham Research Campus
facility as well as the investment into improvements to the Group's
proprietary Composite CHO host cell line and vector system.
One contract won during the year provides a good example of
Abzena's integrated approach to enabling progression of a
customer's development programme towards the clinic. As part of the
Group's complete offering for ADCs, a manufacturing cell line
development project was completed in the first half of the year and
following successful development of the linker-payload and
conjugation chemistry by the Group's Bristol chemists, Abzena
secured a significant $5 million ADC manufacturing contract for the
process development and manufacture of both the antibody and
linker-payload components, and their subsequent combination as an
ADC.
Whilst the majority of the Group's services relate to novel
biopharmaceuticals. Abzena continues to provide biosimilar cell
line development services, with significant tie-in to the Group's
bioanalytical capabilities, and has now started to see interest in
continuing these relationships through to process development and
initial clinical trial supply.
A significant transformation in the Group's biomanufacturing
capability has occurred over the last year with the adoption of
stirred tank bioreactors, using single-use disposable process
materials, to provide a more efficient, effective and scalable
manufacturing solution.
Critical to establishing this platform has been the preferred
provider arrangement secured with Sartorius in December 2017 for
the stirred tank bioreactors which should result in an improvement
of margin earned on manufacturing contracts going forward. The
Company's first new 500L Sartorius bioreactor has been installed
and is fully operational.
As part of the strategy to broaden the customer base over the
year, more of Abzena's customers are emerging biotech companies or
academic institutions pursuing translational research programmes
into the clinic. Whilst cost is always a key consideration for
these companies, they increasingly recognise the value of working
with Abzena. This understanding creates and underpins strong
relationships with a growing number of organisations, thereby
meeting the strategic aim to win larger, longer term
programmes.
Chemistry research, development & manufacturing services
The chemistry research services business comprises custom
synthesis, process optimisation, ADC linkers, payloads,
bioanalytics and bioconjugation, including use of the
ThioBridge(TM) linker technology, developed by the Group, or other
linker technologies for attaching drugs, such as cytotoxic
compounds for targeted cancer therapy, to antibodies or other
proteins.
Chemistry revenues increased 15% to GBP8.0 million (FY17: GBP7.0
million), driven by initiation of contracts for ADC process
development and manufacturing at the Bristol PA (USA) facility.
However, initiation of these first ADC process development and
manufacturing contracts for the Group was slower than anticipated.
Revenue growth improved in H2 18, driven by progression of
manufacturing process development projects in advance of GMP
manufacturing projects for linker-payloads and ADCs. Whilst
chemistry research services revenues increased 15%, gross margin
increased from 36% to 58% due to the higher margin achievable for
ADC process development and manufacturing. With reduced R&D
investment within the chemistry division, chemistry research and
manufacturing services provide GBP2.5 million contribution, of
GBP3.5 million total Group contribution, from direct scientific and
technical operations.
The investment programme at the Bristol site was substantially
complete by the end of Q1 18. With the GMP bioconjugation
capability and additional process chemistry capacity available, in
anticipation of further client demand, growth for this division is
expected to continue during the coming year.
Since the acquisition of TCRS, the Group's chemistry services
have expanded into process development and GMP manufacturing for
ADC linkers and linker-payload reagents, as well as the conjugation
process for ADC manufacture. The bioanalytical group has also been
firmly established at the Group's Cambridge facility as a focus for
the Group's bioanalytical capabilities and to leverage
sophisticated mass spectrometry capability.
Current ongoing projects include several longer term Full Time
Equivalent (FTE)-funded chemistry research relationships, which
have been renewed and expanded. In addition, the Group has
concluded many shorter duration custom synthesis and ThioBridge(TM)
technology evaluation agreements, many of which have the potential
to lead to further longer-term scale-up, process development and
manufacturing projects.
In December 2017, a US biotech company entered into a new $5
million agreement with Abzena to enable the complete process
development and manufacturing of a novel ADC. This project extended
the existing relationship between the customer and Abzena to a
significantly higher level - leveraging Abzena's integrated
platform and enabling this customer to expedite its development
programme. The majority of the services to be provided under the
agreement are due to take place within the current financial
year.
The ThioBridge(TM) platform offers the Group's ADC partners the
ability to maintain the stability of the antibody at a consistent
Drug-to-Antibody Ratio (DAR), critical quality attributes for this
class of drugs. Following an extensive technology evaluation
programme, Abzena secured its latest ThioBridge(TM) licensing deal
with OBI Pharma in July 2017. The licensing agreement allows
ThioBridge(TM) to be applied by OBI Pharma across a series of ADCs.
Abzena has the potential to receive over $150 million in licensing
fees and milestone payments from this agreement, with the potential
for additional royalties on sales of any approved products
incorporating ThioBridge(TM). As well as the long-term potential
upside of this licensing deal, this collaboration has also moved
forwards into process development and GMP manufacturing. This
extension is further validation of the decision to strengthen
customer relationships and expand service revenues by establishing
GMP manufacturing capabilities.
In summary, Abzena's chemistry division is able to support
customers with more complex custom synthesis and conjugation
projects. These projects can be particularly challenging, but the
breadth and depth of the experience within this division makes
Abzena a good partner for these types of projects. This
appreciation is reflected by recent publications by Cellerant and
Regeneron which have cited the contribution of Abzena chemists
towards the development of novel ADC payloads. This growing
industry recognition is a good platform for future business
development activities.
Biology research services
The biology research division provides a range of services
across bioassays, immunology and protein engineering.
The revenue for this division decreased during the year to
GBP4.9 million (FY17: GBP5.7 million). Bioassay and protein
engineering revenues improved during the year, but immunology
revenues were lower than expected which impacted the overall
result. Immunology revenues were stronger in the second half
indicating a reversal of the downward trend in this service line
as, despite increased competition from new entrants in this field,
Abzena's expertise and capability in the immunology research
services field is being re-established as exemplified by an FDA
presentation at the recent PEGS conference in Boston of results
from an immnogenicity assessment collbaoration with Abzena.
Gross margin for biology research services declined to 46%
(FY17: 54%), but with increasing revenue within this division and a
focus on resource utilisation, gross margin is expected to increase
again this year.
As Abzena has expanded its immunology research services
capabilities, the bioassay group has also become an established
part of Abzena's offering. The services provided for assay and
analytical services are increasingly a core element of the service
capability. Over the last year, the bioassay group has commenced
developing potency assays to support process development and
manufacturing programmes and is achieving GMP compliance to perform
release assays as part of Abzena's integrated development and
manufacturing services.
At the earlier stage of the drug discovery process, Abzena has
integrated antibody discovery services into its offering through
the absorption of the two members of staff from the Babraham
Technology Development Laboratory and who are now working alongside
the other members of the Group's protein engineering team in
Cambridge.
Abzena has pursued effective scientific engagement with its
customers during the year. As a result, the biology research
services division is increasingly able to find and advise on
expedited development pathways for customers' programmes. By
deploying its integrated capabilities for discovery, development
and manufacturing, Abzena is building strong connections with key
biotech customers and certain venture capital groups seeking to
leverage this integrated capability.
ABZENA Inside portfolio
The ABZENA Inside portfolio encompasses products that have been
created using the Group's proprietary technologies and are
undergoing preclinical and clinical development by its partners,
and include Composite Human Antibodies(TM) and ThioBridge(TM) ADCs.
Abzena has the potential to earn future licensing fees, milestone
payments and/or royalties on these Abzena Inside products, as well
as, in some cases, further service revenues as these products
progress through development. There are currently 12 ABZENA Inside
products that have progressed to clinical development, with active
clinical trials ongoing for 9 of these (source:
clinicaltrials.gov). Vascular Pharmaceuticals' VPI-2690B failed to
achieve its primary endpoint in a Phase II diabetic nephropathy
study. With rights having reverted to University of North Carolina,
further development of this Composite Human Antibody potentially
for coronary artery disease in diabetic patients or for peripheral
vascular disease is being considered. Although not formally
discontinued from development, given that the development of ABZENA
Inside products is outside of Abzena's control, it is realistic to
assume that in some cases products not in active clinical trials
may not proceed further.
A significant event around one of the more advanced programmes
within the portfolio was the acquisition of True North Therapeutics
initially by Bioverativ and then the subsequent acquisition of
Bioverativ by Sanofi. These acquisitions occurred whilst BIVV009
(formerly TNT009) progressed into Phase III clinical studies. Two
Phase III trials in patients with cold agglutinin disease are now
underway and expected to complete in 2019. Analysts at Cowen and
company (New York) have forecast peak sales for this product, if
successful in development, at more than $1.5 billion. Another
programme of note is Gilead's andecaliximab for which a Phase III
trial in gastric cancer patients is ongoing.
In July 2017, Abzena signed a new Composite Human Antibodies(TM)
licence agreement with Telix Pharmaceuticals for the development of
radiopharmaceuticals for diagnostic (imaging) and therapeutic uses
incorporating anti-PSMA antibodies developed by Abzena. The
agreement has the potential, subject to successful development, to
deliver in excess of US$65 million in licence fees and milestone
payments to Abzena over its term. These fees and payments are based
on achievement of certain development, regulatory and commercial
milestones, in addition royalties on net sales of approved products
would be payable to Abzena.
A new ThioBridge(TM) licence agreement was signed in July 2017
with OBI Pharma (Taiwan) to enable the development of OBI's
proprietary ADC, OBI-999, and a series of further ADCs. OBI-999
specifically targets cancer cells overexpressing the cancer antigen
Globo H, which is found in 14 different types of cancer. Abzena
received a small initial up-front payment from OBI and has the
potential, subject to successful development, to receive up to $150
million, in aggregate. Abzena will also receive royalties on sales
of any approved ADC products that incorporate the ThioBridge(TM)
technology.
One ThioBridge(TM) programme fell away when Halozyme decided not
to progress with its ADC programme for strategic reasons. The exit
of some programmes from the Abzena Inside portfolio is always
expected, reflecting the risk of the drug development pathway and
infers no downside to the Group.
Both licence agreements with Telix Pharmaceuticals and OBI
Pharma were accompanied with service agreements to enable these
partners to progress their programmes using Abzena's process
development and manufacturing capabilities.
