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BTG plc Annual Report and Accounts 2013
Growing
Focused
Innovative
Because people depend on us
Introduction
Growing
BTG is a growing international specialist healthcare
company with a mission to bring to market medical
products that meet the needs of specialist healthcare
physicians and their patients.
Focused
We operate in three business areas: Specialty
Pharmaceuticals, Interventional Medicine and
Licensing & Biotechnology. We sell our products
directly in the US and elsewhere through partners.
Innovative
We seek to acquire, develop and market differentiated
products that make a real difference.
In everything we do we are guided by our core values
and Code of Conduct. We believe that by doing the
right thing every time, we can deliver sustainable
growth and value to all our stakeholders.
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Our corporate website
www.btgplc.com
Our values
www.btgplc.com/about-us/our-values
Contents
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Interventional Medicine
Business review
02 2013 highlights
03 Our business
04 Our areas of business
06 Specialty Pharmaceuticals
08
10 Licensing & Biotechnology
12 Chairman’s statement
14 Chief Executive Officer’s review
17 Business review
27 Financial review
32 Principal risks and uncertainties
36 Corporate responsibility report
Directors and governance
42 Board of directors
44 Directors’ report
48 Corporate governance
57 Audit Committee report
61 Nomination Committee report
63 Remuneration Committee report
82
83
Statement of directors’ responsibilities
Independent auditor’s report
to the members of BTG plc
Financials
86 Consolidated income statement
87 Consolidated statement of comprehensive income
Consolidated statement of financial position
88
Consolidated statement of cash flows
89
Consolidated statement of changes in equity
90
Notes to the consolidated financial statements
91
133 Company statement of financial position
134 Company statement of cash flows
135 Company statement of changes in equity
136 Notes to the Company financial statements
140 Five-year financial record
142 Shareholder information
144 Cautionary statement and Trade marks
Business review
Contents
BTG plc Annual Report and Accounts 2013
01
2013 highlights
Below we summarise our 2012/13 financial highlights.
The full financial results are described on pages 27
to 31 and we report on progress against non-financial
performance indicators on page 26. Opposite we
summarise BTG’s business and show where more
detail can be found on each aspect.
Total revenue
Total revenue by
business area
Contribution by
business area
£233.7m
3
3
2
£233.7m
£197.0m
1
2
1
12/13
11/12
10/11
09/10
08/09
£111.4m
£98.5m
£84.8m
3
2
1
1. Specialty Pharmaceuticals £97.2m
2. Interventional Medicine
£36.1m
3. Licensing & Biotechnology £100.4m
1. Specialty Pharmaceuticals £55.4m
2. Interventional Medicine
£13.0m
3. Licensing & Biotechnology £40.1m
Gross margin
Underlying operating profit1
Cash and cash equivalents2
71.0%
£69.0m
£158.7m
12/13
11/12
10/11
09/10
08/09
71.0%
71.4%
12/13
11/12
69.4%
10/11
£1.7m
66.7%
09/10
£10.8m
56.3%
08/09
£7.0m
£69.0m
12/13
£158.7m
£54.0m
11/12
10/11
09/10
08/09
£111.9m
£73.9m
£82.6m
£78.2m
1 Operating profit excluding acquisition adjustments and reorganisation costs.
2 Including held to maturity financial assets.
02 Business review
2013 highlights
BTG plc Annual Report and Accounts 2013
Our business
Core purpose
Core activities
Corporate priorities
Bring to market differentiated
products that meet the needs of
specialist physicians and their
patients.
For a description of our products
and the markets in which we
operate, see pages 17 to 26.
Acquire, develop, manufacture
and commercialise specialist
medical products, using insights
from customers and other
stakeholders to develop new
business opportunities.
Our core activities are described
in detail on page 20.
Our medium-term goals are
grouped into four categories:
financial management; internal
processes and capabilities;
delivering products for our key
stakeholders; and learning and
growth.
An update on progress with these
priorities is given on
pages 20 to 26.
e n t
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Enviro n m
Learning a n d g r o
Custo m er i n
C o r porate priorities
C o re activities
h t
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Core purpose
Strate
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u r c e s a n d relationships
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I n t e r n a l p r o
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Strategy and
governance
Deliver sustainable growth by
building leading market
positions in specialist medical
markets, operating compliantly
and inline with our values.
See pages 21 for further
information on strategy, pages 36
to 40 for corporate responsibility
and pages 48 to 56 for our
corporate governance report.
Resources and
relationships
Our financial and human
resources are key enablers for
us to deliver on our growth
strategy.
These and other enablers are
discussed on pages 22 to 25.
Performance
We monitor performance using
financial and non-financial
indicators.
These are described on page 26.
See also the highlights on page 2
and the financial review on pages
27 to 31.
Environment
We operate in a highly regulated
industry that is subject to
external influences including
healthcare reform, regulatory
changes, competition and
product innovation.
Further details are given on pages
25 to 26. See also the risks section
on pages 32 to 35.
Business review
Our business
BTG plc Annual Report and Accounts 2013
03
Our areas of business
Our commercial sales
CroFab® (crotalidae polyvalent immune fab (ovine))
The only approved treatment for the management of patients
with North American pit viper envenomation.
DigiFab® (digoxin immune fab (ovine))
A treatment for patients with life-threatening or potentially
life-threatening toxicity associated with the heart medication
digoxin.
£97.2m
£76.7m
Voraxaze® (glucarpidase)
A treatment for the toxicity that can occur in cancer patients
with renal impairment who are receiving high-dose methotrexate
therapy.
Uridine triacetate
We are seeking to in-license or acquire additional antidotes,
A treatment in development with Wellstat Therapeutics
as well as other products used by Acute Care and other
Corporation for toxicity associated with use of the
chemotherapeutic 5-fluorouracil. BTG has acquired US
and an option for EU commercial rights.
specialist physicians.
LC Bead™, DC Bead® and Bead Block®
Embolisation and drug-eluting beads that are used to treat
patients with hypervascularised tumours.
Brachytherapy implants
Low-dose radioactive seeds used primarily to treat early-stage
prostate cancer.
Varisolve® (polidocanol endovenous microfoam (PEM))
We plan to continue investing in clinical development of the
A potential comprehensive treatment to reduce the symptoms
bead products to expand their indicated uses and geographic
and appearance of varicose veins. A regulatory application is
availability. We are also seeking to acquire additional products
used by interventional radiologists, medical oncologists and
vascular surgeons.
under review in the US.
PARAGON Bead®
cholangiocarcinoma.
PRECISION Bead®
A drug-eluting bead pre-loaded with the chemotherapeutic drug
irinotecan. In development for the treatment of colorectal cancer
which has metastasised to the liver (mCRC). Humanitarian Use
Device (HUD) designation granted in intrahepatic
A drug-eluting bead pre-loaded with the chemotherapeutic drug
doxorubicin. In development for the treatment of primary liver
cancer or hepatocellular carcinoma (HCC). HUD designation
granted in uveal melanoma.
Zytiga® (abiraterone acetate)
A treatment for advanced prostate cancer which is marketed by
the Janssen Pharmaceutical Companies of Johnson & Johnson.
Lemtrada™ (alemtuzumab)
A potential treatment for relapsing multiple sclerosis. US and EU
regulatory applications have been submitted by partner Sanofi.
Two-Part Hip Cup
A prosthetic hip joint replacement licensed to most major
hip-replacement technology manufacturers.
£36.1m
£28.7m
£100.4m
£91.6m
Specialty
Pharmaceuticals
Revenue
£97.2m
12/13
11/12
Interventional
Medicine
Revenue
£36.1m
12/13
11/12
Licensing &
Biotechnology
Revenue
£100.4m
12/13
11/12
04 Business review
Our areas of business
BTG plc Annual Report and Accounts 2013
Specialty
Pharmaceuticals
£97.2m
Revenue
12/13
11/12
CroFab® (crotalidae polyvalent immune fab (ovine))
The only approved treatment for the management of patients
with North American pit viper envenomation.
DigiFab® (digoxin immune fab (ovine))
A treatment for patients with life-threatening or potentially
life-threatening toxicity associated with the heart medication
Voraxaze® (glucarpidase)
£97.2m
A treatment for the toxicity that can occur in cancer patients
with renal impairment who are receiving high-dose methotrexate
£76.7m
digoxin.
therapy.
Interventional
Medicine
£36.1m
Revenue
12/13
11/12
£36.1m
£28.7m
LC Bead™, DC Bead® and Bead Block®
Embolisation and drug-eluting beads that are used to treat
patients with hypervascularised tumours.
Brachytherapy implants
prostate cancer.
Low-dose radioactive seeds used primarily to treat early-stage
Late-stage development
Growth strategy
Uridine triacetate
A treatment in development with Wellstat Therapeutics
Corporation for toxicity associated with use of the
chemotherapeutic 5-fluorouracil. BTG has acquired US
and an option for EU commercial rights.
We are seeking to in-license or acquire additional antidotes,
as well as other products used by Acute Care and other
specialist physicians.
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We plan to continue investing in clinical development of the
bead products to expand their indicated uses and geographic
availability. We are also seeking to acquire additional products
used by interventional radiologists, medical oncologists and
vascular surgeons.
Varisolve® (polidocanol endovenous microfoam (PEM))
A potential comprehensive treatment to reduce the symptoms
and appearance of varicose veins. A regulatory application is
under review in the US.
PARAGON Bead®
A drug-eluting bead pre-loaded with the chemotherapeutic drug
irinotecan. In development for the treatment of colorectal cancer
which has metastasised to the liver (mCRC). Humanitarian Use
Device (HUD) designation granted in intrahepatic
cholangiocarcinoma.
PRECISION Bead®
A drug-eluting bead pre-loaded with the chemotherapeutic drug
doxorubicin. In development for the treatment of primary liver
cancer or hepatocellular carcinoma (HCC). HUD designation
granted in uveal melanoma.
Licensing &
Biotechnology
£100.4m
Revenue
12/13
11/12
£100.4m
£91.6m
Zytiga® (abiraterone acetate)
A treatment for advanced prostate cancer which is marketed by
the Janssen Pharmaceutical Companies of Johnson & Johnson.
Lemtrada™ (alemtuzumab)
A potential treatment for relapsing multiple sclerosis. US and EU
regulatory applications have been submitted by partner Sanofi.
Two-Part Hip Cup
A prosthetic hip joint replacement licensed to most major
hip-replacement technology manufacturers.
Business review
Our areas of business
BTG plc Annual Report and Accounts 2013
05
Specialty
Pharmaceuticals
The current focus within Specialty
Pharmaceuticals is on antidote products
that are used within hospitals. We market
and sell our products directly in the
US, and elsewhere we work with
distribution partners.
Specialty Pharmaceuticals revenue
£97.2m 12/13
£76.7m
11/12
Specialty Pharmaceuticals contribution
£55.4m 12/13
£39.4m
11/12
Specialty Pharmaceuticals revenue split
3
2
1
1. CroFab®
2. DigiFab®
3. Voraxaze®
£62.7m
£23.8m
£10.7m
06 Business review
Specialty Pharmaceuticals
BTG plc Annual Report and Accounts 2013
“Our strategy is to deliver
value beyond our products’
attributes to promote
even stronger customer
relationships.”
Matthew Gantz
Executive Vice President, US
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CroFab®
CroFab® (crotalidae polyvalent immune
fab (ovine)) is a treatment for the
management of patients with North
American pit viper envenomation.
CroFab® has been clinically proven to
halt envenomation progression from
venomous North American pit viper bites.
Voraxaze®
DigiFab®
Voraxaze® (glucarpidase) is indicated
for the treatment of toxic plasma
methotrexate concentrations in patients
with delayed methotrexate clearance
due to impaired renal function. Voraxaze®
breaks down the chemotherapeutic
methotrexate into inactive metabolites
which are then eliminated from the body.
Voraxaze® is the first and only drug
available to reduce toxic plasma
methotrexate levels.
DigiFab® (digoxin immune fab (ovine)) is a
treatment for patients with life-threatening
or potentially life-threatening digoxin toxicity
or overdose and is clinically proven to
effectively clear digoxin from the body.
Digoxin is widely used as a treatment for
various heart conditions.
Business review
Specialty Pharmaceuticals
BTG plc Annual Report and Accounts 2013
07
Interventional
Medicine
Our key products are embolisation
and drug-eluting beads used primarily
to treat patients with liver tumours and
Brachytherapy products used mainly
for early-stage prostate cancer.
Interventional Medicine revenue
£36.1m 12/13
£28.7m
11/12
Interventional Medicine contribution
£13.0m 12/13
£6.8m
11/12
Interventional Medicine revenue split
2
1
1. Beads
2. Brachytherapy
£28.8m
£7.3m
08 Business review
Interventional Medicine
BTG plc Annual Report and Accounts 2013
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“ We see considerable
growth opportunities for
our embolisation and drug-
eluting beads in the Far
East where there is an
especially high incidence
of primary liver cancer.”
John Sylvester
Chief Commercial Officer
LC Bead™, DC Bead®
and Bead Block®
Embolisation beads, approved for the
embolisation of hypervascularised
tumours and arteriovenous malformations
in the US and for the embolisation or
chemoembolisation of malignant
hypervascular tumours in the EU.
PARAGON Bead® and
PRECISION Bead®
Embolising and drug-eluting beads
preloaded with chemotherapeutics.
In development for colorectal cancer
which has metastasised to the liver
(mCRC) and primary liver cancer
(heptocellular carcinoma). Humanitarian
Use Device (HUD) designations granted
in intrahepatic cholangiocarcinoma
and uveal melanoma respectively.
Brachytherapy implants
A variety of customised radioactive
implants for the treatment of early-stage
prostate cancer.
Business review
Interventional Medicine
BTG plc Annual Report and Accounts 2013
09
Licensing &
Biotechnology
This business area comprises
licensed products and programmes
and generates significant royalties
for BTG. We out-license assets that
we do not intend to market ourselves.