The Board is exploring the potential to partially monetise the
value of the current ABZENA Inside portfolio through the sale of an
interest in future royalties.
Going concern
As set out in Note 2 to the financial statements, the Group had
GBP6.8 million in cash and cash equivalents as at 31 March 2018.
Following the substantive investments made in FY18, the Directors
believe that the Group's current infrastructure is sufficient for
its current needs and no further substantial capital commitments
are envisaged in the remainder of the 2018 calendar year. In April
2018, the Board has taken actions to implement a cost reduction
programme to reduce operating costs. Under this programme, total
operating costs (including R&D) are expected to be
approximately GBP2 million (8%) lower on an annualised basis. This
programme has been designed to ensure that Abzena's resource base
and infrastructure are optimised to meet customers' needs.
Although the Board believes that these actions have extended the
cash runway of the Group significantly, the Directors believe that
additional working capital will be required within the next twelve
months to support the continued growth of the Group. The Board is
working with its advisers to explore appropriate options, and,
based on these discussions, the Directors have a reasonable
expectation that the Company will be able to raise sufficient funds
within an appropriate timeline, although there can be no certainty
of this.
On this basis, the Directors have concluded that it is
appropriate to prepare the financial statements on a going concern
basis. The financial statements do not include any adjustments that
may be necessary should the Company be unsuccessful in raising the
required finance.
Conclusion
After a slow first half of the year, the growth seen in the
second half of FY18 is encouraging and reflects integration of the
Group's full suite of biology, chemistry and manufacturing service
offerings. The investment that has been made into the facilities,
equipment and capabilities will further support this integrated
approach and closer collaboration between teams, enabling the
delivery of outstanding drug discovery and development projects for
customers.
The start to the new financial year has been encouraging as the
Group has started the current financial year with committed forward
contracts of GBP11.4 million and a strong and growing business
development pipeline that has translated into significant new
contracts in the first two months of the year. As a result, the
Group is expecting annual revenue growth in FY19 at a slightly
higher rate to that seen for FY18, although due to the phasing of
significant development and manufacturing contracts, the growth in
revenue will principally fall in the second half of the year.
The management team is looking forward to the continued growth
of the business through the coming year with an extended suite of
services and technology to offer customers from across the three
sites. The integration and growth of the Abzena business is
translating into a position as a preferred partner for integrated
biopharmaceutical discovery, development and manufacturing
solutions.
J. Burt
Chief Executive Officer
3 June 2018
Independent auditor's report to the members of Abzena plc
Opinion
We have audited the financial statements of Abzena plc (the
'Company') for the year ended 31 March 2018 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated
and Parent Company Statement of Financial Position, the
Consolidated and Parent Company Cash Flow Statement, the
Consolidated and Parent Company Statements of Changes in Equity and
the related notes, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards as adopted by the
European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the Group and
Parent Company's affairs as at 31 March 2018 and of the Group's
loss for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- in respect of the Parent Company financial statements, have
been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards of Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further discussed in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standards as applied to listed entities, and we have
fulfilled our ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Emphasis of matter regarding going concern
In forming our opinion on the financial statements, which is not
qualified, we have considered the adequacy of the disclosures in
note 2 regarding the ability of the Company and the Group to
continue as a going concern.
The Group incurred losses for the year of GBP14.2 million and at
31 March 2018 had cash reserves of GBP6.8 million. As explained in
note 2 to the financial statements, the Group will require
significant additional funding to carry on operating for the
foreseeable future. The Board are pursuing fundraising
opportunities and are confident of raising the required funds,
however until such time that the fundraising is complete, this is
inherently uncertain.
Further, the Group's forecasts for the current and future years
assume both significant revenue growth and cost reductions. The
adequacy of the fundraising mentioned above is predicated on these
forecasts being achieved, which is again inherently uncertain.
These matters, as further explained in note 2 to the financial
statements, are material uncertainties which may cast significant
doubt on the Group and Company's ability to continue as a going
concern for the foreseeable future. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group
and its environment, assessing the risks of material misstatement
in the financial statements and planning and performing appropriate
audit procedures in response to those risks.
The Group operates via several trading subsidiaries situated in
the UK and the USA and, in addition, has a number of intermediate
holdings companies in the same jurisdictions. The UK subsidiaries
are subject to statutory audit requirements and we are the auditors
to all of the UK entities.
The US subsidiaries are not subject to local audit requirements.
We carried out the procedures that we considered necessary
regarding the US subsidiaries in order to form an opinion on the
Group financial statements. The majority of the necessary
procedures were undertaken by the Group audit team from the UK.
Certain procedures were carried out by local auditors in the USA
under our direction and supervision.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the
audit; and directing efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Revenue recognition
Risk description
As with most trading businesses, there is a significant inherent
risk of misstatement of revenue, whether amounting from fraud or
error.
How the scope of our audit responded to the risk
To assess the appropriateness and completeness of revenue
recognised in the year we performed the following procedures:
-- examined a sample of revenue transactions by reference to
underlying contractual terms and records of work performed;
-- examined a sample of items of accrued and deferred revenue on
incomplete projects by reference to contractual terms and stage of
completeness;
-- considered the appropriateness and application of the Group's
accounting policy for revenue recognition; and
-- considered the disclosures in the financial statements
regarding revenue.
Key observations
The results of our procedures were satisfactory.
Valuation of intangible assets
Risk description
The Group Statement of Financial Position includes material
intangible assets which are subject to significant impairment
risk.
How the scope of our audit responded to the risk
We performed a detailed review of management's impairment
reviews and the conclusions drawn therefrom including detailed
discussion and review of the key assumptions, uncertainties and
sensitivity analysis. We also reviewed the adequacy and
appropriateness of the related disclosures in the financial
statements.
Key observations
The results of our testing were satisfactory.
Going concern
Risk description
There is some uncertainty about the Group's ability to continue
operating as a going concern for the foreseeable future as
described in note 2.
How the scope of our audit responded to the risk
We performed audit procedures to assess the appropriateness of
the directors' assumptions and conclusions regarding going concern
and the adequacy of the disclosures in respect of the inherent
uncertainties.
Key observations
Our conclusions are described in the "emphasis of matter
regarding going concern" section above.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement we determined materiality
for the financial statements as a whole to be GBP440,000. The key
driver for the materiality calculation was 2% of revenue but we
also considered the appropriateness of this figure in the context
of the reported loss for the year and the Group and Parent Company
Statements of Financial Position.
We agreed with the directors that we would report all audit
differences in excess of GBP22,000 as well as differences below
that threshold that, in our view, warranted reporting on
qualitative grounds. We also report on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
Other information included in the annual report
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated we do not express any form of assurance
conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit of otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial
statements or a material misstatement in the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to the financial statements which the Companies Act 2006
requires us to report to you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for the audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement set out on page 22 the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors' either intend to liquidate the Company or to cease
operating, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial
statements
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an Auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statement.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: frc.org.uk. This description forms part of
our auditors' report.
Alan Poole BA (Hons) FCA (Senior Statutory Auditor)
For and on behalf of
James Cowper Kreston
Statutory Auditors
2 Chawley Park, Cumnor Hill, Oxford, OX2 9GG
Date: 3 June 2018
Consolidated Financial Statements
Consolidated Income Statement
Year ended Year ended
31 March 31 March
2018 2017
Note GBP'000 GBP'000
-------------------------------------------- ---- ---------- ----------
Continuing operations
Revenue 3 21,950 18,654
Cost of sales (12,315) (10,547)
Gross profit 9,635 8,107
Other operating income 239 611
Research and development costs (3,568) (2,875)
Laboratory operating costs (2,592) (1,592)
Sales and marketing (2,861) (2,390)
Administrative expenses - Other (15,740) (11,603)
Exceptional expenses 5 (448) -
Exceptional items, recoverable legal fees 5 393 -
-------------------------------------------- ---- ---------- ----------
Operating loss (14,942) (9,742)
Finance income 4 251 330
Finance expense 4 (63) (53)
-------------------------------------------- ---- ---------- ----------
Loss before income tax 5 (14,754) (9,465)
Income tax 7 593 347
-------------------------------------------- ---- ---------- ----------
Loss for the year (14,161) (9,118)
-------------------------------------------- ---- ---------- ----------
Basic and diluted losses per Ordinary Share 8 (7p) (7p)
-------------------------------------------- ---- ---------- ----------
The accompanying notes are an integral part of these
consolidated financial statements
Consolidated Statement of Other Comprehensive Income
Year ended Year ended
31 March 31 March
2018 2017
Note GBP'000 GBP'000
--------------------------------------------------- ----- ---------- ----------
Loss for the year (14,161) (9,118)
---------------------------------------------------------- ---------- ----------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (2,448) 3,650
---------------------------------------------------------- ---------- ----------
Other comprehensive loss for the year net
of tax (2,448) 3,650
---------------------------------------------------------- ---------- ----------
Total comprehensive loss for the year attributable
to owners of the parent (16,609) (5,468)
---------------------------------------------------------- ---------- ----------
The accompanying notes are an integral part of these
consolidated financial statements
Consolidated Statement of Financial Position
At 31 March At 31 March
2018 2017