Licensing & Biotechnology revenue
£100.4m 12/13
£91.6m
11/12
Licensing & Biotechnology contribution
£40.1m 12/13
£45.6m
11/12
Licensing & Biotechnology revenue split
4
2
3
5
1
1. Zytiga®
2. BeneFIX®
3. Two-Part Hip Cup
4. Other
5. Milestones/one-offs
£49.9m
£14.0m
£13.3m
£14.6m
£8.6m
10 Business review
Licensing & Biotechnology
BTG plc Annual Report and Accounts 2013
Zytiga®
Zytiga® (abiraterone acetate) is a
treatment for advanced, metastatic
castration-resistant prostate cancer.
Approved in the US and EU, both for
patients who have, and those who
have not received prior chemotherapy
containing docetaxel and marketed by
the Janssen Pharmaceutical Companies
of Johnson & Johnson.
“ We have received
substantial royalties from
a number of products that
are subject to intellectual
property and technology
licence agreements.”
Rolf Soderstrom
Chief Financial Officer
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Two-Part Hip Cup
Lemtrada™
A prosthetic hip joint replacement which
allows for a range of motion that helps to
avoid dislocation. Licensed to all major
orthopaedic companies.
Lemtrada™ (alemtuzumab) is in
development as a potential treatment
for relapsing multiple sclerosis. Sanofi
and its subsidiary Genzyme have submitted
regulatory applications in the US and EU.
Business review
Licensing & Biotechnology
BTG plc Annual Report and Accounts 2013
11
I am pleased to report that our business
has performed very well during 2012/13.
Revenues, underlying profi tability and
cash generation increased substantially
and we made good progress with the
operating priorities we set out in last
year’s Report.
The strong growth in revenue refl ects
a robust performance in our Specialty
Pharmaceuticals business, the impact
of the transition to direct sales of our
interventional oncology products in the
US and increased royalties from licensed
products. Operating achievements
during the year include the submission
of a new drug application for Varisolve®
PEM in the US and the US launch of
Voraxaze® (glucarpidase) by our Acute
Care team.
To deliver further growth, we continue
to pursue our strategy of investing in
and expanding our portfolio of specialist
healthcare products. Our strong cash
reserves and increasing cash generation
enable us to invest both in internal
development activities and in the
acquisition of complementary products
and late-stage development
programmes. During the year, we
outlined a planned programme of
studies to expand the approved uses
of our interventional oncology products.
In addition, we continue to review a
number of acquisition opportunities
that arose during the year.
These focused investments give us the
platform to create a leading international
specialist healthcare business that
makes a real difference to physicians
and patients alike, that delivers
signifi cant value to our stakeholders
and that creates fulfi lling careers for
our employees.
Investing for growth is expected to
create signifi cant value over the longer
term and remains our current focus,
so we do not recommend payment of
a dividend. However, the Board intends
to review its dividend policy regularly
as the business continues to evolve.
Our key challenge is to grow in a
sustainable way. For us, sustainability
means combining the right strategy with
strong execution, fi nancial discipline,
a culture of continuous improvement,
strong governance and good corporate
citizenship. These themes are the focus
of our medium-term priorities, which
we discuss on page 20 of this Report.
They also feature in the Chief Executive
Offi cer’s review, the business review, the
corporate responsibility report and the
sections on risk management and
corporate governance.
In the corporate governance report
on page 48 we state that the Company
has complied fully with the 2010
edition of the UK Corporate Governance
Code. Our next Annual Report will
comment on compliance with the new
provisions of the Code as it applies to
reporting periods beginning on or after
1 October 2012.
Chairman’s
statement
Garry Watts
Chairman
Read more about our strategy
www.btgplc.com/about-us/strategy
Our latest share prices
www.btgplc.com/investors/share-price-data
12 Business review
Chairman’s statement
BTG plc Annual Report and Accounts 2013
I am grateful to the Board of directors
for the guidance, oversight, support and
challenge they bring, which contributes
significantly to the Company’s overall
success. On behalf of the Board, my
thanks go to Peter Chambré, who retired
in September 2012 after six years as
a non-executive director, having helped
steer the business through a period
of strategic change and expansion.
Richard Wohanka, who was appointed
as a non-executive director in January
2013, brings significant additional
business experience to the Board.
I would especially like to thank our
employees, on whose talent and energy
our success ultimately depends, for
their continued dedication and focus
on delivery. I welcome those employees
who joined us over the past year.
On behalf of the whole Company, I also
wish to thank you, our shareholders, for
your continued support as we implement
our growth plans.
BTG has made excellent progress in
recent years. We have the financial
resources, capabilities and opportunities
to continue to build the business and
deliver sustainable growth.
Garry Watts
Chairman
“ BTG has made excellent
progress in recent years.
We have the financial
resources, capabilities and
opportunities to continue
to build the business and
deliver sustainable growth.”
Garry Watts
Chairman
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Business review
Chairman’s statement
BTG plc Annual Report and Accounts 2013
13
The past year was one of signifi cant
progress for BTG. In addition to a strong
overall business performance, each of
our three business areas performed well
fi nancially and key operational goals
were achieved.
In Specialty Pharmaceuticals, where
we currently focus on antidote products,
revenue grew by 27% to £97.2m,
resulting in a 41% increase in pre-R&D
profi t contribution to £55.4m.
The Interventional Medicine business,
which currently provides interventional
oncology products used to treat patients
with liver tumours and early-stage
prostate cancer, delivered a 26%
increase in revenues to £36.1m and a
91% higher profi t contribution of £13.0m.
The Licensing & Biotechnology segment
delivered a strong performance with
revenue 10% higher at £100.4m. The
profi t contribution was 12% lower at
£40.1m as a result of the reduced
revenue from BeneFIX®, which was a
high-margin royalty stream, and an
increase in the central costs allocated
to this business segment as we have
built our internal capabilities.
Operating highlights include the
submission of a new drug application
(NDA) in the US seeking approval of
PEM as a comprehensive treatment
for moderate to severe varicose
veins; a strong launch for Voraxaze®
(glucarpidase) by the US Acute Care
team; and the supplementary approvals
of Johnson & Johnson’s Zytiga®
(abiraterone acetate) for use in chemo-
naïve patients with metastatic
castration-resistant prostate cancer.
Over the medium-term, we are investing
the cash generated in our three
business segments in three principal
areas: product development, product
acquisitions and building our
capabilities.
During the year, we outlined our
plans to invest in a number of studies
designed to support the expanded use
of our Bead products. These include
investigational studies to explore use
in different patient populations, together
with larger-scale randomised clinical
trials that are designed to support
pre-market approval (PMA) applications
to extend the indicated uses of the
products.
Through the Beads expansion activities
and PEM, we have signifi cant organic
growth potential. Expanding our
portfolio through the acquisition of
complementary products that meet our
fi nancial and strategic criteria is also a
key growth driver.
We are very clear on the criteria we
use when considering acquisitions.
They must, of course, have the potential
to deliver an appropriate return on
investment, but they must also leverage
existing capabilities such as our sales
forces, commercial infrastructure or
developing expertise in drug-device
combinations. We continue to review a
number of opportunities and have also
experienced an increase in the number
of opportunities that are being brought
to us.
BTG operates in a highly regulated
business environment. To expand
our portfolio, enter new markets and
adapt to healthcare reforms, we must
continuously enhance our internal
processes and capabilities. This is
a corporate priority which we are
addressing, partly through our Learning
and Development programme for
employees, and partly through hiring new
employees with specifi c skill sets and
experience. The average number of
employees increased during the year
from 498 to 569, and we anticipate
further growth as we continue to prepare
for the anticipated US approval and
launch of PEM.
Chief Executive
Offi cer’s review
Louise Makin
Chief Executive Offi cer
Read more about our strategy
www.btgplc.com/about-us/strategy
Our latest share prices
www.btgplc.com/investors/share-price-data
14 Business review
Chief Executive Offi cer’s review
BTG plc Annual Report and Accounts 2013
Varisolve® (polidocanol
endovenous microfoam
(PEM))
A new drug application (NDA) has
been submitted to the FDA in the US,
seeking approval of PEM as a potential
comprehensive treatment to reduce
the symptoms and appearance of
varicose veins.
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Business review
Chief Executive Officer’s review
BTG plc Annual Report and Accounts 2013
15
Our business has enjoyed strong
growth in recent years, whether
measured by revenue, underlying
profitability or market capitalisation,
or by reference to the number of
products we sell, the market segments
we serve or the people we employ.
The business is in good shape and
the outlook is positive. With a clear
strategy to build our interventional
oncology business, the potential
approval of PEM, and the resources to
acquire complementary products, we
have the opportunity to create significant
additional value in the business.
Louise Makin
Chief Executive Officer
With the approval of Voraxaze® and
the completion of our PEM Phase III
trials, the balance of our development
activities is shifting towards the
Bead products and in particular the
development of our novel pre-loaded
Beads and the studies we plan to
initiate to support the expansion of
their indicated uses.
We have realigned our research and
development function to best support
the current and medium-term plans.
We have also created an innovation
function. This group’s role is to engage
with customers and the wider medical
community to identify market
opportunities and to conduct feasibility
studies. These opportunities may exploit
our existing platforms and products, or
they may link to our acquisition activities.
We set a new goal last year of being an
excellent corporate citizen by embedding
compliance, quality and environmental,
Health and Safety matters in all
activities. Nowhere is this more
important than in our manufacturing
activities, the integrity of which is crucial
to maintaining the safety and availability
of our products. We have made good
progress and will continue to invest in
training, process improvements and
adding new people where we identify
gaps. Our corporate responsibility report
on pages 36 to 40 provides more
information.
People are our most important asset
and being able to recruit, retain and
motivate the talent we need is critical to
our long-term success. How we conduct
our business is as important as the
results we achieve; living our values
begins with the recruitment process and
is embedded throughout the
organisation.
Chief Executive Officer’s
review continued
“ With a clear strategy to
build our interventional
oncology business, the
potential approval of PEM,
and the resources to
acquire complementary
products, we have the
opportunity to create
significant additional value
in the business.”
Louise Makin
Chief Executive Officer
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BTG plc Annual Report and Accounts 2013
Business review
In this section we review the
performance and trends in our three
operating segments; we give an overview
of our business activities and the
business environment; we include a
detailed financial review and corporate
responsibility report; and we provide an
update on risk management.
Performance in 2012/13
BTG has delivered a strong financial and
operational performance in 2012/13.
The financial review on pages 27 to 31
gives the results in detail, and on page
26 we describe progress against the
key financial and non-financial indicators
we use to monitor overall business
performance. Below we describe the
performance and trends in our three
operating segments.
Specialty Pharmaceuticals
In the US we now sell three marketed
products, CroFab®, DigiFab® and
Voraxaze®, through our Acute Care field
force of 19 representatives. Whereas
CroFab® is only sold in the US, DigiFab®
and Voraxaze® are sold through partners
in other countries where approved or
available on a named patient basis.
Revenues in this segment grew from
£76.7m to £97.2m. A strong CroFab®
performance was enhanced by
wholesalers rebuilding inventory from
the comparatively low levels held in the
previous year. DigiFab® sales continue
to grow, in part due to continued
geographic expansion and a price
increase. Voraxaze® sales were
significantly higher than in the previous
year following US approval and the US
nationwide launch in April 2012.
All of these products address markets
bounded by the number of toxic events.
In the case of CroFab®, there are on
average 5,500 treated envenomations
per annum in the US; our goal is to
ensure every bite that needs treating
is treated optimally in terms of initial
dosing and maintenance.
DigiFab® is used when life-threatening
toxicity or overdose occur following
digoxin administration. The number
of global digoxin prescriptions is fairly
static from year-to-year at around 16
million globally, with between 1% and
4% of patients experiencing toxicity.
Through educational activities, we aim
to ensure that physicians are aware
of the signs of life-threatening digoxin
toxicity and that it is treated when
detected. We are also seeking to extend
the geographical approvals of the
product, or to make it available on a
named patient basis where achieving
regulatory approval is not practical.
Voraxaze® is approved in the US to
treat life-threatening toxicity following
treatment with the chemotherapeutic
high-dose methotrexate, which we
estimate affects around 200 to 300
patients in the US each year. We are
exploring additional regulatory approvals
in other geographies and seek to make
the product available on a named patient
basis where appropriate.
Specialty Pharmaceuticals is a highly
cash-generative business segment.
We anticipate that revenue from the
current product portfolio has the
potential to grow annually at a rate of
mid-to-high single digits on average.
Revenue growth above this level would
reflect the addition of new products,
which would also be expected to
enhance commercial operating
efficiency.
We currently have one late-stage
product in the pipeline: uridine
triacetate, which is being developed
by Wellstat Therapeutics Corporation.
This is another antidote, a potential
treatment for life-threatening toxicity
following administration of the
chemotherapeutic 5-fluorouracil.
If the US New Drug Application (NDA)
is submitted as expected around
mid-2014, with a priority review this
could result in approval and launch
by the end of 2014.
Profit contribution
£55.4m 12/13
£39.4m
11/12
A strong performance in
Speciality Pharmaceuticals
resulted in a 41% increase
in pre-investment profit
contribution.
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Interventional Medicine
In the US we now sell our embolising
Bead products, which are used to treat
liver tumours, and Brachytherapy
products, which are used to treat
early-stage prostate cancer, directly
through a team of 20 account managers.
The business is supported by 12
medical science liaisons. The products
are sold in other territories through
distribution partners; we are seeking to
expand their geographical availability by
pursuing additional regulatory approvals
in key markets such as Asia, working
with appropriate local partners.
Interventional Medicine revenues
increased from £28.7m to £36.1m.
The switch to direct sales of LC Bead™
in the US has gone well. Product that
was in the supply chain from the
previous distribution arrangement has
now been depleted, and ordering
patterns from customers have
normalised.