Note GBP'000 GBP'000
-------------------------------------------- ---- ----------- -----------
Assets
Non-Current Assets
Goodwill 9 16,264 18,017
Other intangible assets 9 6,871 7,865
Property, plant and equipment 10 11,514 7,612
-------------------------------------------- ---- ----------- -----------
Total Non-Current Assets 34,649 33,494
Current Assets
Inventories 12 1,939 1,876
Trade and other receivables 13 10,170 4,982
Current income tax assets 746 274
Cash and cash equivalents 14 6,785 4,135
-------------------------------------------- ---- ----------- -----------
Total Current Assets 19,640 11,267
Total Assets 54,289 44,761
-------------------------------------------- ---- ----------- -----------
Equity and Liabilities
Equity attributable to owners of the parent
Ordinary shares 16 428 276
Share premium 65,583 41,822
Retained earnings (24,336) (10,175)
Share based payment reserve 1,018 567
Contingent consideration reserve 10 10
Foreign exchange reserve 986 3,434
Total Equity 43,689 35,934
-------------------------------------------- ---- ----------- -----------
Liabilities
Non-current liabilities
Other non-current liabilities 15 1,600 -
Finance lease liabilities 448 494
Deferred tax 7 1,649 2,014
-------------------------------------------- ---- ----------- -----------
Total Non-Current Liabilities 3,697 2,508
-------------------------------------------- ---- ----------- -----------
Current liabilities
Trade and other payables 15 6,557 6,032
Finance lease liabilities 213 169
Provisions 133 118
-------------------------------------------- ---- ----------- -----------
Total Current Liabilities 6,903 6,319
-------------------------------------------- ---- ----------- -----------
Total Liabilities 10,600 8,827
-------------------------------------------- ---- ----------- -----------
Total Equity and Liabilities 54,289 44,761
-------------------------------------------- ---- ----------- -----------
Company Registered Number: 08957107
The financial statements were approved by the Board and are
signed on its behalf by:
J. Smith
3 June 2018
Consolidated Cash Flow Statement
Year ended Year ended
31 March 31 March
2018 2017
Note GBP'000 GBP'000
----------------------------------------------------- ---- ---------- ----------
Cash flows from operating activities
Loss before income tax (14,754) (9,465)
Adjustments to reconcile operating loss to
net cash flows used
in operating activities:
Share based payments 533 412
Depreciation of property, plant and equipment 10 1,667 1,157
Loss / (profit) on disposal of property, plant
and equipment 9 (9)
Amortisation of intangible assets 9 726 723
Foreign exchange gain adjustment 295 119
Increase / (decrease) in provisions 28 (294)
Net finance income 4 (188) (277)
----------------------------------------------------- ---- ---------- ----------
(11,684) (7,634)
Working Capital Adjustments
(Increase) / decrease in trade and other receivables (5,621) 267
Increase in inventories (112) (461)
Increase in trade and other payables 2,487 5
----------------------------------------------------- ---- ---------- ----------
Net working capital movements (3,246) (189)
----------------------------------------------------- ---- ---------- ----------
Cash used in operating activities (14,930) (7,823)
Taxation received 39 1,665
----------------------------------------------------- ---- ---------- ----------
Net cash used in operating activities (14,891) (6,158)
----------------------------------------------------- ---- ---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment 10 (6,107) (3,312)
Purchase of intangible assets 9 - (8)
Cash proceeds from the sale of property, plant
and equipment - 4
Interest received 4 24 2
----------------------------------------------------- ---- ---------- ----------
Net cash used in investing activities (6,083) (3,289)
----------------------------------------------------- ---- ---------- ----------
Cash flows from financing activities
Cash proceeds from share issues 16 23,913 29
Capital element of finance lease repayments (226) (118)
Interest paid (63) (53)
----------------------------------------------------- ---- ---------- ----------
Net cash (used in) / generated from financing
activities 23,624 (142)
----------------------------------------------------- ---- ---------- ----------
Net increase in cash and cash equivalents 2,650 (9,589)
Cash and cash equivalents at beginning of
the year 4,135 13,724
----------------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at end of the year 14 6,785 4,135
----------------------------------------------------- ---- ---------- ----------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2018
Attributable to owners of the parent
Issued Share based Contingent Foreign
Share Share Retained payments consideration exchange
Note Capital Premium Earnings reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---- -------- -------- --------- ----------- -------------- --------- --------
Balance at 1 April
2017 276 41,822 (10,175) 567 10 3,434 35,934
Comprehensive income
Loss for the year - - (14,161) - - - (14,161)
Other comprehensive
loss - - - - - (2,448) (2,448)
Total comprehensive
loss for the year - - (14,161) - - (2,448) (16,609)
Transactions with
Owners
Share based payments - - - 533 - - 533
RSUs to be settled
in cash - - - (58) - - (58)
Foreign exchange
gain arising in US
subsidiaries - - - (24) - - (24)
Share capital issued 16 152 24,961 - - - - 25,113
Issue costs - (1,200) - - - - (1,200)
------------------------- ---- -------- -------- --------- ----------- -------------- --------- --------
Total transactions
with owners, recognised
directly in equity 152 23,761 - 451 - - 24,364
------------------------- ---- -------- -------- --------- ----------- -------------- --------- --------
Balance at 31 March
2018 428 65,583 (24,336) 1,018 10 986 43,689
------------------------- ---- -------- -------- --------- ----------- -------------- --------- --------
For the year ended 31 March 2017
Attributable to owners of the parent
Share
Issued based Contingent Foreign
Share Share Retained payments consideration exchange
Note Capital Premium Earnings reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---- --------- -------- --------- --------- -------------- --------- -------
Balance at 1 April
2016 272 41,263 (1,026) 155 608 (216) 41,056
Comprehensive income
Loss for the year - - (9,118) - - - (9,118)
Other comprehensive
loss - - - - - 3,650 3,650
Total comprehensive
loss for the year - - (9,118) - - 3,650 (5,468)
Transactions with
Owners
Share based payments - - - 412 - - 412
Share capital issued 16 4 559 (31) - (598) - (66)
------------------------- ---- --------- -------- --------- --------- -------------- --------- -------
Total transactions
with owners, recognised
directly in equity 4 559 (31) 412 (598) - 346
------------------------- ---- --------- -------- --------- --------- -------------- --------- -------
Balance at 31 March
2017 276 41,822 (10,175) 567 10 3,434 35,934
------------------------- ---- --------- -------- --------- --------- -------------- --------- -------
Company Statement of Financial Position
At 31 March At 31 March
2018 2017
Note GBP'000 GBP'000
-------------------------------------------- ---- ----------- -----------
Assets
Non-Current Assets
Investments 11 1,114 580
-------------------------------------------- ---- ----------- -----------
Total Non-Current Assets 1,114 580
-------------------------------------------- ---- ----------- -----------
Current Assets
Trade and other receivables 13 66,855 41,370
Cash and cash equivalents 14 323 1,378
Total Current Assets 67,178 42,748
-------------------------------------------- ---- ----------- -----------
Total Assets 68,292 43,328
-------------------------------------------- ---- ----------- -----------
Equity and Liabilities
Equity attributable to owners of the parent
Ordinary shares 16 428 276
Share premium 65,582 41,822
Retained earnings 1,182 663
Share based payment reserve 1,100 567
Total Equity 68,292 43,328
-------------------------------------------- ---- ----------- -----------
Company Registered Number: 08957107
The financial statements were approved by the Board and are
signed on its behalf by:
J. Smith
3 June 2018
Company Cash Flow Statement
Year ended Year ended
31 March 31 March
2018 2017
Note GBP'000 GBP'000
----------------------------------------------- ---- ---------- ----------
Cash flows from operating activities
Profit before income tax 19 517 647
Net finance income (517) (593)
Net cash inflow from operating activities - 54
Working Capital Adjustments
Increase in trade and other receivables (25,485) (645)
Net working capital movements (25,485) (645)
----------------------------------------------- ---- ---------- ----------
Cash used in operating activities (25,485) (591)
Net cash used in operating activities (25,485) (591)
----------------------------------------------- ---- ---------- ----------
Cash flows from investing activities
Investing activities - -
----------------------------------------------- ---- ---------- ----------
Net cash used in investing activities - -
----------------------------------------------- ---- ---------- ----------
Cash flows from financing activities
Cash proceeds from share issues 23,913 29
Interest received 517 593
Net cash generated from financing activities 24,430 622
----------------------------------------------- ---- ---------- ----------
Net increase in cash and cash equivalents (1,055) 31
Cash and cash equivalents at beginning of
the period 1,378 1,347
----------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at end of the period 14 323 1,378
----------------------------------------------- ---- ---------- ----------
Company Statement of Changes in Equity
For the year ended 31 March 2018
Note Issued
Share Share Retained Share based
Capital Premium Earnings payments reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---- -------- -------- --------- ----------------- --------
Balance at 1 April 2017 276 41,822 663 567 43,328
Comprehensive income
Total comprehensive income
for the year - - 517 - 517
----------------------------- ---- -------- -------- --------- ----------------- --------
Transactions with owners
Share based payment charge
in respect of Group option
scheme 18 - - 2 533 535
Share capital issued 16 152 24,960 - - 25,112
Issue costs - (1,200) - - (1,200)
Total transactions with
owners, recognised directly
in equity 152 23,760 2 533 24,447
----------------------------- ---- -------- -------- --------- ----------------- --------
Balance at 31 March 2018 428 65,582 1,182 1,100 68,292
----------------------------- ---- -------- -------- --------- ----------------- --------
For the year ended 31 March 2017
Note Issued
Share Share Retained Share based
Capital Premium Earnings payments reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---- -------- -------- --------- ----------------- -------
Balance at 1 April 2016 272 41,263 73 - 41,608
Comprehensive income
Total comprehensive income
for the year - - 647 - 647
----------------------------- ---- -------- -------- --------- ----------------- -------
Transactions with owners
Share based payment charge
in respect of Group option
scheme 18 - - (57) 567 510
Share capital issued 16 4 559 - - 563
Total transactions with
owners, recognised directly
in equity 4 559 (57) 567 1,073
----------------------------- ---- -------- -------- --------- ----------------- -------
Balance at 31 March 2017 276 41,822 663 567 43,328
----------------------------- ---- -------- -------- --------- ----------------- -------
Notes to the consolidated financial statements
Notes to the Summary Financial Information.
The summary financial information set out above, which was
approved by the Board on 3 June 2018, is derived from the
Consolidated Financial Statements for the year ended 31 March 2018
and does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006.
The Consolidated Financial Statements on which the auditors have
given an unqualified report, and which does not contain a statement
under section 498(2) or (3) of the Companies Act 2006, will be
delivered to the Registrar of Companies in due course. The Auditors
report on the Consolidated Financial Statements is reproduced
above.
Copies of the Company's Annual Report will be shortly available
on the Company's website at
www.abzena.com/results-and-presentations.
1. Summary of significant accounting policies
General information
Abzena plc is a public limited company incorporated and
domiciled in England and Wales with registered number 08957107. The
Company's registered office is Babraham Research Campus, Babraham,
Cambridge, CB22 3AT.
The principal activity of the Group is that of life science
R&D and the provision of services and technology licensing to
the biopharmaceutical industry. The consolidated financial
statements comprise a consolidation of the Company and the
following subsidiary companies:
Company Country of Incorporation
======================================= ==========================
Abzena Holdings Limited England & Wales
Holding Company
Babraham Research Campus, Babraham, Cambridge CB22 3AT
=====================================================================
Abzena Holdings Inc. USA
Holding Company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Abzena Manufacturing Inc. USA
Holding company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Abzena Inc. USA
Holding Company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Abzena Manufacturing Property Inc. USA
Holding company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Abzena Pennsylvania Inc. USA
Holding company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Abzena Property Inc. USA
Holding company
2711 Centreville Road, Suite 400, Wilmington, DE 19808
=====================================================================
Antitope Limited England & Wales
Services & technology licensing to the biopharmaceutical industry
Babraham Research Campus, Babraham, Cambridge CB22 3AT
=====================================================================
PacificGMP USA
Manufacturing of biopharmaceutical products
8810 Rehco Road, Suite E, San Diego, CA 92121
=====================================================================
PolyTherics Limited England & Wales
Services & technology licensing to the biopharmaceutical industry
Babraham Research Campus, Babraham, Cambridge CB22 3AT
=====================================================================
The Chemistry Research Solution LLC USA
Services & technology licensing to the biopharmaceutical industry
1521 Concord Pike, #202, Wilmington, DE 19803
=====================================================================
Warwick Effect Polymers Limited England & Wales
Non-trading
Babraham Research Campus, Babraham, Cambridge CB22 3AT
=====================================================================
All the subsidiaries of the Group are 100% owned by the Group
and have been included in the consolidated Financial Information
from the date of acquisition.
The Group owns 3,750 ordinary shares (88.2%) in Denceptor
Therapeutics Limited, Matthew Baker and Kevin Fitzgerald both
owning 250 ordinary shares (5.9%). The non-controlling interest in
respect of Denceptor Therapeutics Limited is not material and it
has been included in the consolidated Financial Information from
date of acquisition.
The Group's Financial Information presented is as at 31 March
2018 and 31 March 2017 and for the year ended 31 March 2018 and the
year ended 31 March 2017.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the financial periods presented,
unless otherwise stated.
Basis of preparation
The consolidated Financial Statements have been prepared in
accordance with European Union Endorsed International Financial
Reporting Standards (IFRSs), the IFRS Interpretations Committee
(formerly the International Financial Reporting Interpretations
Committee (IFRIC)) interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. The Financial
Statements have been prepared on a going concern basis and under
the historical cost convention, except for certain financial
instruments that have been measured at fair value.
The preparation of the Financial Statements in conformity with
IFRS as endorsed by the EU requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies.
The Financial Statements are rounded to the nearest thousand
pound sterling.
Recent accounting developments
New standards, amendments and interpretations
(a) Standards, amendments and interpretations effective from 1
April 2017 and applied by the Group:
The Company has adopted the following revisions and amendments
to IFRS issued by the International Accounting Standards Board,
which are relevant to and effective for the Group's financial
statements for the period beginning 1 April 2017.
-- IFRS 2 Share-based Payment - Definitions of vesting
conditions
-- IFRS 3 Business Combinations - Accounting for contingent
consideration in a business combination
-- IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations - Changes in methods of disposal
-- IFRS 7 Financial Instruments: Disclosures - Servicing
contracts
-- IFRS 7 Financial Instruments: Disclosures - Applicability of
the offsetting disclosures to condensed interim financial
statements
-- IFRS 8 Operating Segments - Aggregation of operating
segments
-- IFRS 8 Operating Segments - Reconciliation of the total of
the reportable segments' assets to the entity's assets
-- IFRS 10 and IAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture - Amendments to IFRS 10
and IAS 28
-- IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the
Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS
28
-- IFRS 11 Accounting for Acquisitions of Interests in Joint
Operations - Amendments to IFRS 11
-- IFRS 14 Regulatory Deferral Accounts
-- IAS 1 Disclosure Initiative - Amendments to IAS 1
-- IAS 16 and IAS 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation - Amendments to IAS 16 and IAS 38
-- IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets - Revaluation method - proportionate restatement of
accumulated depreciation/amortisation
-- IAS 19 Employee Benefits - Discount rate: regional market
issue
-- IAS 24 Related Party Disclosures - Key management
personnel
-- IAS 27 - Equity Method in Separate Financial Statements -
Amendments to IAS 27
-- IAS 34 Interim Financial Reporting - Disclosure of
information 'elsewhere in the interim financial report'
-- IAS 7 Disclosure Initiatives - Amendments to IAS 7
-- IAS 12 Recognition of Deferred Tax Assets for Unrealised
Losses - Amendments to IAS 12
AIP IFRS 12 Disclosure of Interests in Other Entities -
Clarification of the scope of the disclosure requirements in IFRS
12
The Directors have assessed that the adoption of these revisions
and amendments did not have a material impact on the financial
position or performance of the Company.
(b) Standards, amendments and interpretations that are not yet
effective and have not been early adopted:
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
Effective date* -01-Jan-18
-- IFRS 2 Classification and Measurement of Share-based Payment
Transactions - Amendments to IFRS 2
-- IFRS 9 Financial Instruments
-- IFRS 15 Revenue from Contracts with Customers
-- IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration
-- AIP IFRS 1 First-time Adoption of International Financial
Reporting Standards - Deletion of short-term exemptions for
first-time adopters
-- AIP IAS 28 Investments in Associates and Joint Ventures -
clarification that measuring investees at fair value through profit
or loss is an investment - by - investment choice
Effective date* -01-Jan-19
-- IFRS 16 Leases
* the standard is effective for accounting periods beginning in
or after this date
IFRS 15, Revenue from Contracts with Customers and IFRS 16,
Leases, and their impact on the financial statements for year to 31
March 2019 is being considered.
Merger accounting
On 23 May 2014 Abzena plc acquired the entire issued share
capital of PolyTherics Limited in a share for share exchange, in an
exact replication of the pre-existing share capital.
Reorganisations involving entities under common control are outside
the scope of IFRS 3, and there is no other specific IFRS guidance
that applies in these circumstances. Accordingly, the Directors
have used their judgement to develop an accounting policy that is
relevant and reliable and therefore the Group reconstruction has
been accounted for using the merger method of accounting in
accordance with FRS 6, which treats the merged entities as if they
had been combined throughout the current and comparative accounting
periods. Under merger accounting, the results for the Group have
been reported as if the Group had been in existence in its current
form through the current and previous financial years. No purchased
goodwill was created in the transaction and the assets and
liabilities of PolyTherics Limited were not adjusted to reflect
their fair value.
Revenue recognition
Revenue, which excludes value added tax, represents the income
generated by the Group from services provided to external parties,
licensing activities and grants. Revenue is recognised only when it
is reasonably certain that the economic benefits associated with
the transaction will flow to the Group.
Revenue in respect of service contracts, where the Group's
contractual obligations are performed gradually over time, is
recognised as the contracted activity progresses, to reflect the
Group's partial performance of its contractual obligations. The
stage of completion requires a degree of estimation and judgement
by management, although typically obligations are discharged evenly
over the performance period and revenue is therefore typically
recognised on a straight-line basis. This is not necessarily in
line with the stage payments specified within contractual
agreements, resulting in accrued and deferred revenue, as
appropriate. Where the substance of a contract is that a right to
consideration does not arise until the occurrence of a critical
event, revenue is not recognised until the event occurs.
Consideration for options and similar contingent receipts are
recognised when the contingency is resolved or from the point the
option is exercised.
Revenue in respect of licensing activities typically comprises
an initial up-front fee receivable on signature of the agreement,
followed by subsequent payments when certain milestone conditions
are met. In addition, future sales royalties may also be due under
licence agreements. The initial up-front fee receivable on the
signature of a licence agreement is generally recognised in full on
the date the agreement is executed, if all the Group's obligations
required to enter into the licence have been completed and at the
point that the up-front fee becomes non-refundable.
Milestone payments are recognised only when all the conditions
stipulated in the agreement are satisfied for the particular
milestone payment and all the Group's obligations have been met.
Future sales royalties receivable under a licence would generally
be recognised on receipt of a royalty statement unless accurate
sales information is available to accrue revenue for royalty over
the financial period. To date, the Group has not received nor
recognised any royalty income.
Grant income is typically claimed quarterly in arrears and is
recognised on a straight-line basis throughout each quarter. Where
a grant claim has not been made, grant income is accrued on a
straight-line basis. Grant income is disclosed as Other Operating
Income on the face of the Consolidated Statement of Comprehensive
Income. Government grants received relating to property, plant and
equipment are treated as deferred income and released to the
Consolidated Statement of Comprehensive Income over the shorter of
the period of the grant, or the life of the asset.
Goodwill and intangible assets arising on business
combinations
IFRS 3 (revised)"Business Combinations" requires that goodwill
arising on the acquisition of subsidiaries is capitalised and
included in intangible assets. IFRS 3 (revised) also requires the
identification of other intangible assets at acquisition. The
assumptions involved in valuing these intangible assets requires
the use of estimates and judgements which may differ from the
actual outcome. These estimates and judgements cover future growth
rates, expected inflation rates and the discount rate used.
Changing the assumptions selected by management could significantly
affect the allocation of the purchase price paid between goodwill
and other acquired intangibles.
Classification of IPO and share issuance costs
Due to the nature of an initial public offering (IPO) and other
public share issuances new shares are issued to raise additional
capital and, along with existing shares, subsequently become listed
on a stock exchange. Judgement is required in assessing whether the
associated expenditure is directly attributable to the issue of
shares and whether it meets the criteria to be offset against the
share premium account
Basis of consolidation
The Group's consolidated Financial Information consists of
Abzena plc and all its subsidiaries.
Subsidiaries are consolidated from the date of their
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The Group controls an entity when the Group is expected to,
or has the rights to, variable returns from its involvement with
the entity and has the ability to effect those returns through its
power over the entity. The acquisition method of accounting is used
to account for the acquisition of subsidiaries by the Group.