Over the near- to medium-term, we expect
underlying low double-digit annual growth
for our bead products. This is expected
to result from the general increasing
trend towards using loco-regional
therapies to treat liver tumours and from
the continued generation of clinical data
supporting the use of transarterial
chemoembolisation (TACE) in patients
with liver cancer. TACE is currently
included as the standard of care for
intermediate-stage patients in guidelines
such as the Barcelona Centre Liver
Cancer staging system for hepatocellular
carcinoma (HCC), the most common
form of primary liver cancer.
During the year, we outlined a planned
series of investments designed to expand
further the indicated uses of the Beads.
We aim to seek Humanitarian Device
Exemptions (HDEs) in the US for
PRECISION Bead® and PARAGON Bead®,
novel drug-device combination products
that are pre-loaded with appropriate
chemotherapeutics, for treating patients
with uveal melanoma metastases and
intrahepatic cholangiocarcinoma,
respectively. HDE approvals are based
on demonstrated safety and probable
clinical benefit demonstrated in
exploratory studies in niche indications
where there is currently no treatment
option. Subject to ongoing dialogue with
the FDA. The HDE submissions, which
have 75 day review cycles, are expected
during H2 2013.
We will continue to fund investigator-led
studies to explore use in different
patient populations with primary or
metastatic liver cancer. In addition to
proposing certain studies ourselves,
we also invite physicians to submit
proposals to us for funding to conduct
studies which are intended to inform our
future development strategy. We also
intend to generate data from larger-scale
randomised, controlled clinical trials
which, if successful, would support
expanded approvals such as pre-market
approvals (PMAs) in specific indications.
In primary liver cancer we are planning
studies in earlier-stage patients to
maintain their eligibility for transplant,
and in later-stage patients to explore the
use of the Beads in combination with
sorafenib, the current standard of care
chemotherapeutic for advanced-stage
primary liver cancer. We are finalising the
designs of appropriate studies and aim
to start one study, subject to regulatory
approvals, by the end of 2013. Expanding
the use of our Beads from intermediate-
stage patients to earlier- and later-stage
patients could approximately double the
addressable patient population.
Business review continued
Profit contribution
£13.0m 12/13
£6.8m
11/12
The transition to direct
US sales has increased
the profit contribution in
Interventional Medicine
by 91%.
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BTG plc Annual Report and Accounts 2013
In secondary liver cancer, we recently
completed the PARAGON II study in
patients with metastatic colorectal
cancer (mCRC) to assess the safety of
PARAGON Bead®in surgical resection.
We are also reviewing data from a US
Phase II study using our Beads loaded
with irinotecan in combination with
systemic chemotherapy (FOLFOX-DEBIRI)
in patients with mCRC. TACE is not
currently indicated for use in patients
with mCRC and success in this study
would open up a significant new
opportunity for further development of
the Beads.
Sales of our Brachytherapy products
were slightly lower than in the previous
year, which was a good performance
in a challenging market that declined by
around 20%. US healthcare reform has
resulted in fewer men receiving prostate
specific antigen (PSA) tests with fewer
subsequent referrals for treatment.
During the year we completed a review
of options for CellMed, which we
acquired with Biocompatibles. Having
reviewed manufacturing options for our
novel pre-loaded Bead products, we have
decided to refocus the CellMed facility
(renamed as BTG International Germany
GmbH) primarily to support the
development and manufacturing of
these products.
There was good progress during the
year with Varisolve® (PEM), which is
under development to treat varicose
veins. Full data from the pivotal US
Phase III trials, in which all endpoints
were met, were presented at the
American College of Phlebology’s
annual meeting in November 2012.
A NDA seeking approval of PEM as a
comprehensive treatment to improve
the symptoms and appearance of
varicose veins was submitted in
February 2013 and accepted for full
review in April 2013. We anticipate
potential US approval and product
launch in H1 2014. If approved, PEM
will be the only comprehensive treatment
for the symptoms and appearance of
varicose veins in patients with great
saphenous vein incompetence.
Secondary manufacturing was
successfully transferred to our Farnham
site, where we have constructed a
dedicated facility.
Commercial activities are progressing
ahead of the anticipated US approval.
These include pricing and
reimbursement research, physician
research and planning for the
recruitment of a dedicated PEM sales
team. There are approximately 1,000
private vein clinics in the US, which
we estimate can be served by a sales
team of around 40 people.
We estimate the global peak sales
potential of PEM to be $500m. Around
half of this is represented by the US
reimbursed sector, which will be our first
target market following approval. The
balance relates to self-pay markets in
the US and in other countries where
there are established self-pay markets
for healthcare products.
Licensing & Biotechnology
Revenue in the Licensing &
Biotechnology segment results
principally from royalties relating to
sales of products that are subject to
intellectual property and technology
licence agreements between BTG and
various partners. BTG has no role in,
or influence over, those sales. Royalties
vary but on average are around mid to
high single digit percentages of partners’
sales revenues; the gross royalty
amounts received by BTG are usually
shared on a 50:50 basis with originators
of the relevant intellectual property or
technology.
Revenue in this segment increased from
£91.6m to £100.4m. The continued
growth of Johnson & Johnson’s Zytiga®
(abiraterone acetate), used for treating
patients with metastatic castration-
resistant prostate cancer, was the chief
driver of higher royalties.
Profit contribution
£40.1m 12/13
£45.6m
11/12
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The Licensing &
Biotechnology segment
delivered a strong profit
contribution despite the
expected loss of BeneFix®
revenues from the second
half of the year.
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Over the medium-term, the performance
of this business segment will be strongly
influenced by Zytiga® royalties and the
potential 2013 EU and US approvals
of Sanofi’s Lemtrada™ (alemtuzumab),
which is under review as a treatment
for patients with multiple sclerosis.
Attrition rates are high in drug
development and, during the year, an
experimental treatment for severe
sepsis, AZD9773 (CytoFab™), did not
achieve the endpoints in a Phase II
study being conducted by AstraZeneca.
Development, and the associated
licence agreement, were terminated.
Overview and business model
BTG is a specialist healthcare company
whose core purpose is to bring to market
medical products that meet the needs of
specialist physicians and their patients.
We operate through three business
areas: Specialty Pharmaceuticals,
Interventional Medicine and Licensing
& Biotechnology.
In the following pages we expand on
the schematic of our business model
shown on page 3. We describe our
core activities and progress against
our medium-term corporate priorities.
We then comment on the key internal
and external factors that enable and
influence our performance and
prospects.
Core activities
The Group acquires, develops,
manufactures and commercialises
specialist medical products, using
insights from customers and others
to identify new business and product
opportunities.
Customer insights
Our products are used by specialist
groups of physicians with whom we
engage in a number of ways. We
promote the approved uses of our
products; we provide training in the
use of our products; we offer dedicated
medical support to physicians regarding
the safety, efficacy or use of our products
and to provide data when requested; we
invite proposals for funding to explore
the use of our products in different
patient populations and we approach
physicians with our own ideas for
studies to invite them to participate.
In these interactions we gain valuable
knowledge about how physicians use
our products in practice, why they might
choose not to use our products in
certain patient populations, where they
require more data to support use, and
where they see gaps in current
treatment options. Our innovation team
specifically engages with customers
and the wider scientific and medical
community to gain insights into
treatment practice and trends and
to identify unmet medical needs.
We supplement these insights from
customers and others with formal
market research, using the information
to identify potential new product
opportunities.
Acquisition and development
The new opportunities we identify
might be based around current products
and platforms, or they may require
acquisition or in-licensing activities. We
conduct the latter through a dedicated
business development team, supported
by our medical, regulatory, development
and commercial teams.
Prior to commencing a full development
programme, we undertake feasibility
studies, which are led by our innovation
team. If these show promise, we
commence full development
programmes. At this stage we conduct
non-clinical and clinical studies to
assess factors including the safety
and efficacy of our pharmaceutical
and medical device product candidates.
“ Our innovation team
engages with customers
and the wider scientific
and medical community
to identify unmet
medical needs.”
Peter Stratford
Chief Technical Officer,
Interventional Medicine
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Commercialisation
We sell our products directly in the US
and through partners elsewhere. This
model is most financially efficient but
we will continue to review options to sell
directly in territories outside the US as
we build sufficient critical mass of
product and sales to justify the
additional investment.
In the US we sell CroFab®, DigiFab®
and Voraxaze® through a 19-person
Acute Care sales force. We sell Bead
Block®, LC Bead™ and our Brachytherapy
products through a separate 32-person
Interventional Medicine team of account
managers and MSLs. DigiFab®,
Voraxaze®, Bead Block® and DC Bead®
are sold through distributors outside the
US where approved or through named-
patient protocols.
Although no longer a core part of our
activities, we may also commercialise
programmes that we do not intend to
develop into products to sell ourselves,
or products that are non-core. These
may be retained assets from the history
of BTG or the companies it has acquired,
or they may be non-core parts of
transactions we undertake.
Strategy and governance
The Board of directors sets the strategic
direction for the Company, monitors
performance and standards of behaviour
and maintains appropriate corporate
governance, compliance and risk
management procedures. Further details
are contained in the corporate governance
report on page 48, the risk management
update on page 32 and the corporate
responsibility report on page 36.
We liaise with regulators over the
development pathways for our products
and their approvability. Our development
personnel manage these activities
and oversee the contract research
organisations we contract to conduct
many of our studies.
Our business development team is also
seeking to in-licence or acquire additional
products (or late-stage programmes)
that we can sell through our existing
sales channels, or potentially through
a new sales team that can be supported
by our existing commercial infrastructure
if the potential financial returns support
that investment.
Manufacturing
Manufacturing of pharmaceuticals
and medical devices is highly regulated
and requires specialist skills and
knowledge. Our manufacturing activities
have increased significantly following the
acquisition of Protherics and
Biocompatibles, and as PEM has
progressed towards potential regulatory
approval in the US.
We manufacture the ovine polyclonal
antibodies CroFab® and DigiFab®.
The supply chains are complex, involving
raising antibodies in dedicated sheep
flocks in Australia, processing and
bulk substance manufacture at our
manufacturing plant in Wales, then
filling and freeze-drying by a third-party
in the US.
We also manufacture our embolic and
drug-eluting beads at our Farnham site,
with additional activity supporting our
novel pre-loaded Beads taking place at
our site in Germany. We manufacture our
bespoke Brachytherapy products in
Oxford, CT, USA.
We contract out certain aspects of
our manufacturing supply chain, though
we remain responsible for meeting
regulatory and quality requirements
and for the overall safety of our
products. We are continuing to invest
in upgrading our manufacturing
operations and capabilities.
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“ We focus on niche market
segments where we believe
we can build leading market
positions.”
John Sylvester
Chief Commercial Officer,
Interventional Medicine
Our strategy to deliver long-term value is
to be a focused, integrated, international
specialist healthcare business. We
focus on niche medical areas in which
we can build leading market positions.
By integrating our research and
development, manufacturing, sales and
marketing and business development
activities, we aim to capture the full
value of our marketed products and
development programmes.
The cash we generate enables us to
fund product acquisition opportunities of
a significant size. As a growing business
with a maturing financial profile, in April
2013 we put in place a £60m multi-
currency revolving credit facility for a
period of three years by April 2016, as
yet undrawn but available to fund
day-to-day working capital requirements
should our cash reserves substantially
reduce as a result of investing activities.
We operate internationally, selling
directly in the US and working elsewhere
with local partners. We undertake
regulatory and development activities
to expand the geographic and approved
uses of our products. We choose to
operate in specialist healthcare
segments, so that we can operate with
small sales forces, develop strong
relationships with our customers and
build leading market positions.
BTG’s annual strategic planning cycle
commences with ‘horizon scanning’
activities. These seek to understand
trends in the global healthcare
environment and changes in the
competitive landscape, so that
opportunities and challenges to our
business can be identified. The Board
and Leadership Team review corporate
strategy and plans in light of this
information. Corporate priorities are
defined for the short and medium-term,
which are cascaded into divisional, team
and individual goals and used for budget
development (see page 26).
Resources and relationships
Financial resources
BTG ended the 2012/13 year with
cash and cash equivalents of £158.7m,
having generated £46.8m of cash in
the period. We manage our financial
resources such that the cash we
generate will be sufficient to cover our
overheads and planned development
expenditure, and to enable appropriate
investment in growth activities such as
the acquisition of assets to expand our
portfolio of marketed products and
development programmes.
Marketplace and competition
We choose to operate in niche markets
and selected geographies within the
global healthcare market, which share
certain characteristics.
These include that the physician
customer groups are relatively small and
can be serviced by small sales forces
and support functions. In addition,
market sizes for particular specialisms
are generally modest as products often
address relatively small patient
populations; hence competition from
medium and larger companies is lower.
In addition, the size and cost of clinical
trials to gain approval are manageable
for a company of BTG’s scale and
resources, and reimbursement can
usually be achieved as the products
often address unmet needs.
Our current focus areas are Specialty
Pharmaceuticals, principally antidote
products, and Interventional Medicine,
principally interventional oncology
products for treating tumours in the liver
and prostate.
Within Specialty Pharmaceuticals, we
have three marketed products: CroFab®,
which is currently the only approved
treatment for bites from North American
crotalid snakes (although one potential
competitor is in development); DigiFab®,
which is the only approved and available
product for treating life-threatening
toxicity resulting from treatment with
digoxin; and Voraxaze®, which is the only
approved treatment for life-threatening
toxicity due to renal impairment resulting
from treatment with high-dose
methotrexate.
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The market opportunity for these
products relates to the number of
incidents that occur – the number of
snake bites for CroFab® and the number
of toxic events associated with digoxin
and high-dose methotrexate use. Annual
growth is anticipated to be in the range
mid to high single digits. Overall growth
in this franchise would result from the
addition of new products. A potential
future product addition is uridine
triacetate, under development for
treating toxicity associated with use
of the chemotherapeutic 5-FU. There
is no currently approved product in
this indication.
Within Interventional Medicine, our
marketed products are: Bead Block®
and LC Bead™, both used for embolising
hypervascularised tumours and
arteriovenous malformations; DC Bead®,
used for chemoembolisation of
hypervascularised tumours; and
brachytherapy products, primarily
implantable seeds used to deliver
low-dose radiation to localised prostate
tumours.
We estimate, based on our own sales
and published data from other
manufacturers of interventional oncology
products, that the global sales of these
loco-regional treatments for liver cancer
have experienced double-digit growth
between 2007 and 2011, reaching
$188m at the end of 2011. This market
opportunity would increase to $400m
with sustained 8% annual growth
through 2021. However, we believe the
opportunity could exceed $800m by
2021, driven by the generation of new
clinical data resulting in indication
expansion, geographic expansion, in
particular into important Asian markets
where penetration rates are currently
very low, and product innovations that
increase their usefulness to treating
physicians.
BTG seeks to differentiate itself from
competitors in the implantable oncology
device market in a number of ways.
We have designed our beads to have
technical advantages over competing
products. For example, we are
developing beads that are pre-loaded
with chemotherapeutic agents that will
eliminate the need for the pharmacist to
load the beads in situ. We recognise that
data from high-quality clinical studies is
important to the physicians who manage
patients with liver tumours, so we are
continuing to invest in investigator-led
studies to generate data and we intend
to invest in pre-market approval studies
to expand the approved indications for
our products. We also aim to provide the
best customer service and follow-up in
our sector.
The US remains one of the world’s
largest markets for healthcare products
and go-to-market costs are lower than
in other fragmented markets such as
Europe. Around 80% of BTG’s total
revenues are currently denominated in
US dollars, making it our most important
geographic market (although a
proportion of our dollar-denominated
revenues, for example royalties on
Zytiga®, derive from worldwide sales
but are presented to BTG in dollars
by a US-based licensee).
Our strategy is to sell our products
directly in the US, where we have
two sales forces, in Specialty
Pharmaceuticals and Interventional
Medicine, and where we are preparing
to set up a third sales force to support
the launch of PEM, which is under review
as a comprehensive treatment to
reduce the symptoms and improve
the appearance of varicose veins.
Outside the US we currently sell through
distributors, but we will review this as
we build our product portfolio and our
ex-US revenue base.
Cash generation
£46.8m 12/13
£43.1m
11/12
“ We continue our track
record of strong cash
generation during the year.”
Rolf Soderstrom
Chief Financial Officer
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While CroFab® is used only in the
US, DigiFab® and Voraxaze® have the
potential for worldwide sales. DigiFab®
is now approved in Canada, Switzerland
and the UK, and following the US
approval of Voraxaze® we will work with
other regulators to seek to make
Voraxaze® available in a range of
territories.
As we look to acquire products and
programmes from third-parties, we
are usually in competition with other
companies to acquire those assets.
We assess the financial returns and
strategic fit of all external opportunities,
and through a combination of both,
try to position ourselves as the most
appropriate acquirer.
We believe there is significant scope
to expand the geographic use of our
Bead products. In Asia, the underlying
incidence and prevalence of primary liver
cancer is several times higher than in
western countries. This primarily reflects
the higher incidence in Asia of hepatitis,
a major cause of liver cancer.
Penetration of interventional oncology
devices into Asian markets is currently
very low.
Relationships
We operate in a highly regulated
environment and are required to adhere
to specific regulations in addition to the
legal and regulatory frameworks that
apply to most businesses. Some of
these relate to our relationships with
stakeholders in the medical supply chain
including doctors, government officials
and agencies, patients, trade bodies,
suppliers and the worldwide media.
BTG is working with partners in key
Asian markets to gain approvals and
reimbursement. The approvals
processes in Asian markets can be
longer than in the US and EU. The
potential economic burden to the
healthcare systems in Asian countries
from these new treatments is significant.
To control the growth of these costs,
other steps following approval usually
include agreeing, or being assigned, a
price and limiting treatment or
reimbursement coverage to sub-sets of
patients. It is therefore anticipated that
it will take several years to realise the
significant potential of these products
within Asian markets.
In Japan, where our partner is Eisai,
DC Bead® received regulatory approval
in April 2013. We await pricing and
reimbursement decisions and marketing
approval. In China our partner is
SciClone and our regulatory application
is under review by the Chinese regulator.
In South Korea, regulatory approval and
limited reimbursement have been
achieved, and we are working with our
local partner to try to extend
reimbursement coverage.
BTG’s policy is straightforward in that we
will uphold the law and all regulations in
territories where we work, and we will act
with transparency and integrity in our
dealings with all our stakeholders. Our
Code of Conduct describes our approach
in detail (available via our website:
www.btgplc.com/about-us/corporate-
governance/code-of-conduct).
Our people
BTG’s success relies on it attracting,
retaining and motivating talented people.
It is as important for us to employ
people who adhere to our values as it is
that they have the right technical skills
and experience. We aim to foster a
high-performance culture and have built
performance monitoring systems and
rewards programmes to support that
goal.
We employ around 570 people in the UK,
US, Australia and Germany, the majority
of whom are engaged in commercial,
research and development,
manufacturing and corporate and
support roles.
For more information on our human
resources policies see our corporate
responsibility report on pages 36 to 40
and our remuneration report on pages
63 to 81.
Sustainability
We are building a business that we
believe is capable of delivering
sustainable, profitable growth. Our
strategy for this is to continue to develop
our business as a specialist healthcare
company focused on leadership in
specialty pharmaceuticals and
Interventional Medicine.
Sustainability is being achieved through
continued focus on: strategic planning,
so we can respond to opportunities and
challenges; research and development,
to bring new products to market and to
expand the use of existing products;
manufacturing excellence, to assure
the safety and efficacy of our products;
business development, to acquire or
in-licence new products and
programmes; financial discipline, to
make efficient use of our resources to
drive growth and deliver shareholder
value; and strong governance, so we
conduct all our affairs in a responsible,
compliant way.
Environment
The pharmaceutical and medical devices
industries are subject to many external
influences that we must monitor and
react to. Horizon-scanning is embedded
into our strategic planning cycle and is
intended to highlight changes in the
business environment so that we can
develop appropriate strategies and
plans.
Our research, development, regulatory,
manufacturing and commercial activities
are all subject to specific regulations,
which requires us to have sophisticated
and extensive quality and compliance
systems and procedures in place and
to recruit highly skilled and experienced
employees. The environment for
recruiting is good for BTG, with mergers
and acquisitions and company
restructurings resulting in a large pool of
talented people who are looking for new
opportunities. People are also attracted
to BTG as a growing company that has
strong core values and where they can
make a difference.
The industries we operate in are highly
competitive. There is competition for
acquiring good assets, recruiting
employees, being first to market with
new product categories, developing
products with better safety or efficacy to
gain marketing advantage. By focusing
on specialist healthcare segments
usually means we face less competition.
Our Specialty Pharmaceutical products
currently have no competitor products,
whereas our interventional oncology
products sometimes compete with other
products for use in certain patient
populations. Our strategy is to
differentiate our products by generating
supportive clinical data.
Healthcare reform has become a key
external influence on our industry. The
ultimate goal is for governments and
other payers to control expenditure,
which is leading to pressures on pricing
power and reimbursement. We have
enhanced our capabilities to ensure
we can monitor and understand the
potential impact of these reforms on our
business. When reviewing new product
development opportunities, we factor in
healthcare reform and trends and
progress only those opportunities we
believe are either aligned with trends
or are relatively immune to them. An
example of the former is PEM, our
treatment for varicose veins, which we
believe meets the needs of payers in
the US to find a better value for money
treatment that can help contain the
rising cost of treating moderate to
severe varicose veins as more patients
seek treatment. Examples of the latter
are our antidote products, which have no
competition and are used in potentially
life-threatening conditions.
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BTG plc Annual Report and Accounts 2013
25
Business review continued
“ Our Code of Conduct
is designed to promote
understanding of, and
adherence to, the ethical
behaviours that we expect
of all employees.”
Louise Makin
Chief Executive Officer
26 Business review
Business review
BTG plc Annual Report and Accounts 2013
There are increasing societal pressures
on healthcare companies to change
their practice in areas such as
publication of all clinical trial data,
access to medicines and treatments in
poorer communities, patient strategies
and the focus of development activities.
We are guided by our values and Code
of Conduct, and we have made being a
good corporate citizen one of our four
medium-term corporate priorities. We
are a small company in comparison to
the major pharmaceutical and device
companies. We are therefore unlikely
to lead change, and our approach is to
monitor such developments and make
changes where appropriate and
practicable for us.
Key performance indicators and
corporate priorities
The key financial indicators we use
to monitor performance are: revenue,
gross margin, underlying operating
profit and cash management. Similar
financial indicators are used in the
Group’s annual bonus scheme (see the
remuneration report on pages 63 to 81).
BTG’s corporate medium-term goals are
grouped into four categories: financial;
delivering products for our customers
and other stakeholders; enhancing
internal processes and capabilities;
learning and growth. Many of the
objectives span a number of annual
reporting periods. We will report
progress against each goal annually.
Corporate objectives
Progress in 2012/13
Financial management
IAchieve revenue, gross margin,
profit and cash targets.
IDelivered revenue of £233.7m
(11/12: £197.0m); gross margin
of 71% (11/12: 71%); underlying
operating profit of £69.0m
(11/12: £54.0m); generated
£46.8m of cash (11/12: £43.1m).
Delivering products for our key
stakeholders
I Submit PEM US NDA and prepare for
commercial launch.
IBuild a leading position in the
interventional oncology space.
IMaintain leadership in antidote/rescue
IPEM US NDA accepted for review.
ITransition to direct US sales of
interventional oncology products fully
executed and clinical development
strategy defined.
therapies and expand Specialty
Pharmaceuticals business.
IIdentify and acquire new products to
IStrong performance; Voraxaze®
launched nationwide in the US.
IAcquisition targets identified and
complement existing franchises.
progressed.
Internal processes/capabilities
IFocus R&D activities to best support
growth in Interventional Medicine and
Specialty Pharmaceuticals businesses.
IBe an excellent corporate citizen by
embedding compliance, quality and
EHS in all activities.
Learning and growth
IEnhance capabilities and capacity to
support growth plans.
IR & D reorganisation – innovation
function created.
ILaunched investigator-initiated study
policy; launched several Good Practice
training initiatives.
INew hires made in commercial,
quality, development, technical.
IDefine and implement global
IStrategy defined and implemented;
manufacturing strategy to efficiently
support current business and deliver
on growth strategy.
training modules launched.
Financial review
BTG has continued with its track record
of delivering strong fi nancial results.
Revenue has grown by 19% to £233.7m
refl ecting the transition to direct sales of
LC Bead™ in the US, the growth of the
Zytiga® royalty stream and another
successful year from the Specialty
Pharmaceuticals products.
Gross margin of 71% is inline with prior
year as the positive impact of selling
LC Bead™ directly in the US is offset by
a reduction in margin from Licensing &
Biotechnology following the receipt of
fi nal royalties from BeneFix®.
Operating profi t of £25.7m compares to
£19.9m in the prior year. Operating profi t
excluding acquisition adjustments and
reorganisation costs has grown by 28%
to £69.0m.
Interventional Medicine
The Interventional Medicine operating
segment represents the portfolio of
Beads and Brachytherapy products.
Revenue of £36.1m (11/12: £28.7m)
refl ects the fi rst full year of selling LC
Bead™ directly in the US. This generated
gross profi t of £30.5m (11/12:
£20.1m), an increase of 52% on the
prior year. The gross margin was 84%
(11/12: 70%). Prior year cost of sales
includes the fi nal release of a fair value
uplift adjustment to inventory recognised
upon acquisition of £2.1m. Excluding
this adjustment, the prior year gross
margin was 77%.
The increase in SG&A to £17.5m
(11/12: £13.3m) refl ects the full year
run-rate of having the direct sales force
in the US.
The Group generated £46.8m of cash,
resulting in cash and cash equivalents,
together with cash on fi xed-term
deposits of £158.7m at 31 March 2013
(31 March 2012: £111.9m).
Overall profi t contribution margin from
this operating segment has increased
to 36% (11/12: 24%; 31% excluding
fair value acquisition adjustments).
Specialty Pharmaceuticals
The Specialty Pharmaceuticals operating
segment has delivered a strong trading
performance during the year. Revenue of
£97.2m is 27% above the prior year total
of £76.7m. This is principally due to a
fi rst full year of commercial sales from
Voraxaze® and to strong performances
from both CroFab® and DigiFab®, with the
latter benefi tting from geographic
expansion and a price increase.
Gross margin at 78% (11/12: 76%),
which is broadly inline with prior year
and with our ongoing expectations for
this operating segment, generated
£75.6m of gross profi t (11/12:
£58.0m). After deducting selling, general
and administrative (SG&A) expenses of
£20.2m (11/12: £18.6m) this segment
generates a profi t contribution of
£55.4m (11/12: £39.4m) refl ecting a
57% operating margin (11/12: 51%).
Licensing & Biotechnology
The Licensing & Biotechnology operating
segment principally includes revenues
from the Group’s licensed portfolio of
intellectual property. Revenue is split
between recurring income from royalties
from products already being sold by
licensees and one-off income relating
to milestones.
2013
£m
91.8
Recurring revenue
Milestones and one-offs 8.6
100.4
2012
£m
80.5
11.1
91.6
Recurring revenue includes royalties from
Zytiga® of £49.9m (11/12: £18.6m),
the Two-Part Hip Cup of £13.3m
(11/12: £13.0m) and BeneFIX® of
£14.0m (11/12: £29.4m).