The cost of acquisition is measured at fair value of assets
given, equity instruments issued and liabilities incurred or
assumed at the date of exchange. Acquisition related costs are
expensed as incurred. Identifiable assets acquired, and liabilities
and contingent liabilities assumed, in a business combination are
initially measured at their fair values at acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets is recorded as
goodwill.
Inter-company transactions, balances and unrealised gains /
losses on transactions between Group companies are eliminated.
Accounting policies of subsidiary undertakings have been changed
where necessary to ensure consistency with the policies adopted by
the Group.
Foreign currency translation
The consolidated Financial Statements are presented in pounds
sterling, which is the Group's presentational currency. The Group
determines the functional currency of each entity. Transactions
undertaken in foreign currencies are translated into the functional
currency of the subsidiary at the exchange rate prevailing on the
date of the transaction. Foreign currency assets and liabilities
are translated into the functional currency at the rates of
exchange ruling at the year-end date. Any exchange differences
arising are included within 'Administrative expenses' in the
Consolidated Income statement, except for foreign exchange gains
and losses that relate to borrowings and cash and cash equivalents
which are presented in the Consolidated Income Statement within
'Finance income' or 'Finance expenses'. This also applies to
sterling-based entities with foreign currency transactions, assets
and liabilities.
The Group has subsidiaries where the functional operating
currency is United States dollars. The results of these
subsidiaries are translated monthly at the prevailing rate of
exchange. At each reporting period end, the assets and liabilities
are translated at the closing rate of exchange.
Gains or losses on translation are recorded in the Consolidated
Statement of Comprehensive Income and as a separate component of
equity. Goodwill and fair value adjustments arising on the
acquisition of the US subsidiaries are treated as assets and
liabilities of the US subsidiaries and translated at the closing
rate. Exchange differences are recognised in the Consolidated
Statement of Comprehensive Income. Such gains or losses are
transferred to the Consolidated Income statement on disposal or
liquidation of the relevant subsidiary.
Intra-group loans denominated in US dollars are translated at
the prevailing exchange rate at the year end. Gains on the
retranslation of these loans, which are expected to remain in place
on a long-term basis, form part of the net investment in the
foreign operations and are taken to reserves and shown in the
Consolidated Statement of Comprehensive Income.
Financial instruments
The Group uses financial instruments comprising cash and cash
equivalents and various other short-term instruments such as trade
receivables and trade payables which arise from its operations. The
main purpose of these financial instruments is to fund the Group's
business strategy and the short-term working capital requirements
of the Group.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for
impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The
amount of the provision is the difference between the asset's
carrying amount and the present value of the estimated future cash
flows, discounted at the effective interest rate. The amount of the
provision is recognised in the Consolidated Statement of
Comprehensive Income within administrative expenses.
Trade payables
Trade payables are recognised initially at fair value and
subsequently held at amortised cost using the effective interest
rate method.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
with banks, bank overdrafts and other short-term highly liquid
investments with original maturities of less than 3 months. Short
term liquid investments with a maturity of over three months would
be included in a separate category, 'Short term liquidity
investments'.
Research and development
Research costs are written off to the Consolidated Income
Statement in the year in which they are incurred. All research
costs, whether funded by grant or not, are included within R&D
costs on the face of the income statement.
All ongoing development expenditure is currently expensed in the
year in which it is incurred. Due to the regulatory and other
uncertainties inherent in the development of the Group's
programmes, the criteria for development costs to be recognised as
an asset, as prescribed by IAS 38, "Intangible assets", are not met
until the product has been submitted for regulatory approval, such
approval has been received and it is probable that future economic
benefits will flow to the Group. The Group does not currently have
any such internal development costs that qualify for capitalisation
as intangible assets.
The Group is entitled to claim tax credits in the United Kingdom
for certain R&D expenditure and these are recognised in the
financial statements on an accrual basis.
Pensions
The Group makes payments to defined contribution schemes. The
assets of the schemes are held separately from those of the Group
in independently administered funds. Contributions made by the
Group are charged to the Consolidated Statement of Comprehensive
Income in the period to which they relate.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes all expenditure directly attributable to
bringing each product to its present location and condition on a
first in first out basis, unless separately identified. Net
realisable value is based on estimated selling price, or value in
use less further costs expected to be incurred to completion and
disposal. Where necessary, provision is made for obsolete, slow
moving and defective inventories.
Current and deferred income tax
Income tax on the result for the year comprises current and
deferred tax. Income tax is recognised in the Consolidated
Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income for the period, using tax rates enacted or
substantively enacted at the Statement of Financial Position date,
and any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided using the Statement of Financial
Position liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the Statement of Financial Position date.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Operating leases
Rentals paid under operating leases are charged to the
Consolidated Statement of Comprehensive Income on a straight-line
basis over the period of the lease.
Benefits received and receivable as an incentive to sign an
operating lease are recognised on a straight-line basis over the
period of the lease.
Finance leases
The Group leases certain equipment. The Group has substantially
all the risks and rewards of ownership and these are classified as
finance leases, which are capitalised at the leases' commencement
dates at the lower of fair value and the present value of minimum
lease payments. Each lease payment is allocated between the
liability and finance charge. The corresponding rental obligations,
net of finance charges, are included in other long-term payables.
The interest element of the finance charge is charged to the income
statement over the period of the lease to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The equipment acquired under finance leases is
depreciated over the shorter of the useful life of the asset and
the lease term.
Warrants
Where the Company issues shares and equity-classified warrants
in the same transaction, the Group estimates the fair value of the
warrant instruments. If material, the fair value of the warrants is
recorded as a separate component of equity.
Goodwill
Goodwill arising on the acquisition of a subsidiary represents
the excess of the fair value of the consideration given over the
fair value of the identifiable net assets acquired. Goodwill is
initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill
impairment reviews are undertaken annually, or more frequently if
events or changes in circumstances indicate potential impairment.
The carrying value of goodwill is compared with the recoverable
amount, which is the higher of the value in use and the fair value
less costs to sell. Any impairment is recognised immediately as an
expense, separately disclosed in the intangible fixed asset note to
the financial statements, and is not subsequently reversed.
Impairment
The carrying value of non-current assets is reviewed whenever
events or changes in circumstances indicate that the carrying value
may not be recoverable to determine whether there is any indication
of impairment. If any such indication exists, the asset's
recoverable amount is estimated. Intangible assets initially
recognised during the current annual period which are not yet
available for use are also tested for impairment by reference to
the asset's recoverable amount at the Statement of Financial
Position date.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the greater of the fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows over the remaining useful economic life of the
asset in question are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
Exceptional Items
The Group discloses separately items of income or expenditure
which are by nature not expected to recur as part of the normal
operational activity of the business. Such items are shown
separately on the face of the Consolidated Statement of
Comprehensive Income.
Segmental reporting
An operating segment is a component of an entity that engages in
business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions
with other components of the same entity), whose operating results
are regularly reviewed by the entity's Chief Operating Decision
Maker to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete
financial information is available. Operating segments are
aggregated into reporting segments where they share similar
economic characteristics.
Equity
All the classes of the Group's share capital are classified as
equity. Share capital is determined using the nominal value of
shares issued.
The share premium account represents premiums received on the
initial issuance of share capital. Incremental costs directly
attributable to the issue of new share capital are shown as a
deduction, net of tax, from the share premium account.
The share based payment reserve represents the cumulative amount
which has been expensed in the Consolidated Statement of
Comprehensive Income in connection with equity settled share based
payments, less any amounts transferred to the retained earnings on
the exercise of share options.
Retained earnings include all current and prior results as
disclosed in the Consolidated Statement of Comprehensive
Income.
Where, as part of a business combination, the Group enters into
an agreement which includes a contingent element that is classified
as equity, these amounts are fair valued at the date of acquisition
and held in a separate equity reserve. These amounts are not
subsequently re-measured but are transferred to share capital and
share premium on settlement of the contingent consideration.
Foreign Exchange Reserve
The results of these subsidiaries where the functional operating
currency is United States dollars are translated monthly at the
prevailing rate of exchange. At each reporting period end, the
assets and liabilities are translated at the closing rate of
exchange.
Gains or losses on translation are recorded in the Consolidated
Statement of Comprehensive Income and as a separate component of
equity, the Foreign Exchange Reserve.
Goodwill and fair value adjustments arising on the acquisition
of the US subsidiaries are treated as assets and liabilities of the
US subsidiaries and translated at the closing rate. Exchange
differences are recognised in the Consolidated Statement of
Comprehensive Income and as a separate component of equity within
the Foreign Exchange Reserve. The gains or losses are transferred
to the Consolidated Income statement on disposal or liquidation of
the relevant subsidiary.
Intra-group loans denominated in US dollars are translated at
the prevailing exchange rate at the year end. Gains on the
retranslation of these loans form part of the net investment in the
foreign operations and are taken to the Foreign Exchange Reserves
and shown in the Consolidated Statement of Comprehensive
Income.
Significant accounting judgements and estimates
The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the
consolidated Financial Statements are as follows:
Restricted stock units (RSUs)
Where the Company issues restricted stock units classified as
equity instruments, the Group estimates the fair value of the RSUs
at the date of issue and records the value as a separate component
of equity under deferred consideration. Where the Company issues
restricted stock units classified as liabilities, the Group
estimates the fair value of the RSUs at the date of issue and
records this as a financial liability. At each subsequent Statement
of Financial Position date, the Group revalues the liability using
observable market based data wherever possible and applying
estimates where not possible. Fair value gains and losses are
recorded in the income statement under financial income.
Restructuring provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that the Group will be required to settle that obligation and the
amount can be estimated reliably. Provisions are measured at the
best estimate of the expenditure required to settle the obligation
at the Statement of Financial Position date, and are discounted to
present value where the effect is material.
Share-based payments
Employees (and Directors) receive remuneration in the form of
equity-settled share-based payments, whereby employees render
services in exchange for shares or for rights over shares. The fair
value of the employee services received in exchange for the grant
of options or shares is recognised as an expense. The total amount
to be expensed on a straight-line basis over the vesting period is
determined by reference to the fair value of the options or shares
determined at the grant date, excluding the impact of any
non-market based vesting conditions (for example, continuation of
employment and performance targets).