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Rolf Soderstrom
Chief Financial Offi cer
Read more about our strategy
www.btgplc.com/about-us/strategy
Our latest share prices
www.btgplc.com/investors/share-price-data
Business review
Financial review
BTG plc Annual Report and Accounts 2013
27
Research and development
The Group’s investment in research and
development activities during the year
was £41.2m, slightly above the prior
year total of £39.7m. Activities during
the year have continued to focus on
PEM, with the NDA submission and
Chemistry, Manufacturing and Controls
activities being the major work streams,
and the continued investment in relation
to the Bead products to support
investigator-led studies and the
progression of our novel pre-loaded
Beads towards regulatory submissions.
Operating profit
Before acquisition adjustments and
reorganisation costs the Group delivered
a 28% increase in underlying operating
profit from £54.0m to £69.0m. The key
driver of this improvement in operational
performance is an additional £16.7m of
profit contribution from the three
operating segments as described above.
Foreign exchange gains of £3.1m were
recorded in the year compared to gains
of £2.6m in the prior year. Asset
impairment charges of £1.8m were
recognised against fixed assets used in
the manufacture of AZD9773 during the
year following termination of the licence
agreement by AstraZeneca. In the prior
year, impairment charges of £3.0m were
recognised against the carrying value of
fixed assets used in the manufacture of
Novabel® following termination of the
licence agreement by Merz.
The final Factor IX patent relating to
BeneFix®expired in March 2011 and
BTG continued to receive royalties on
sales of inventory held by Pfizer at the
patent expiry date. The receipt of
£14.0m in the current year represents
the final royalty payment from Pfizer.
Milestones and one-offs in the year
relate to AZD9773. The release of
deferred income of £6.1m (11/12:
£1.5m) was supplemented by a £2.5m
payment from AstraZeneca following
termination of the license. In the prior
year, in addition to the release of
deferred income in relation to AZD9773,
the approval of Zytiga® triggered two
milestones payments and deferred
income was also released in respect
GLP-1 licence that was terminated by
AstraZeneca in that year.
Gross margin at 60% is below the prior
year comparative of 68% due principally
to the lower level of income from
BeneFix®, which had a 90% margin.
Typically, royalty streams have onwards
obligations to the original inventors of
the product and the relative mix of
income between products influences
gross margin. This is expected to reduce
further next financial year as there will
be no income from BeneFix®.
SG&A includes the overheads specific to
the management of the royalty business
but also most centrally managed
support functions and corporate costs.
This has shown an increase over the
prior year due to selected investments
in central support functions to ensure
that the business is well positioned for
growth.
The overall contribution of this business
was £40.1m (11/12: £45.6m) reflecting
a margin of 40% (11/12: 50%).
Financial review continued
28 Business review
Financial review
BTG plc Annual Report and Accounts 2013
Acquisition adjustments and
reorganisation costs were £43.3m
(11/12: £34.1m). These include
underlying amortisation of acquired
intangible assets of £14.4m (11/12:
£18.3m), a charge of £22.5m (11/12:
nil) relating to impairment of the carrying
value of the AZD9773 contract with
AstraZeneca that was terminated during
the year, and other impairment charges
totalling £6.5m (11/12: £12.4m). In the
prior year impairment charges were
taken against the Group’s carrying
values of GLP-1 and Novabel®, two
assets acquired with Biocompatibles.
Net financial expense
Net financial expense of £1.6m (11/12:
income of £3.1m) includes interest
receivable on cash deposits of £1.1m
(11/12: £0.7m) and a loss on the
mark-to-market of foreign exchange
forward contracts of £2.6m (11/12:
£1.5m). Also included in the prior year
comparative is net financial income of
£2.9m, relating to the writeback of a
loan from Merz in relation to Novabel®
manufacturing fixed assets, and the
writeback of £1.1m in relation to the
Contingent Value Notes issued to certain
Biocompatibles shareholders upon
acquisition which was not payable.
Profit before tax
The Group’s profit before tax, which
increased by £1.1m to £24.1m (11/12:
£23.0m), was adversely impacted by the
impairment charge taken against
AZD9773.
Tax
The tax charge for the year is £7.7m
(11/12: £8.4m). This reflects an
effective tax rate of 32% (11/12: 37%).
Current tax is £4.1m (11/12: £3.9m)
and deferred tax is £3.6m (11/12:
£4.5m). Current tax principally arises in
the UK, where the Group has incurred
corporation tax of £3.6m during the year.
The deferred tax charge reflects the
utilisation of tax losses recognised on
the balance sheet offset by a deferred
tax credit arising from the amortisation
and impairment of intangible assets.
Earnings per share
Basic earnings per share was 5.0p
(11/12: 4.5p) on profit after tax of
£16.4m (11/12: £14.6m). Adjusted
earnings per share, excluding acquisition
adjustments and restructuring costs,
increased by 3.1p to 14.5p.
Balance sheet
Non-current assets have reduced
from £331.5m at 31 March 2012
to £302.4m at 31 March 2013.
Amortisation, depreciation and
impairment charges total £50.0m in
the year to 31 March 2013, including
the impairment charges recognised in
relation to AZD9773 (£22.5m within
intangible assets and £1.8m within
property, plant and equipment).
Additions to non-current assets were
£10.2m, including £3.0m in relation to
our Farnham manufacturing site. The
retranslation of assets denominated in
foreign currencies added a net £6.4m to
the carrying value in the balance sheet.
Underlying operating profit
£69.0m 12/13
£54.0m
11/12
“ The Group delivered a
28% increase in underlying
operating profit.”
Rolf Soderstrom
Chief Financial Officer
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BTG plc Annual Report and Accounts 2013
29
Financial review continued
30 Business review
Financial review
BTG plc Annual Report and Accounts 2013
The Group’s defined benefit pension
scheme, as measured under IAS19 –
Employee Benefits, has changed from
a £0.1m liability at 31 March 2012 to
an asset of £4.7m at 31 March 2013,
which has been recorded within
non-current assets. The movements
in this position are due to Company
contributions during the year of £5.1m
plus an actuarial gain of £0.1m offset by
an income statement charge of £0.4m.
The actuarial deficit at 31 March 2010,
the date of the last formal actuarial
valuation and measured in accordance
with guidelines set by the Pensions
Regulator, was £13.9m. The next formal
actuarial valuation will be measured as
at 31 March 2013. The results of this
valuation exercise, undertaken by the
Trustees of the scheme, are expected
in 2014.
Within current assets, cash, cash
equivalents and held to maturity
financial assets (fixed-term cash
deposits) have increased by £46.8m to
£158.7m (31 March 2012: £111.9m)
and trade and other receivables have
increased by £14.4m to £54.5m
(31 March 2012: £40.1m). The increase
in receivables is principally due to higher
royalty accruals at 31 March 2013 in
relation to Zytiga® in particular and also
to the business’s overall increase in
sales leading to higher trade receivable
balances than at 31 March 2012.
Subsequent to the year end, the Group
signed a £60m multi-currency revolving
credit facility providing access to funds
for a period of three years to April 2016.
The Group’s total liabilities have
increased by £8.7m to £108.3m at
31 March 2013 (31 March 2012:
£99.6m). There has been an increase
in the net deferred tax liability of £6.6m
as the rate of utilisation of tax losses
(which reduces the amount of deferred
tax asset that can be applied against
the deferred tax liability recognised on
business combination intangible assets)
has been faster than the reduction in the
deferred tax liability that occurs inline
with the amortisation of intangible
assets. Trade and other payables have
increased by £1.7m, primarily
representing additional revenue sharing
accruals (due to higher levels of royalty
income) offset by the release of deferred
income on AZD9773. The fair value of
the Group’s forward contracts as at
31 March 2013 was a liability of £2.2m
compared to an asset of £0.5m at
31 March 2012. Other movements within
liabilities are a reduction in tax accruals
of £0.9m due to payments made on
account by the Group during the year and
a reduction in provisions of £0.8m.
Cash flow
The Group has continued its track record
of strong cash generation during the
year, with closing cash and short-term
deposits at 31 March 2013 of £158.7m,
an increase of £46.8m over the prior
year closing position of £111.9m.
Operating profit of £25.7m (11/12:
£19.9m) has generated a net cash
inflow from operating activities of
£61.0m (11/12: £48.3m). The principal
reconciling items are non-cash income
statement charges of £54.6m (11/12:
£40.7m); a net cash outflow from
working capital balances of £14.7m
(11/12: £7.5m) and contributions made
to the Group’s defined benefit pension
fund of £4.6m (11/12: £4.8m).
The working capital outflow is principally
due to an increase in royalty accruals
relating to Zytiga®.
The Group has invested £10.2m
(11/12: £9.7m) in capital expenditure,
securing the building within which both
the Bead products and PEM are
manufactured and investing in the
required equipment for the secondary
manufacture of PEM. Also included
within investing activities is the purchase
of EU rights to Wellstat’s UTA product for
an initial payment of $3.0m. In the
prior year the Group purchased the US
commercial rights to the same product
for an initial payment of $7.5m.
Tax payments of £5.5m (11/12: £1.1m)
have been made, principally in the UK as
profits in this jurisdiction have arisen in
statutory entities where tax losses do
not fully offset profits.
Summary and outlook
The Group delivered a strong financial
performance during the year with
revenues, underlying profitability and
cash generation all increasing
substantially. We also made significant
progress with key operating goals of
advancing our pipeline and building
our capabilities.
Specifically, we intend to invest in a third
specialist sales team to support our
PEM product, which we anticipate could
be approved and launched in the first
half of 2014. We also plan to initiate a
number of clinical studies to support
expansion of the approved uses of our
Bead products.
A core part of our strategy is to acquire
products and programmes: we continue
to review opportunities and we are in a
strong position financially and in terms
of capabilities to expand our portfolio
with complementary products.
Overall, the business is in good shape:
we have the financial resources,
capabilities and opportunities to enable
us to continue building value and to
deliver further profitable growth.
“ The Group has delivered
a strong financial
performance during
the year. We have the
resources, capabilities
and opportunities to
continue to build value
in the business.”
Louise Makin
Chief Executive Officer
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BTG plc Annual Report and Accounts 2013
31
Principal risks and
uncertainties
Our performance and prospects may
be affected by risks and uncertainties
relating to our business and operating
environment. Our internal controls
include a risk management process to
identify key risks and, where possible,
manage the risks through systems and
processes and by implementing specific
mitigation strategies.
The most significant risks identified
in an annual update of the Group’s risk
register that could materially affect
the Group’s ability to achieve its financial
and operating objectives are
summarised in this section. Other risks
are unknown or deemed less material.
32 Business review
Principal risks and uncertainties
BTG plc Annual Report and Accounts 2013
Risk:
Interruption to
product supply
Risk:
Patent invalidity, patent
infringement litigation and
changes in patent laws
Impact:
BTG can be subject to patent challenge at any
time. Challenges can relate to the validity of
BTG’s patents or to alleged infringement by
BTG of intellectual property rights of others,
which might result in litigation costs and/or
loss of earnings. BTG might be obliged to
sue third-parties for their infringement of its
patents in order to protect revenue streams.
Failure by BTG to maintain or renew key
patents might lead to losses of earnings and
liabilities to licensees or licensors. BTG may
not be able to secure the necessary
intellectual property rights in relation to
products in development, limiting the
potential to generate value from these
products. Changes in patent laws and other
intellectual property regulations in territories
where BTG or its licensees conduct business
that make it more difficult or time-consuming
to prosecute patents, or which reduce the
available term of granted patents or periods
of market exclusivity protection, could
adversely impact the Group’s financial
performance.
BTG’s patent portfolio is currently subject
to several challenges.
Mitigation:
Dedicated internal resource supplemented
by external expertise monitors patent
portfolios, third-party patent applications
and intellectual property rights; development
and implementation filing, defence and
enforcement IP strategies; robust processes
in place to automate patent renewals;
internal controls established to avoid
disclosure of patentable material prior to
filing patent applications.
Change in 2012/13:
None.
Impact:
BTG relies on third-party contractors for the
supply of many key materials and services,
such as filling and freeze-drying of end
products. These processes carry risks of
failure and loss of product. Problems at
contractors’ facilities may lead to delays and
disruptions in supplies. Some materials and
services may be available from one source
only and regulatory requirements make
substitution costly, time-consuming or
commercially unviable. BTG’s polyclonal
antibody products rely on serum produced
from our sheep flocks in Australia, which
could be subject to disease outbreaks or fire.
BTG relies on its single site in Wales for
supply of manufactured antibody products,
with the consequent possibilities for
disruption to supplies. BTG manufactures
its own Bead and Brachytherapy products
at single sites in Farnham, UK, and Oxford,
CT, USA, respectively, with the consequent
possibilities for disruption to supplies.
BTG plans to undertake the manufacture
of PEM at its Farnham site, requiring the
completion of new manufacturing facilities
to meet the requirements of Good
Manufacturing Practice. This site will require
regulatory approval and a licence to support
the commercialisation of PEM. Any delay in
completion of this facility or obtaining the
necessary manufacturing licences may result
in a delay in the approval of PEM reducing
future earning potential. The continuity of
potential PEM revenues will also be subject
to single source risk.
Mitigation:
Rigorous monitoring of suppliers; dual
sourcing implemented where practicable;
inventories maintained and monitored
through sales and operational planning
process and production changes
implemented where needed to ensure
continued product supply; rigorous quality
control procedures in place; regular checks
made on sheep flock health; disaster
recovery plans under regular review.
Change in 2012/13:
PEM has been transferred to our Farnham
site with a successful UK regulatory
inspection completed.
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Risk:
Product liability and other
key risks may not be
capable of being adequately
insured
Impact:
The manufacturing, testing, marketing and
sale of BTG’s products involve significant
product liability. As the developer,
manufacturer and/or seller of certain
products, BTG may be held liable for death
or personal injury to persons receiving the
products during development or after the
product is approved.