The share options are valued using the Black-Scholes option
pricing model. Non-market based vesting conditions are included in
assumptions about the number of options that are expected to become
exercisable or the number of shares that the employee will
ultimately receive. This estimate is revised at each Statement of
Financial Position date to allow for forecast leaving employees and
the difference is charged or credited to the Consolidated Statement
of Comprehensive Income, with a corresponding adjustment to
reserves.
Impairment of goodwill and acquired intangibles
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating unit ("CGU") to which
goodwill has been allocated. The value in use calculation requires
the entity to estimate the future cash flows of the CGU, and a
suitable discount rate, in order to calculate present value.
Similar calculations are required in respect of other acquired
intangibles. Changing the assumptions selected by management, in
particular the discount rate and growth rate assumptions used in
the cash flow projections, could significantly affect the Group's
impairment evaluation.
Acquired intangible assets
At the date of acquisition of a subsidiary, intangible assets
that are separately identifiable and that arise from contractual or
other legal rights are capitalised and included within net
identifiable assets acquired. These intangible assets are initially
measured at fair value, which reflects market expectations of the
probability that the future economic benefits embodied in the asset
will flow to the entity, and are amortised as follows:
Licence portfolio Commencing upon receipt of royalties due under licences
over remaining patent life
Existing customer Straight line over expected useful economic life
relationships estimated to be 2 - 9 years
Trade names Straight line over expected useful economic life
estimated to be 8 years
Current technology Straight line over expected useful economic life
estimated to be 10 years
They are subsequently measured at cost less accumulated
amortisation and impairment. At each Statement of Financial
Position date, these assets are assessed for indicators of
impairment and, in the event that an asset's carrying amount is
determined to be greater than its recoverable amount, the asset is
written down immediately through the Consolidated Statement of
Comprehensive Income.
Property, plant and equipment
All property, plant and equipment are stated at historical cost
less accumulated depreciation, together with any incidental costs
of acquisition. Cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its
working condition for its intended use. Depreciation is provided on
all property, plant and equipment at rates calculated to write each
asset down to its estimated residual value on a straight-line basis
over its expected useful life, as follows:
Leasehold property improvements: over the life of the lease
Fixtures, fittings and equipment: 20%-33% straight-line
The assets' residual lives are reviewed annually and at any
given time where there is an event which may indicate potential
impairment and are adjusted as appropriate.
2. Going concern
The Group is currently loss making and has raised funds in the
past by issuing equity. As at 31 March 2018 the Group had GBP6.8
million in cash and cash equivalents.
The future cash consumption will depend on the trajectory of
revenue, cost of goods sold, gross profit growth and overhead
expenditure together with the amount of capital expenditure, the
level of Research & Development ("R&D") and the overheads
required to support the growth. These forecast items of income and
expenditure are inherently uncertain.
Following the substantial investments made in FY'18, the
Directors believe that the Group's current infrastructure is
sufficient for its current needs and no further substantial cash
capital commitments are envisaged in the reminder of the 2018
calendar year. Should the rate of growth of order intake be
materially higher than the current trajectory, further new
investment in manufacturing and/or laboratory facilities may be
required to increase capacity in calendar year 2019 and, supported
by concrete evidence of additional demand, the Board would then
consider such additional investment, subject to appropriate funding
being available.
Investment in R&D will be focussed directly on supporting
the immediate short-term revenue growth opportunities and gross
profit enhancement of technology for the services currently
provided by the Group.
As announced on 16 April 2018, the Board has taken actions to
implement a cost reduction programme to reduce operating costs.
Under this programme, total operating Costs (including R&D) are
expected to be approximately GBP2 million (8%) lower on an
annualised basis. This programme has been designed to ensure that
Abzena's resource base and infrastructure are optimised to meet
customers' needs.
Although the Board believe that these actions have extended the
forecast cash runway of the Group significantly, the Directors
believe that additional working capital will be required within the
next twelve months to support the continued growth of the Group.
The Board is working with its advisers to explore appropriate
options and based on these discussions, the Directors have a
reasonable expectation that the Company will be able to raise
sufficient funds within an appropriate timeline, although there can
be no certainty of this.
On this basis, the Directors have concluded that it is
appropriate to prepare the financial statements on a going concern
basis. The financial statements do not include any adjustments that
may be necessary should the Company be unsuccessful in raising the
required finance.
3. Segmental reporting
The Group has adopted IFRS 8, "Operating Segments". IFRS 8
defines operating segments as those activities of an entity about
which separate financial information is available and which are
evaluated by the Chief Operating Decision Maker to assess
performance and determine the allocation of resources. The Chief
Operating Decision Maker has been identified as the Chief Executive
Officer.
Segmental reporting has been reviewed and considered in light of
the development of the Group's businesses over the year ended 31
March 2018 and the Directors are of the opinion that under IFRS 8
the Group has three operating segments; biology research services,
Chemistry research and manufacture services and bio-manufacturing.
However, the results of the segments are only reported and assessed
to a "contribution level". The contribution analysis considered by
the CEO represents cash generated by the laboratory based staff and
direct management. The costs include the direct customer related
and internal research and development material costs. Salary costs
include total salary costs of the scientists carrying out customer
related work or supporting research and development activity and
directly attributable scientific management. Central costs are not
allocated to segments.
Assets and liabilities are currently not reported on a fully
segmental basis and it is the opinion of the Directors that,
presently, it would not be relevant or appropriate to do so.
Segmental reporting will continue to be reviewed and considered in
light of the on-going development and growth of the Group's
businesses.
The Group had no single significant customer which alone
contributed more than 11% of Group revenue in 2018 (2017: largest
customer contributed 7%). An analysis of the revenue from all
sources is as given below:
Analysis of revenue by location of customer:
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------------------- ---------- ----------
North America 14,841 14,251
Europe (excluding United Kingdom) 3,297 2,656
United Kingdom 1,472 787
Other 2,340 960
================================== ========== ==========
Total 21,950 18,654
---------------------------------- ---------- ----------
Analysis of revenue:
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Biology research services
Immunology 2,536 4,055
Protein engineering 2,044 1,548
Bioassay 346 116
-------------------------------------------- ---------- ----------
4,926 5,719
Chemistry research & manufacturing services
Chemistry 6,468 6,846
Bio Analytical 407 115
Chemistry manufacturing 1,149 -
-------------------------------------------- ---------- ----------
8,024 6,961
Bio-manufacturing
Cell line development 1,213 1,204
Process development & biomanufacturing 7,270 4,112
8,483 5,316
Licence revenue 517 658
============================================ ========== ==========
Total 21,950 18,654
-------------------------------------------- ---------- ----------
Within Biomanufacturing revenue stated above, a customer
generated revenue of GBP2,408,000 which represents 11% of overall
revenue for the year ended 31 March 2018. There were no other
customers who generated revenue greater than 10% of overall
revenue. In the year ended 31 March 2017, there were no customers
who represented over 10% of overall revenue.
Analysis of revenue, gross margin and contribution by
segment:
Revenue by segment
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------- ---------- ----------
Service revenue
Biology 4,926 5,719
Chemistry 8,024 6,961
Biomanufacturing 8,483 5,316
Total service revenue 21,433 17,996
---------------------- ---------- ----------
Gross profit by segment
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------------- ---------- ----------
Service gross margin
Biology 2,250 3,076
Chemistry 4,658 2,533
Biomanufacturing 2,210 1,840
--------------------------- ---------- ----------
Total service gross margin 9,118 7,449
Licence revenue 517 658
--------------------------- ---------- ----------
Gross profit 9,635 8,107
--------------------------- ---------- ----------
Contribution by segment
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
------------------------------ ---------- ----------
Contribution
Biology 781 1,418
Chemistry 2,517 1,594
Biomanufacturing 174 654
------------------------------ ---------- ----------
Total contribution 3,472 3,666
Licence revenue 517 658
Other income 239 611
Overheads (16,777) (12,777)
Depreciation and amortisation (2,393) (1,900)
Finance income 188 277
------------------------------ ---------- ----------
Loss before income tax (14,754) (9,465)
------------------------------ ---------- ----------
4. Finance income and expenses
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
Interest received 23 27
Net gains on financial instruments 228 303
---------------------------------------------- ---------- ----------
Finance Income 251 330
---------------------------------------------- ---------- ----------
Interest paid (19) (33)
Interest expense on finance lease liabilities (44) (20)
---------------------------------------------- ---------- ----------
Finance Expense (63) (53)
---------------------------------------------- ---------- ----------
5. Loss before income tax
Loss before income tax is stated after charging /
(crediting):
Year ended Year Ended
31 March 31 March
2018 2017
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment 1,543 1,101
Depreciation of equipment purchased under finance
lease 124 56
Amortisation of intangible fixed assets 726 723
Operating lease costs (land and buildings) 2,093 1,189
Cost of inventories recognised as an expense 7,113 4,994
Exceptional items 55 -
Employee benefit expense 533 412
Foreign exchange gains 253 (137)
-------------------------------------------------------- ---------- ----------
Auditors' remuneration:
Fees payable to the Group's auditors and its associates
for the audit of the parent Company and consolidated
accounts 69 67
Fees payable to the Group's auditors and its associates
for other services:
- The auditing of accounts of subsidiaries of
the Company pursuant to
legislation by Group and subsidiaries' auditors 59 94
- Other services supplied including services for
taxation compliance 30 49
- All other non-audit services 24 53
-------------------------------------------------------- ---------- ----------
Total auditors' remuneration 182 263
-------------------------------------------------------- ---------- ----------
Exceptional costs in the year ended 31 March 2018 amounted to
net GBP55,000 (2017: GBPnil). The charge principally arose from the
legal fees associated with the defence and subsequent agreed
resolution of the complaint filed by Stanford University, CA, USA.
These legal fees are recoverable from funds held in escrow. The net
charge represents unrecoverable non-legal costs associated with
reaching the agreement.
The audit fee of GBP69,000 (2017: GBP67,000) for the Parent and
the Group is borne by Polytherics Ltd.