Mitigation:
BTG maintains product liability insurance
and operates quality systems relating to
the manufacture of its products and a
pharmacovigilance system to monitor
safety events arising with respect to products
sold. It may not be commercially viable to
adequately insure against the occurrence
of other key risks.
Change in 2012/13:
None.
Risk:
Patent expiry, competition
may reduce current
revenues
Impact:
BTG’s key current royalty-generating products
are expected to continue to provide royalty
revenues until their patents or licence
agreements expire. Any unforeseen patent
loss, supply, safety or compliance issues
with these products could result in premature
cessation of the revenues. BTG earns
revenues from sales of its Acute Care
products CroFab®, DigiFab® and Voraxaze®.
CroFab® is patent protected but DigiFab® and
Voraxaze® have no patent protection at this
time; CroFab® and DigiFab® are protected by
significant know-how and complex
manufacturing processes and BTG expects
revenues to continue regardless of patent
protection. However, future competition
cannot be ruled out and competing products
could materially adversely impact BTG’s
financial results. Instituto Bioclon has
announced the completion of a Phase III
clinical trial of a potential competitor product
to CroFab®. BTG also earns revenues from
sales of its bead and brachytherapy products,
all of which are subject to competition. While
these medical devices benefit from patent
protection certain patents are subject to
challenge.
Mitigation:
New royalty streams may emerge. For
example, following expanded regulatory
approval in the US and elsewhere of Zytiga®
as a treatment for men with advanced
prostate cancer during 2012, this has
become BTG’s largest royalty stream;
additional future royalty streams would result
if alemtuzumab is approved to treat multiple
sclerosis. Mitigations with respect to the
bead products include product development,
geographic expansion, appropriate IP lifecycle
management and the conduct of clinical
studies to expand their indicated uses
and sales.
Change in 2012/13:
Zytiga® received approvals to treat
chemo-naïve prostate cancer patients
and royalty revenue increased significantly,
offsetting the final royalties received on
BeneFIX®.
Risk:
Failure to comply with
regulations may result in
product delays, failures,
regulatory actions and
financial penalties
Impact:
The pharmaceutical industry is highly
regulated and the Group must comply with
a broad range of regulations relating to the
development, approval, manufacturing and
marketing of its products. This is particularly
true in the US, from which the Group derives
most of its revenues and where the Group
has established its own sales and marketing
operations. Specific requirements relating
to quality assurance apply to the Group’s
manufacture of products, particularly in the
pharmaceutical area. Regulatory regimes
are complex and dynamic, and alterations
to the regulations may result in delays in
product development, approval or withdrawal.
Ensuring compliance with such regulations
necessitates allocation of significant financial
and operating resources. Failure to comply
with certain rules, laws and regulations
may result in criminal and civil proceedings
against the Group. Significant breaches could
result in large financial penalties, which could
materially adversely impact the Group’s
financial performance and prospects.
Moreover, failure by BTG or a BTG partner
company to comply with regulations may
result in a product being withdrawn from the
market with a subsequent loss of revenues.
Mitigation:
A Code of Conduct has been established,
supported by a mandatory training
programme; robust compliance systems
are in place to ensure sales and marketing
activities comply with regulations in the US
and other territories; standard operating
procedures are in place to ensure compliance
with good clinical and manufacturing practice
and to manage pharmacovigilance
requirements, monitored through quality
control systems. Internal expertise is
maintained to manage these risks.
Change in 2012/13:
The Group had several regulatory inspections
at its various sites during the year which have
resulted in the Group needing to Conduct
assessments and undertake remedial
actions in relation to findings.
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Principal risks and uncertainties
BTG plc Annual Report and Accounts 2013
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Risk:
Inability to access new
products and programmes
may limit future growth
Risk:
The success of development
activities and market
acceptance is uncertain
Impact:
BTG conducts limited fundamental
research to generate its own development
programmes but instead seeks to acquire
new products and late-stage development
programmes from other organisations.
There is significant competition from other
companies also seeking to acquire new
products and programmes who may have
greater financial resources and sales and
marketing reach than BTG. BTG may not
be able to acquire suitable products and
programmes, which will materially adversely
impact the Group’s financial future
performance and growth prospects.
Mitigation:
Dedicated product acquisition team in place;
strategy is to focus on niche opportunities
that leverage BTG’s US commercial
operations and those that may be a better fit
with BTG than with other organisations.
Development teams working to develop
follow-on products from existing technology
platforms such as embolisation beads.
Change in 2012/13:
Strategy to expand the approved uses of
Bead products outlined during the year.
Impact:
The development of medical products and
medical devices is inherently uncertain and
the timelines and costs to approval may vary
significantly from budget or expectation. The
product may not demonstrate the expected
safety and efficacy benefits and may not
be approved by regulatory bodies, such
as the US Food and Drug Administration.
Manufacturing difficulties or patent litigation
may cause programmes to be delayed or
halted or products withdrawn. Failure of a
late-stage programme such as PEM would
materially adversely impact the Group’s
financial prospects. Regulatory approval
requirements may change, resulting in further
uncertainty. Even if a product is approved that
is no assurance of commercial success.
Mitigation:
Experienced development team in place;
focus is on acquiring late-stage programmes
that have already demonstrated proof of
concept and potentially have lower-risk
development pathways; development
programmes monitored to identify risks and
challenges and recommend mitigating and
corrective actions. Certain products are
licensed to other companies who may have
greater resources to support product
development. Regulatory team in place,
consultation undertaken with applicable
regulatory authorities.
Change in 2012/13:
None.
Principal risks and
uncertainties continued
34 Business review
Principal risks and uncertainties
BTG plc Annual Report and Accounts 2013
Risk:
Competition may erode
revenues
Risk:
Pricing and reimbursement
pressures are increasing
Risk:
Currency and treasury
effects can adversely
impact results
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Impact:
Many of BTG’s revenues and receipts are
denominated in US dollars and movements
in foreign exchange rates could adversely
impact results.
Mitigation:
BTG actively manages its exchange risks
where feasible, using short-term hedging
transactions guided by market expectations
and economic forecasts to seek to match
actual receipts and payments over a rolling
12-month period to those forecast. This
policy can result in both exchange gains and
losses but provides a level of certainty over
cash receipts.
Change in 2012/13:
None.
Impact:
The Group operates in competitive markets.
The products on which BTG currently earns
revenues, or from which it anticipates
earning revenues once on the market,
face competition from other products that
are already approved or in development.
Competing products may have superior
efficacy and side effect profiles, cost less to
produce or be offered at a lower price than
BTG’s products; such competition could
materially adversely impact Group revenues.
Mitigation:
BTG focuses on niche opportunities,
addressing specialist markets where there
is limited competition and high barriers to
entry; CroFab® and DigiFab® have no current
competitors; both products are complex to
manufacture. We seek to differentiate the
embolisation and drug-eluting Bead products
by supporting a range of clinical studies to
generate safety and efficacy data to expand
their indicated uses.
Change in 2012/13:
None.
Impact:
There is increasing pressure on healthcare
budgets causing payers to demand
increasing treatment and economic benefits
before agreeing to reimburse product
suppliers at all or at appropriate prices.
In March 2010, healthcare reform legislation
was adopted in the US, requiring
manufacturers to increase the rebates or
discounts they give on products reimbursed
or paid for by public payers, including
Medicaid and Medicare. The purpose of the
reform is to increase healthcare coverage in
the US population and to manage treatment
of chronic conditions efficiently and cost
effectively. Management of acute conditions
is generally not affected. BTG’s Acute Care
and interventional oncology products treat
serious medical conditions and the impact of
existing healthcare reform on current Group
revenues is not expected to be material to
the Group’s financial position. If BTG acquires
products in future that are more impacted by
healthcare reforms, revenue expectations
could be lower. Failure of a product to qualify
for government or health insurance
reimbursement or the failure to achieve an
appropriate sales price could adversely
impact the Group’s financial performance.
Future healthcare reforms may become more
onerous and may have a negative impact on
Group revenues.
Mitigation:
BTG focuses primarily on niche products that
address serious unmet needs; early on in a
product’s development, the Group conducts
pricing and reimbursement studies; the
assessments of potential new products will
include an assessment of healthcare reforms
on pricing and reimbursement.
Change in 2012/13:
None.
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BTG plc Annual Report and Accounts 2013
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Corporate
responsibility report
Environmental, social and governance issues are key
considerations in all of the decisions that we make.
This helps us to reduce risk, save money and build
stronger relationships with our customers, all of which
are essential elements in building a sustainable and
successful business.
As our business grows we will encounter new
challenges so it is vital that we review the impact of
our activities regularly and aim to do the right thing.
We focus our activities
in five key areas which we
believe are most relevant
to our business and
address our principle
business impacts.
Areas of focus
1. Business ethics
2. Research and
development
3. Suppliers and customers
4. People and communities
5. Environment
In this report we provide an overview
of our achievements during the
year, disclose our non-financial key
performance indicators and provide a
progress report on targets in each of
our five focus areas. We also disclose
our aims and objectives for the
upcoming year.
Read more about corporate
responsibility online:
www.btgplc.com/responsibility
36 Business review
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BTG plc Annual Report and Accounts 2013
FTSE Group confirms that BTG has been
independently assessed according to the
FTSE4Good criteria, and has satisfied the
requirements to become a constituent of
the FTSE4Good Index Series.
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BTG is a constituent of the Kempen
SNS SRI Universe, which indicates that
we have passed stringent criteria and
can be considered a company that
demonstrates a clear strategy towards
corporate responsibility.
1. Business ethics
Code of Conduct
Our Code of Conduct provides guidance
on the ethical behaviours that we expect
from all of our employees. It describes
the principles, policies and procedures
that we have developed. The core
principle is that every one of us must
take individual responsibility for
behaving ethically and compliantly and
that we are each accountable for our
actions. It is regularly updated to reflect
changes in legislation and best practice
and annual training is a mandatory
requirement for all employees.
The responsible and ethical
commercialisation of our products is
essential to what we do. During the
last year we further standardised and
embedded the processes we use to
review and approve promotional
materials and external requests for
financial support. We also provided
greater visibility in our interactions
with healthcare professionals utilising
monitoring and auditing techniques
to identify areas of non-compliance
with our policies.
Anti-bribery and corruption
Our expanding international commercial
activities mean that we operate in parts
of the world where bribery and corruption
are still prevalent. We take a zero-
tolerance approach to this illegal activity
and we are committed to implementing
and enforcing effective systems to
counter it. Our anti-bribery and anti-
corruption policy provides a useful
reference guide for employees and we
engage the services of an agency to
assist us with global anti-bribery
compliance assessments. During the
last year, in an effort to ensure that our
business partners share our values,
we completed due diligence, per our
policies, on third-parties who conduct
business on behalf of BTG.
Human rights and anti-slavery
BTG adheres to numerous international
standards including the United Nations
Universal Declaration of Human Rights.
We are developing a human rights policy,
defining a company-wide standard
for human rights, consistent with
internationally recognised standards
and aim to complete this activity in the
new financial year.
2. Research and
development
Animal research
Our Animal Ethics Committee meets
regularly to review the use of animals
at BTG, both in animal research and in
the production of our products. Animal
welfare is always a key consideration in
the decisions that we make. During the
last year we updated our animal ethics
and welfare standard and have audited
relevant sites to demonstrate
compliance. All research study contracts
that involve animals are awarded to
companies and facilities that employ,
standards, policies and procedures,
equivalent to the BTG standard.
Alternatives to in vivo animal testing
are always assessed and in vitro testing
performed as an alternative wherever
possible. Proper account is taken of all
possibilities for reduction, refinement or
replacement and high standards of
animal husbandry are required.
Clinical trials
We perform all of our clinical trials in
accordance with the listed directives,
applicable laws and the global standards
of good practice. During the last year we
updated and relaunched our internal
procedures to evaluate and respond to
any serious adverse events which occur
in our clinical trials. We also finalised
and launched an investigator-initiated
study policy and standard operating
procedure, and provided improved
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BTG plc Annual Report and Accounts 2013
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Corporate responsibility
report continued
“Taking everything into account, I would
say that this is a great place to work.”
70% agree
66% agree
12/13
10/11
Charitable contributions made
by the Group during the year
£15,201 12/13
£5,989
11/12
38 Business review
Corporate responsibility report
BTG plc Annual Report and Accounts 2013
transparency on the grant support
process. During the last year we also
launched mandatory training for all
relevant employees on Good Practice
(GxP), including Good Laboratory
Practice (GLP), Good Clinical Practice
(GCP) and Good Manufacturing Practices
(GMP).This has all been completed apart
from GLP training which we aim to
complete during the next financial year.
3. Suppliers and customers
Suppliers
This year we created a dedicated
procurement function and launched a
new responsible supply chain policy,
including written supplier requirements.
The results of the assessment are used
by us to help identify potential risks
associated with human rights, and to
inform the supplier selection process.
We provide information, instruction and
training to our employees directly
involved in the selection of new suppliers
and ongoing management of existing
suppliers. This training covers
responsibilities for ensuring ethical
business practices. Our business
partner contracts ensure that all work
conducted by business partners on our
behalf is in accordance with all
applicable laws, regulations, governmental
requirements and industry guidelines.
Customers
We aim to forge good relationships with
the specialist physicians who use our
products. Examples of activities to
support this include sponsorship of
educational initiatives and providing
funding to explore the use of our
products. With respect to these activities
and when promoting our products to
customers, we abide by all relevant
regulations. Compliance training is
mandatory for all employees.
During the year we made progress
establishing a Standard Operating
Procedure to make unlicensed medicinal
products available for compassionate
use in the situation where there is no
distributor in place and aim to finalise this
initiative during the next financial year.
4. People and communities
Employee engagement and well-being
During 2012 we conducted our second
biennial employee engagement survey
with the Great Place to Work Institute® to
provide global and local measurements
of employee satisfaction and
engagement.
Our global score has improved compared
to two years ago despite significant
change, including integration of the
Biocompatibles business. Local groups
have been formed to engage with
employees and tackle any local issues
which arose from the survey.
We operate a number of Employee
Assistance Programmes (EAP) in
territories where we have operations,
to protect and enhance employee
satisfaction, mental and physical health.
We also believe that this contributes to
the retention and productivity of our
employees. These free services provide
employees and their families with
practical information and advice
concerning a range of topics affecting
health, family, money matters and work.
Training and development
Continuous learning is one of our
company values as we recognise that
enhancing our capabilities will support
our future growth. Every employee has a
training and development plan and there
is an annual Learning and Development
agenda for all employees, encompassing
a range of core skills and mandatory
training, IT training, EHS training, and
Management development. We
incentivise and reward values-based
behaviour by including a values-based
assessment as part of our annual
employee appraisal process.
Charitable giving
We implemented our new global
Charitable Giving Policy during the year
and we focus our activities on corporate
charities that are relevant to our
business or local to our offices and
facilities. A number of events were
organised during the year to raise money
for our charities including a number of
walk-a-thons, a relay for life and a
treasure Hunt in the City of London.
More information on each of these is
available on our corporate website.
We encourage employees to support
events to raise money for their chosen
charities and we match individual
donations up to a cap of £250. In the
UK we also operate a Give As You
Earn Scheme.
During the last year we made donations
to a number of charities. A full list of
these are available on our website.
In addition to the £15,201 of charitable
contributions made by the Group during
the year, BTG made a one-off donation
of £125,000 to establish the BTG Junior
Research Fellowship in the Biosciences
at Lincoln College, Oxford, a registered
charity. This position, which runs in
perpetuity, recognises the long-standing
relationship between BTG and the
Sir William Dunn School of Pathology,
Lincoln College, including the
contribution made by the ‘Factor IX
protein’ patent originally filed by
inventors at the School in 1985 and
licensed by BTG. This led to the
commercial production of BeneFIX®,
a Factor IX protein free of contamination
by viruses such a HIV or Hepatitis C virus
for treatment of Haemophilia B patients.
5. Environment
Health and Safety
Last year we launched our global
Environmental, Health and Safety Policy
and provided training for all employees.
A corporate auditing system of all sites
commenced in 2012. Audits will be
undertaken periodically, against our
Environmental Health and Safety Policy
and the underpinning standards.
We report our global accident rate
as the number of lost days per
100,000 worked.
Sustainability
Managing our resources is an essential
part of our commitment to becoming
more sustainable as a business. As a
growing business, we do expect our
resource usage to increase in absolute
terms, hence our approach is to control
growth through various initiatives.
During the last year we built a global
environmental management system
and applied the Global Reporting
Initiative (GRI) Sustainability Reporting
Guidelines. Further information on this
is accessible in the Responsibility
section of our website.
We measure water consumption at four
of our production sites and implement
water saving measures wherever
possible to aid efficiency.
We measure waste produced from all of
our production sites. As production has
increased over the last year our total
waste has increased. We aim to recycle
as much as possible and reduce landfill
over the longer term.
Lost time accident rate per
100,000 hours worked1
1.17 days
1.29 days
12/13
11/12
1 This includes all accidents where one or more
days are lost. UK companies usually only
report when three or more days are lost. Also
includes accidents where people have
returned to work and were given alternative
duties as they were not able to fulfil their
normal roles.
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Water consumption at production sites1
20,406m3 12/13
21,430m3
11/12
1 Water consumption measured at our sites
in Australia, Wales, Oxford and Farnham.
Waste from our production sites (tonnes)
1,573t
872t
12/13
11/12
Waste from our production sites (tonnes)
3
2
1
2012/13
1. Recycled
2. Hazardous Waste
508t (32%)
(incineration/treatment) 309t (20%)
756t (48%)
3. Landfill
2011/12
1. Recycled
2. Hazardous Waste
345t (40%)
(incineration/treatment) 200t (23%)
327t (37%)
3. Landfill
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Energy Efficiency
We regularly assess the environmental
impact of our business to ensure
that we’re taking advantage of all
opportunities to improve our performance
and efficiency.
We operate an international supply chain
for the manufacture of our products
and we aim to transport in bulk where
possible and use the most efficient
transportation to save money and
reduce our carbon emissions.
We monitor electricity and gas
consumption at manufacturing sites
and offices which employ more than
20 people, and we try to reduce our
carbon emissions and increase
energy efficiency wherever possible.
We participate in CDP, the Carbon
Disclosure Project.
This year we have started to measure
MwH of electricity produced per
production unit and kg CO2 produced
per production unit. We aim to increase
operational efficiency and reduce kg CO2
per production unit over the longer term.
Corporate responsibility
report continued
Electricity consumed
6,451 MwH1 12/13
6,441 MwH1
11/12
1 Data from all operational sites with more
than 20 employees, excludes transport.
MwH electricity per production unit
during 2012/13
0.33
MwH per production unit
192,658 Total production units
CO2 equivalent emissions generated
5,687 tonnes1
4,573 tonnes1
1 Conversion factors used: Environment
12/13
11/12
Agency 2012.
Kg CO2 per production unit during
2012/13
30
Kg CO2 per production unit
192,658 Total production units
CO2 equivalent emissions generated
3
2
1
2012/13
1. Purchased Electricity
2. Oil Heating
3. Gas Heating
3,578t (63%)
686t (12%)
1,423t (25%)
2011/12
1. Purchased Electricity
2. Oil Heating
3. Gas Heating
3274t (72%)
676t (14%)
623t (14%)
40 Business review
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BTG plc Annual Report and Accounts 2013
Directors and
governance
Directors and governance
42 Board of directors
44 Directors’ report
48 Corporate governance
57 Audit Committee report
61 Nomination Committee report
63 Remuneration Committee report
82
83
Statement of directors’ responsibilities
Independent auditor’s report
to the members of BTG plc
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Board of directors
What are the responsibilities
of the Board?
Our Board of directors are employed to
ensure the Company’s prosperity by
directing the Company’s affairs. They are
not only responsible for governing the
Company but are ultimately accountable
to our shareholders for our activities,
strategy and performance. Each year we
hold an Annual General Meeting at which
the directors must provide a report to
shareholders on the performance of the
business, what its future plans and
strategies are and also submit
themselves for re-election to the Board.
Key to Committees
Audit Committee
Remuneration Committee
Nomination Committee
1 Committee Chairman
Board composition
Executive
Non-executive
2
6
Male
Female
6
2
01
03
05
07
42 Directors and governance
Board of directors
BTG plc Annual Report and Accounts 2013
02
04
06
08
01 Garry Watts FCA MBE
1
Chairman
02 Louise Makin MA PHD (CANTAB) MBA
Chief Executive Officer
Appointed to Board January 2012
Appointed to Board October 2004
External appointments Chairman of Spire Healthcare, deputy
Chairman of Stagecoach Group plc and non-executive director
of Coca-Cola Enterprises, Inc.
Previous experience Until December 2010, Garry was for seven
years CEO of SSL International plc and before that its CFO. He is
also a former partner at KPMG. He was previously an executive
director of Celltech plc and of Medeva plc and a non-executive
director of Protherics PLC. Other roles have included 17 years
as a member of the UK Medicines and Healthcare Products
Regulatory Agency Supervisory Board.
External appointments Non-executive director of Intertek Group
plc and a Trustee of the Outward Bound Trust.
Previous experience From 2001, Louise was President,
Biopharmaceuticals Europe of Baxter Healthcare, where she was
responsible for Europe, Africa and the Middle East. Louise joined
Baxter Healthcare in 2000 as Vice President, Strategy &
Business Development Europe. Before joining Baxter, she was
Director of Global Ceramics at English China Clay and prior to
that she held a variety of roles at ICI between 1985 and 1998.
03 Rolf Soderstrom BA ACA
Chief Financial Officer
Appointed to Board December 2008
External appointments N/A
04 Giles Kerr FCA 1
Non-executive director
(Company’s Senior Independent Director)
Appointed to Board October 2007
Previous experience Rolf Soderstrom, joined BTG from Protherics
PLC, where he was Finance Director from August 2007. From
2004, he was a Divisional Finance Director of Cobham plc,
managing a portfolio of businesses across Europe and the USA.
From 2000 he was a Director of Corporate Finance at Cable &
Wireless plc. Prior to this, he worked in the Corporate Recovery
and Corporate Finance Department of PricewaterhouseCoopers
after qualifying as a Chartered Accountant.
External appointments Director of Finance with the University of
Oxford, UK, Director of Victrex plc, Elan Corporation plc and Isis
Innovation Ltd.
Previous experience Previously Giles was the Group Finance
Director and Chief Financial Officer of Amersham plc, acquired by
GE Healthcare in 2004. Prior to his role at Amersham, he was a
partner with Arthur Andersen in the UK. He is a graduate of the
University of York.
05 Melanie Lee PHD CBE FMEDSCI DSC (HONS)
Non-executive director
06 Ian Much
1
Non-executive director
Appointed to Board November 2010
Appointed to Board August 2010
External appointments Chief Executive Officer of Syntaxin
Limited, a Founder and Director of the pharmaceutical
consultancy Think10, and a non-executive director of
H Lundbeck A/S.
Previous experience Melanie was previously the Chair of Cancer
Research Technology and a Trustee and Deputy-Chair of Cancer
Research UK. During her career she has held a number of
positions at Glaxo, GlaxoWellcome, Celltech and UCB.
In 2008, Melanie was honoured with a CBE for her services
to Medical Science.
External appointments Non-executive director and the senior
independent director of Chemring Group PLC and Senior plc.
Previous experience Ian was Chief Executive of De La Rue plc
between 1998 and 2004 and Chief Executive of T&N plc
between 1996 and 1998. Previous non-executive director
appointments include Manchester United plc, Camelot plc
and Admiral plc.
07 Jim O’Shea
Non-executive director
08 Richard Wohanka
Non-executive director
Appointed to Board April 2009
Appointed to Board January 2013
External appointments Director of Zalicus Inc., Trevi
Therapeutics, Inc. and MAP Pharmaceuticals, Inc. and a former
Chairman of the US National Pharmaceuticals Council.
Previous experience From 2007 to 2008, Jim was Vice Chairman
of Sepracor, Inc., where he was also President and Chief
Operating Officer from 1999 to 2007. Previously he was Senior
Vice President of Sales & Marketing and Medical Affairs for
Zeneca Pharmaceuticals (US), a business unit of Zeneca Inc.
While at Zeneca, Jim held several management positions of
increasing responsibility in international sales and marketing
in the US and the UK.
External appointments Board member of the Nuclear Liabilities
Fund and of the charity United Response.
Previous experience Richard has more than 20 years’ experience
in building asset management businesses. He was CEO of Union
Bancaire Privée Asset Management between October 2009 and
June 2012, and from 2001 to 2009 he was CEO of Fortis
Investment Management.
Directors and governance
Board of directors
BTG plc Annual Report and Accounts 2013
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Directors’ report
The directors present their report together with the financial statements and the independent auditor’s report for the year ended
31 March 2013.
Principal activities and business review
The principal activity of the Group is the business of an international specialist healthcare company, focusing on three areas:
Specialty Pharmaceuticals, Interventional Medicine and Licensing & Biotechnology. The mission of the Group is to bring to
market medical products that meet the needs of specialist healthcare physicians and their patients. The results of the Group
are set out in detail on pages 86 to 90 and the accompanying notes.
The Company is required by the Companies Act 2006 to set out a fair and balanced review of the business, including the
performance and development of the Company during the year and at the year end and a description of the principal risks and
uncertainties it faces. This information is contained in the following statements and reports, which are incorporated into this
report by reference:
IThe Chairman’s Statement on pages 12 to 13, the Chief Executive Officer’s Review on pages 14 to 16 and the business review
on pages 17 to 26 provide details of the Group’s principal activities and strategy, its performance during the year and its
prospects for future development opportunities.
IDetails of the principal risks and uncertainties facing the Group are set out on pages 32 to 35.
IInformation relating to the environment, employees and stakeholders is set out in the corporate responsibility report on
pages 36 to 40.
This information is prepared solely to assist shareholders to assess the Company’s strategies, the risks inherent in them and
the potential for those strategies to succeed. The directors’ report should not be relied on by any other person or for any other
purpose. Forward-looking statements contained in this report have been made by the directors in good faith based on the
information available to them up to the time of their approval of this report and such statements should be treated with caution
due to the uncertainties, including economic and business risk factors inherent in them.
Further information about the Group is available on the Company’s website: www.btgplc.com. Notwithstanding the references
made in this Annual Report to the Company’s website, none of the information made available on the website constitutes part
of, or should be deemed to be incorporated by reference into, this Annual Report.
Results and dividends
The results for the year and the financial position at 31 March 2013 are shown in the consolidated income statement on page
86 and the consolidated statement of financial position on page 88. The directors do not recommend the payment of a dividend
for the year (11/12: nil). The results of the Group for the year are explained further on pages 27 to 31.
Directors and their powers and interests
The directors of the Company at the date of this report, together with their biographical details and dates of appointment, are
shown on pages 42 to 43.
Richard Wohanka was appointed as a non-executive director of the Board on 1 January 2013 following a comprehensive
recruitment process led by the Nomination Committee and external recruitment consultants. More information can be found in
the Nomination Committee report on page 61.
The Board confirms that each of the directors who served during the year, with the exception of Richard Wohanka, has been
appraised during the period. As Richard Wohanka had only recently joined the Company, it was considered too early for him to be
appraised. All the directors continue to demonstrate commitment to the Group, the Board and to their role.
Peter Chambré, who joined the Board in 2006, retired from the Board on 25 September 2012 and the Board wishes to formally
thank Peter for his significant contribution to the Company over that period.