Earnings before interest, tax, depreciation and amortization
analysis
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------- ---------- ----------
Operating loss (14,942) (9,742)
Depreciation 1,667 1,157
Amortisation 726 723
--------------------- ---------- ----------
EBITDA (12,549) (7,862)
Share based payments 533 412
Exceptional items 55 -
--------------------- ---------- ----------
Adjusted EBITDA (11,961) (7,450)
--------------------- ---------- ----------
6. Employees and Directors
Analysis of payroll costs by category: Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
Wages and salaries 12,057 10,512
Social security costs 1,231 1,042
Share options granted to directors and employees 533 412
Other pension costs 860 487
------------------------------------------------- ---------- ----------
Total 14,681 12,453
------------------------------------------------- ---------- ----------
Average monthly number of persons (including Executive Directors
but excluding non-executive Directors) employed:
By Activity Year ended Year ended
31 March 31 March
2018 2017
FTE FTE
------------------------------------------------------- ---------- ----------
Laboratory staff 164 150
Sales, marketing, business development, administration
and management 72 50
------------------------------------------------------- ---------- ----------
Total 236 200
------------------------------------------------------- ---------- ----------
The Parent Company has no employees other than the directors,
who did not receive any remuneration from the Parent Company.
Key Management Compensation
The Group considers all members of the Board (including
Non-Executive Directors) and the senior management team to be key
management. Total compensation paid for the year ended 31 March
2018 amounted to GBP1,758,000 (2017: GBP1,618,000).
Key management emoluments are as follows:
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Aggregate emoluments 660 718
Company contributions to defined contribution
pension schemes 22 26
Sums paid to third parties for Directors' services 28 30
--------------------------------------------------- ---------- ----------
Total 710 774
--------------------------------------------------- ---------- ----------
The Group contributes to defined contribution money purchase
pension schemes for its Executive Directors and employees.
Contributions of GBPNil (included in other payables) were payable
to pension funds for the benefit of Directors at the year-end
(2017: GBP Nil). The details of Directors who received emoluments
from the Group, including details of the highest paid director are
shown in the tables contained in the Directors' Remuneration
Report.
7. Taxation
Analysis of taxation (credit) in the year
The Group is entitled to claim tax credits in the United Kingdom
for certain R&D expenditure. The amount included in the
financial information represents the credit receivable by the Group
for the year. The 2018 amounts have not yet been agreed with the
relevant tax authorities.
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
-------------------------------------------------- ---------- ----------
Current tax:
United Kingdom corporation tax (323) (128)
Adjustment in respect of prior period (14) (14)
-------------------------------------------------- ---------- ----------
Total Current Tax Credit (337) (142)
Deferred tax
Short term timing differences (33) 18
Origination and reversal or temporary differences (223) (223)
-------------------------------------------------- ---------- ----------
Total deferred tax (256) (205)
-------------------------------------------------- ---------- ----------
Total Tax Credit in the Consolidated Statement
of Comprehensive Income (593) (347)
-------------------------------------------------- ---------- ----------
Additionally, included in other operating income is GBP177,000
(2017: GBP231,000) in respect of a R&D expenditure credit.
There is no current tax charge in the year as the Group has
utilised losses brought forward and is entitled to a cash tax
credit in the United Kingdom for certain R&D expenditure. The
repayable tax credit for the year is lower (2017: lower) than the
credit that would be repayable at the standard rate of corporation
tax in the UK of 19% (2017: 20%). The differences are explained in
the following table:
Tax reconciliation
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Loss before income tax (14,754) (9,465)
Loss before income tax multiplied by the standard
rate of corporation tax in the UK of 19% (2017:
20%) (2,803) (1,893)
Tax effect of:
Non-taxable and non-deductible items 137 129
Additional deduction for R&D expenditure (266) (448)
Surrendered losses for R&D tax credit 111 112
Adjustments in respect of prior periods (14) (14)
Adjustments to deferred tax (256) -
Current year losses for which no deferred tax asset
has been recognised 2,498 1,767
---------------------------------------------------- ---------- ----------
Total Tax Credit (593) (347)
---------------------------------------------------- ---------- ----------
Changes to reduce the UK corporation tax rate were substantively
enacted on 26 October 2015 as part of the Finance Bill (2015).
These include reductions in the main rate of corporation tax to
reduce the rate to 19% from 1 April 2018 and to 17% from 1 April
2020. This change has been reflected in the tax workings for the
year ended 31 March 2018.
Deferred tax liability
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Balance at 1 April 2,014 2,031
Deferred tax liability arising on intangible fixed
assets recognised in business combination - 374
Unwinding of deferred tax during the period (223) (206)
Exchange rate difference (106) (185)
Movement in fixed asset temporary differences 7 -
Movement in short term temporary differences (19) -
Adjustment in respect of prior periods (24) -
--------------------------------------------------- ---------- ----------
Total deferred tax liability 1,649 2,014
--------------------------------------------------- ---------- ----------
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------------------- ---------- ----------
Fixed asset temporary differences 1,671 2,017
Short term temporary differences (22) (3)
---------------------------------- ---------- ----------
Total deferred tax liability 1,649 2,014
---------------------------------- ---------- ----------
As at 31 March 2018, the unrecognised deferred tax asset
amounted to GBP3,356,000 (2017: GBP3,130,000). This deferred tax
asset is in respect of cumulative losses incurred to date. The
Directors have not recognised this asset as they are not
sufficiently certain about its recoverability.
8. Loss per share
Basic loss per share is calculated by dividing the loss for the
financial year by the weighted average number of Ordinary Shares in
issue during the period. The losses and weighted average number of
shares used in the calculations are set out below:
Year ended Year ended
31 March 31 March
2018 2017
Loss for the financial period (GBP'000) (14,161) (9,118)
Weighted average number of Ordinary Shares (basic)(thousands) 209,362 137,177
Losses per Ordinary Share basic (pence) (7p) (7p)
-------------------------------------------------------------- ---------- ----------
As net losses were recorded in 2018 and 2017, the potentially
dilutive share options and restricted stock units are anti-dilutive
for the purposes of the losses per share calculation and their
effect is therefore not considered.
9. Intangible Fixed Assets
For the year ended 31 March 2018 - Goodwill and Intangibles
resulting from Business Combinations
Existing Customer Licence Current
Relationships Portfolio Technology (1) Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- ---------- ----------- ------------ -------
Cost
At 1 April 2017 5,233 3,653 835 18,017 27,738
Foreign exchange loss (348) - - (1,753) (2,101)
At 31 March 2018 4,885 3,653 835 16,264 25,637
Amortisation
At 1 April 2017 1,539 - 334 - 1,873
Amortisation in the
year 637 - 83 - 720
Foreign exchange gain (80) - - - (80)
---------------------- ------- ---------- ----------- ------------ -------
At 31 March 2018 2,096 - 417 - 2,513
Net book value:
At 31 March 2017 3,694 3,653 501 18,017 25,865
At 31 March 2018 2,789 3,653 418 16,264 23,124
---------------------- ------- ---------- ----------- ------------ -------
(1) In line with the requirements of IAS 38, the fair value of goodwill is measured as the purchase
consideration paid in excess of an acquired business' tangible and separately identifiable
intangible assets, less liabilities. Goodwill is not amortised but is assessed for impairment
at the end of each accounting period.
For the year ended 31 March 2018 - Other Intangibles
Website Total
GBP'000 GBP'000
------------------------- ------- -------
Cost
At 1 April 2017 22 22
Additions - -
Disposals - -
------------------------- ------- -------
At 31 March 2018 22 22
Amortisation
At 1 April 2017 5 5
Amortisation in the year 6 6
Disposals - -
------------------------- ------- -------
At 31 March 2018 11 11
Net book value:
At 31 March 2017 17 17
At 31 March 2018 11 11
------------------------- ------- -------
For the year ended 31 March 2017 - Goodwill and Intangibles
resulting from Business Combinations
Existing Customer Licence Current
Relationships Portfolio Technology (1) Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ------- ---------- ----------- ------------ -------
Cost
At 1 April 2016 4,668 3,653 835 15,060 24,216
Foreign exchange gain
arising in US immediate
holding company 565 - - 2,957 3,522
------------------------- ------- ---------- ----------- ------------ -------
At 31 March 2017 5,233 3,653 835 18,017 27,738
Amortisation
At 1 April 2016 802 - 251 - 1,053
Amortisation in the
year 635 - 83 - 718
Foreign exchange gain
arising in US immediate
holding company 102 - - - 102
------------------------- ------- ---------- ----------- ------------ -------
At 31 March 2017 1,539 - 334 - 1,873
Net book value:
At 31 March 2016 3,866 3,653 584 15,060 23,163
At 31 March 2017 3,694 3,653 501 18,017 25,865
------------------------- ------- ---------- ----------- ------------ -------
For the year ended 31 March 2017 - Other Intangibles
Website Total
GBP'000 GBP'000
------------------------- ------- -------
Cost
At 1 April 2016 48 48
Additions 8 8
Disposals (34) (34)
------------------------- ------- -------
At 31 March 2017 22 22
Amortisation
At 1 April 2016 34 34
Amortisation in the year 5 5
Disposals (34) (34)
------------------------- ------- -------
At 31 March 2017 5 5
Net book value:
At 31 March 2016 14 14
At 31 March 2017 17 17
------------------------- ------- -------
The amortisation charge for the period has been included in
Administrative expenses in the Consolidated Statement of
Comprehensive Income.
The goodwill arose on the purchase of 100% of the share capital
of each of Antitope Limited on 25 July 2013 as to GBP1,856,000;
PacificGMP on 11 September 2015 as to GBP6,203,000; and TCRS on 11
December 2015 as to GBP7,001,000. The goodwill represents the
excess of the fair value of the consideration over the fair value
of assets acquired.
The Group tests annually whether goodwill and intangible assets
have suffered any impairment and tests more frequently when events
or circumstances indicate that the current carrying value may not
be recoverable. The Directors consider there to be four Cash
Generating Units (CGUs). These are the legacy businesses of
Antitope Limited, PolyTherics Limited, PacificGMP and TCRS. In
considering the goodwill and other intangible asset impairment
reviews the Directors have considered the legacy operations
individually within the Group as conducted by Antitope Limited,
PolyTherics Limited, PacificGMP, and TCRS.
The licence portfolio comprises a number of licence agreements
to the Group's intellectual property which provide the opportunity
for the Group to earn further payments as the customer takes these
products through development, regulatory approval and through to
commercial sales of licensed products. These further payments
include a combination of technology access fees, annual licence
payments, development milestones and/or royalties on commercial
sales. The valuation of these further payments is a complex and
highly judgemental process impacted by the development stage of the
underlying program and the chance that the product will complete
the development process through to become regulatory approval and
commercial sales. In addition, the value will be impacted by the
eventual sales achieved for each product. The most advanced 12
products (2017:12) are in clinical development through phases I, II
or III of the clinical development process. Eleven of the licences
have the potential to yield royalties on commercial sales, if
successfully developed and approved, of between 0.25% and 1% of net
sales, and one agreement specifies a six-figure development
milestone only. The group has no significant information rights to
these programmes and is not responsible for funding any of the
development costs. External analysts have ascribed a value of this
portfolio of licences far in excess of the current carrying value,
and accordingly the Board does not believe any impairment is
required as at the year end.
The goodwill arising on the consolidation of the US subsidiaries
in the books of the immediate US holding companies has been
revalued at the exchange rate prevailing at the year end of
GBP1:$1.401, decreasing the value of goodwill in the Consolidated
Statement of Financial Position to GBP16,264,000 ( 31 March 2017:
GBP18,017,000); the corresponding entry of GBP1,753,000 going to
the Foreign Exchange Reserve.
Goodwill has been allocated to the legacy operations as
follows:
TCRS Antitope PacificGMP Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- --------- ----------- --------
Year ended 31 March 2017 8,508 1,856 7,653 18,017
Year ended 31 March 2018 7,584 1,856 6,824 16,264
-------------------------- -------- --------- ----------- --------
The range of key assumptions used for value in use calculations
are as follows:
Year ended Year ended
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Budgeted gross margin as % of service revenue 37% - 57% 35% - 55%
Revenue growth rate used for cash flows during the
budget period 15% - 58% 15% - 58%
Revenue growth rate used to extrapolate cash flows
beyond the budget period 6% 3% - 5%
Weighted average cost of capital (Discount rate
pre-tax) 10% 10%
--------------------------------------------------- ---------- ----------
The budgeted gross margin represents management's best estimate
of gross margin based on past performance of each business segment
as a percentage of service revenue. The discount rate applied to
the cash flows reflects the weighted average cost of capital of the
Company using the industry standard formula. The growth rate is
consistent, for UK operations, with past experience and management
expectations for US operations given the planned level of
investment. Sensitivity analysis of planned future revenues from US
operations has been performed and showed that no impairment would
be required if revenues achieved were approximately 70% of planned
revenues over the next three years.
10. Property, plant and equipment
Property, plant and equipment for the year ended 31 March
2018
Fixtures,
Short Term Fittings
Leasehold and
Property Equipment Total
GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- -------
Cost
At 1 April 2017 896 9,108 10,004
Additions 1,908 4,105 6,013
Disposals (267) (185) (452)
Foreign exchange gain arising in US
subsidiaries (9) (508) (517)
------------------------------------ ---------- ---------- -------
At 31 March 2018 2,528 12,520 15,048
Depreciation
At 1 April 2017 303 2,089 2,392
Depreciation charge for the period 157 1,510 1,667
Disposals (267) (180) (447)
Foreign exchange gain arising in US
subsidiaries (6) (72) (78)
------------------------------------ ---------- ---------- -------
At 31 March 2018 187 3,347 3,534
Net book value:
At 31 March 2017 593 7,019 7,612
------------------------------------ ---------- ---------- -------
At 31 March 2018 2,341 9,173 11,514
------------------------------------ ---------- ---------- -------
Included in additions above, are GBP150,410 (2017: GBP766,940)
of assets acquired under finance lease and GBP1,451,460 (2017:
GBPnil) of assets acquired under a Sartorius supplier agreement. As
at 31 March 2018, the NBV of assets under finance lease was
GBP736,636 (31 March 2017: GBP710,195). The NBV of assets acquired
under a supplier agreement with Sartorius was GBP1,410,327 (2017:
GBPnil).
See note 25.
The Parent Company has no property, plant and equipment.
Property, plant and equipment for the year ended 31 March
2017
Fixtures,
Short Term Fittings
Leasehold and
Property Equipment Total
GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- -------
Cost
At 1 April 2016 550 5,384 5,934
Additions 346 3,866 4,212
Disposals (67) (505) (572)
Foreign exchange gain arising in US
subsidiaries 67 363 430
------------------------------------ ---------- ---------- -------
At 31 March 2017 896 9,108 10,004
Depreciation
At 1 April 2016 274 1,490 1,764
Depreciation charge for the period 91 1,066 1,157
Disposals (67) (509) (576)
Foreign exchange gain arising in US
subsidiaries 5 42 47
At 31 March 2017 303 2,089 2,392
Net book value:
At 31 March 2016 276 3,894 4,170
------------------------------------ ---------- ---------- -------
At 31 March 2017 593 7,019 7,612
------------------------------------ ---------- ---------- -------
11. Investments
Group
The principal operating subsidiaries of Abzena Plc, all of which
have been included in these consolidated financial statements, are
as follows:
Country of incorporation Proportion of ownership
and principal place interest as
of business at 31 March
Name 2018 2017
PolyTherics Limited United Kingdom 100% 100%
Antitope Limited United Kingdom 100% 100%
PacificGMP USA 100% 100%
The Chemistry Research Solution LLC USA 100% 100%
------------------------------------- ------------------------- ------------ -----------
The full list of subsidiary companies is shown in note 1.
Abzena plc owns 88.2% of Denceptor Therapeutics Limited. The
financial impact of the non-controlling interest is not material to
the Group consolidated financial statements.
Company
31 March
31 March 2018 2017
Investments in subsidiary undertakings GBP'000 GBP'000
--------------------------------------- ------------- --------
PolyTherics Ltd 1,114 580
--------------------------------------- ------------- --------
The investment in PolyTherics Limited, was part of the share
re-organisation and reflects the share capital of PolyTherics
Limited, held by the Company.
12. Inventories - Group
31 March 31 March
2018 2017
GBP'000 GBP'000
--------------------------------- -------- --------
Raw materials and consumables 1,711 1,876
--------------------------------- -------- --------
Intermediates and finished goods 228 -
--------------------------------- -------- --------
Total inventories 1,939 1,876
--------------------------------- -------- --------
13. Trade and other receivables
Group Group Company Company
31 March 31 March 31 March 31 March
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Current:
Trade receivables 4,943 2,531 - -
Provision for impairment
of trade receivables (432) (168)
----------------------------------- -------- -------- -------- --------
Trade receivables - net 4,511 2,363
Amounts owed by Group undertakings - - 66,854 41,360
Other receivables 1,665 303 1 10
Value Added Tax 391 257 - -
Prepayments 1,138 706 - -
Accrued income 2,465 1,353 - -
----------------------------------- -------- -------- -------- --------
Total 10,170 4,982 66,855 41,370
----------------------------------- -------- -------- -------- --------
Included within Other Receivables are two letters of credit
associated with the leases of two US properties. These total
GBP0.9m (2017: GBP0.1m).
Trade receivables by currency at the reporting date were as
follows:
Group Group Company Company
31 March 31 March 31 March 31 March
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- -------- --------
US Dollars 3,641 1,522 - -
Pounds Sterling 739 808 - -
Euros 131 -
Japanese Yen - 33 - -
---------------- -------- -------- -------- --------
Total 4,511 2,363 - -
---------------- -------- -------- -------- --------
Trade receivables past due are as follows:
Group Group
31 March 31 March
2018 2017
GBP'000 GBP'000
---------------------------- -------- --------
Not yet due 3,112 1,591
Past due: 0-30 days 1,044 501
Past due: 31-60 days 99 119
Past due: 61-90 days 7 -
Past due: More than 91 days 249 152
---------------------------- -------- --------
Total 4,511 2,363
---------------------------- -------- --------
14. Cash and cash equivalents
The Group retains cash and cash equivalents on instant access
current and deposit accounts in the following currencies:
Group Group Company Company
31 March 31 March 31 March 31 March
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------- -------- -------- --------
Sterling 5,759 2,901 323 1,378
US Dollars 990 1,032 - -
Euro 31 164 - -
Other 5 38 - -
----------- -------- -------- -------- --------
Total 6,785 4,135 323 1,378
----------- -------- -------- -------- --------
15. Trade and other payables
Group Group Company Company
31 March 31 March 31 March 31 March
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------
Current:
Trade payables 2,105 1,419 - -
Tax and social security 157 178 - -
Other payables 607 247 - -
Deferred consideration - 335 - -
Accruals 1,371 1,555 - -
Deferred income 2,317 2,298 - -
----------------------------- -------- -------- -------- --------
Total 6,557 6,032 - -
----------------------------- -------- -------- -------- --------
Non-current
Sartorius supplier agreement
(note 25) 1,379 - - -
Amount due under lease
incentive 221 - - -
----------------------------- -------- -------- -------- --------
Total 1,600 - - -
----------------------------- -------- -------- -------- --------
16. Issued share capital
A schedule of the issued share capital of the Company at the
year ends was as follows.
31 March 31 March 31 March 31 March
2018 2017 2018 2017
Number Number GBP'000 GBP'000
---------------------------- ----------- ----------- -------- --------
Ordinary shares of GBP0.002
each (2017: GBP0.002 each) 214,220,401 137,846,329 428 276
Total 214,220,401 137,846,329 428 276
---------------------------- ----------- ----------- -------- --------
Shares issued in consideration for the exercise of Share Options
during the year ended 31 March 2018
During the year ended 31 March 2018 a total of 75,757,576
Ordinary shares were issued for gross cash consideration of GBP25
million. A total of 213,227 (2017: 879,713) Ordinary shares were
issued in consideration for the exercise of share options, for cash
consideration amounting to GBP46 (2017: GBP178). RSUs issued as
part of the purchase arrangement of PacificGMP vested and 369,389
Ordinary shares were issued to a former employee / owner of the
subsidiary company and 33,880 Ordinary shares were issued to
employees of the subsidiary company.
During the year ended 31 March 2018, no warrants were exercised
(2017: 81,250) for cash consideration (2017: GBP29,250).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSSEFDFASESM
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