In accordance with the UK Corporate Governance Code, all directors of the Company will stand for election or re-election
annually. The Board is proposing the election of Richard Wohanka, who has been appointed to the Board since the last AGM, and
the re-election of all the other directors.
44 Directors and governance
Directors’ report
BTG plc Annual Report and Accounts 2013
In accordance with the Company’s articles of association, throughout the year the Company has maintained insurance cover
for its directors and officers and those of its subsidiary companies under a directors’ and officers’ liability policy as permitted
by sections 232 to 235 of the Companies Act 2006. The Company has also, to the extent permitted by law, entered into
separate Deeds of Indemnity in favour of each of its directors to provide them with appropriate protection with respect to
potential liabilities arising from the discharge of their duties. Neither the insurance policies, nor the indemnities, provide
cover where the relevant director or officer is found to have acted fraudulently or intentionally breached the law.
Information on directors’ remuneration, contracts, options and their beneficial interests, including those of their immediate
families, in the shares of the Company are shown in the remuneration report on pages 63 to 81. None of the directors had
an interest in any contract of significance to which the Company or any of its subsidiaries was party during the year.
Corporate governance
A report on corporate governance may be found on pages 48 to 56.
Corporate responsibility
Information on the Company’s social, environmental, Health and Safety and ethical considerations, charitable donations
and policies regarding its employees may be found in the corporate responsibility report on pages 36 to 40.
Share capital and shareholders
As at 31 March 2013 the issued share capital of the Company was £32,827,687, divided into 328,276,871 shares of 10p
each. During the year the share capital increased by 984,006 shares due to the exercise and vesting of share awards by
employees and former employees under the Company’s employee share schemes. The Company has only one class of shares
and there are no restrictions on voting rights or on the holding or transfer of these securities.
Details of the movements in the Company’s share capital are shown in note 19 to the financial statements on page 117.
At 31 March 2013, the Company had 10,116 shareholders (2012: 10,727). Further details of shareholdings and Company
reporting dates may be found on page 142.
Under the terms of the acquisition of the Biocompatibles Group in January 2011, Biocompatibles shareholders were entitled to
receive 1.6733 new shares in the Company and either 10p cash or a Contingent Value Note (CVN). The CVN entitled the
recipient to participate in value that potentially could have been achieved from Biocompatibles’ programme to develop a GLP-1
analogue product known as CM-3 in the area of diabetes, which it had partnered with AstraZeneca. If that programme had been
successful, the holder would have been entitled to receive the sterling equivalent of €0.56 in cash for each CVN held.
The Company announced on 13 May 2011 that AstraZeneca had terminated the development and option agreement relating to
CM-3. As a result of AstraZeneca’s decision and the fact that the Company and AstraZeneca did not enter into any alternative
agreement with respect to the GLP-1 asset prior to 31 December 2012, the CVNs were cancelled on 1 January 2013 in
accordance with their terms and the Company notified the holders of CVNs accordingly.
The BTG Employee Share Trust holds shares in the Company which may be used for the benefit of employees. The shares held
by the Trust have the same rights as those held by all other shareholders. Further details of the Trust are set out in note 24 to
the financial statements on page 125.
Details of outstanding share options and awards are set out in note 23 to the financial statements on pages 122 to 125.
As at 31 March 2013, and at the date of this report, the Company had been notified of the following interests held, directly or
indirectly, in 3% or more of the Company’s issued share capital.
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Invesco Asset Management
M&G Investment Management Ltd
AXA Framlington Investment Management Ltd
Standard Life Investments Ltd
Legal & General Investment Management Ltd
Shareholding
% holding
96,210,990
40,997,839
15,249,105
11,528,317
11,408,568
29.31
12.49
4.65
3.51
3.48
Directors and governance
Directors’ report
BTG plc Annual Report and Accounts 2013
45
Directors’ report
continued
Articles of association
The Board may exercise all the powers of the Company, subject to the provisions of relevant statutes, the Company’s articles of
association (the Articles) and any directions given by a special resolution of the shareholders. The Articles, for instance, contain
certain specific provisions and restrictions regarding the Company’s power to borrow money. Powers relating to the issuing and
buying back of shares are included in the Articles and are subject to such authorities being approved annually by shareholders at
the Annual General Meeting (AGM). There is no current intention of requesting the authority to buy back shares of the Company.
The rules for the election and re-election of directors are set out in the Articles however, as reported on page 52 of the corporate
governance report, the directors will stand for annual re-election at the AGM, in accordance with the UK Corporate Governance
Code.
Change of control
There are a number of agreements that take effect after, or terminate upon, a change of control of the Company, such as
commercial contracts, bank facility agreements, guarantees, property agreements and employee share plans. None of these are
considered to be significant in terms of their likely impact on the business of the Group as a whole. Furthermore, the directors
are not aware of any agreements between the Company and its directors or employees that provide for compensation for loss of
office or employment following a takeover of the Company.
Research and development
Research and development (R&D) is an important part of the Group’s activities. The focuses of the Group are the areas of
Specialty Pharmaceuticals and Interventional Medicine and developing and bringing new products to market is a very important
part of the Group’s business. The Group spent £41.2m (11/12: £39.7m) on R&D during the year. See page 28 for more
information on the Group’s R&D activities and areas of focus.
Policy on payment of creditors
It is the Group’s policy to abide by the terms of payment agreed with suppliers. In many cases, the terms of payment are as
stated in the supplier’s own literature. In other cases, the terms of payment are determined by specific written or oral agreement.
At 31 March 2013 the total owed to trade creditors by the Group was equivalent to 34 days average purchases (11/12: 38
days). The Company had no trade creditors at that date (11/12: nil).
Treasury management
The Group’s policy on the use of financial instruments and the management of financial risks is set out in note 26 to the
accounts on pages 126 to 130.
Going concern
The Group’s business activities and the factors affecting its performance, position and future development are set out in the
Chief Executive’s review on pages 14 to 16 and the business review on pages 17 to 26.
The directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about
future performance and taking into account the Group’s cash balances. On the basis of this review, and after making due
enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue
to operate for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial
statements.
46 Directors and governance
Directors’ report
BTG plc Annual Report and Accounts 2013
Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held at 10.30 am on 16 July 2013 at the offices of Stephenson
Harwood LLP, 1 Finsbury Circus, London EC2M 7SH. Matters to be considered at the meeting include resolutions to receive
the Annual Report and Accounts, to appoint the auditor and elect or re-elect the directors. In addition, as a result of the review
by the Remuneration Committee of the Board of the remuneration policy applicable to the executive directors of the Company,
a revised policy and associated arrangements will be put to shareholders for approval at the AGM. A summary of the new policy
can be found in the remuneration report on pages 63 to 81 and will be described in more detail in the Notice of AGM. The Notice
convening the meeting, together with the special business to be considered and explanatory notes for each resolution to be put
to the AGM will be distributed separately to shareholders. It is also available on the Company’s website: www.btgplc.com, where
copies can be viewed or downloaded in PDF format by following the link to Investors and then Reports and Accounts.
Disclosure of information to the auditor
The directors who held office at the date of approval of this Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s auditor is unaware; and each director has taken all the steps that they ought
to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company’s
auditor is aware of that information.
Auditor
Our Auditor, KPMG Audit plc has instigated an orderly winding down of the business which will then be undertaken by KPMG LLP.
Resolutions will be proposed at the forthcoming Annual General Meeting, to appoint KPMG LLP as auditor and to authorise the
directors to determine its remuneration.
By order of the Board
Paul Mussenden
Company Secretary
17 May 2013
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Directors and governance
Directors’ report
BTG plc Annual Report and Accounts 2013
47
Corporate
governance
Dear Shareholder
I am pleased to present the corporate governance report on behalf of the Board.
The Board is committed to achieving and maintaining high levels of corporate governance and recognises its responsibility to
focus on strengthening the Company’s management processes. The Company has complied fully with the 2010 edition of the UK
Corporate Governance Code (the Code) throughout the year ended 31 March 2013. Next year’s Annual Report will comment on
the Company’s compliance with the new provisions of the Code published by the Financial Reporting Council (FRC) in September
2012 as that applies to reporting periods beginning on or after 1 October 2012.
The Board is also committed to maintaining an open dialogue with our shareholders and it is important for me, as well as other
members of the Board to make ourselves available to shareholders and to meet with any who wish to see us. During the year
I have met with two investors, Louise Makin, our CEO, held over 70 meetings with investors and Rolf Soderstrom, our CFO, met
with over 30 institutional investors. In addition, Louise Makin gave presentations at a number of conferences which were
attended by existing and potential shareholders as well as industry representatives. Communications with shareholders are
coordinated during the year by the Director of Investor Relations, who reports directly to the CFO.
At the Company’s AGM on 16 July 2013, all directors will attend and be available to meet investors as usual for face-to face
discussions.
The following pages explain in detail how the Company applies the Code in its day-to-day operations.
Garry Watts
Chairman
48 Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
The Board believes it is fundamental that corporate governance and the Code are actively embedded within the culture of the
organisation in order to continually improve standards and build a successful company. This report explains how the Company
applies the principles of the Code. More information on the Code can be found on the FRC website, www.frc.org.uk.
Board composition, responsibilities and balance
Board composition
The Board comprises six non-executive directors, including the Chairman, and two executive directors. The Board has been
chaired by Garry Watts since he joined the Board in this role on 1 January 2012. The Chairman is responsible for leading
the Board and ensuring it is effective in all aspects of its role. The Chief Executive Officer (CEO), Louise Makin, is primarily
responsible for the running of the Group. Rolf Soderstrom, Chief Financial Officer, is responsible for all financial reporting,
tax and financial control aspects of the Group, providing support to the CEO and the wider business activities of the Group
as required.
Giles Kerr has been the Company’s Senior Independent Director (SID) since July 2008. His principal role as SID is to support
the Chairman in his role, to work with the Chairman and other directors to resolve any significant issues that may arise, to lead
non-executive directors in the oversight of the Chairman and to ensure there is a clear division of responsibility between the
Chairman and CEO. He is also available to shareholders to express concerns which the normal channels have failed to resolve
or which would be inappropriate.
The names and brief biographical details of all the directors are set out on pages 42 to 43. The Company recognises the
importance of diversity, including gender diversity, with 25% of the members of the Board currently being women. Details
of gender diversity in the Group below Board level can be found in the Responsibility area of the website: www.btgplc.com.
The table below details the composition of the Board, its Committees, together with their attendance at meetings since
the last Annual Report and the Company’s assessment of the independence of the directors.
Board and Committee
composition and attendance
Total number of meetings
Executive directors
Louise Makin (CEO)
Rolf Soderstrom (CFO)
Non-executive directors
Garry Watts
Peter Chambré3
Giles Kerr
Melanie Lee
Ian Much
James O’Shea4
Richard Wohanka5
Committee
memberships
Independent
Board
meetings
Nomination
Committee
Audit Remuneration
Committee
Committee
10
3
3
5
None
None
Nom2
Aud, Nom
Aud2, Rem, Nom
Rem
Aud, Rem2, Nom
Nom, Aud
Aud
No
No
10/10
10/10
No1
Yes
Yes
Yes
Yes
Yes
Yes
10/10
2/3
9/10
10/10
9/10
10/10
4/4
N/A
N/A
3/3
0/2
2/3
N/A
3/3
3/3
N/A
N/A
N/A
N/A
3/3
3/3
N/A
3/3
1/1
2/2
N/A
N/AA
N/A
N/A
4/5
5/5
5/5
N/A
N/A
1 Garry Watts is excluded from the determination of independence by virtue of his role as Chairman of the Company.
2 Committee Chairman.
3 Peter Chambré resigned as a director and member of the Audit and Nomination Committees on 25 September 2012.
4 James O’Shea joined the Audit Committee on 25 September 2012 (to replace Peter Chambré) and then stepped down on 19 March 2013 following the
appointment of Richard Wohanka.
5 Richard Wohanka joined the Board and Audit Committee on 1 January 2013.
6 Following the change of venue, Giles Kerr was unable to attend one Board, and one Remuneration Committee and one Nomination Committee meeting.
Due to the convening of one of the Board meetings at short notice, Ian Much was unable to attend due to a pre-existing commitment that could not be changed.
7 The external auditor usually attends the Audit Committee meetings and the remuneration advisers usually attend the Remuneration Committee meetings.
8 The table shows, for each director, number of meetings attended/number of meetings eligible to attend.
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Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
49
Corporate governance
continued
The Board applies a rigorous process in order to satisfy itself that its non-executive directors remain independent. The Board
reviews the independence of the non-executive directors every year, using its own judgement when applying the criteria in the
Code. Having undertaken this review, the Board confirms that all the non-executive directors are considered to be independent
in character and judgement. Inline with the recommendations of the Code, at least half the Board, excluding the Chairman, are
independent non-executive directors. Garry Watts was considered to be independent at the time of his appointment although,
in accordance with the Code, he is excluded from the determination of whether at least half the Board are independent non-
executive directors thereafter.
Board responsibilities and balance
The Board has a number of matters specifically reserved for its decision or approval. These include the approval of the interim
and annual financial statements, the interim management statements and major public announcements, setting strategic
direction, budgets and long-term plans. Other areas include the approval of major investments and disposals, major capital
expenditure, decisions relating to major litigation, significant financing, dividend policy and executive remuneration and
appointments.
The Board as a whole monitors operating performance, the performance of management, succession planning, health, safety
and environmental performance and standards of ethical and social behaviour. It is also responsible for developing robust
corporate governance, legal compliance and risk management procedures aimed at safeguarding the Company’s reputation
and assets and the integrity of its financial information and business conduct.
While the executive and non-executive directors are collectively responsible for the success of the Company and have fiduciary
duties towards shareholders, their roles are strictly delineated. The executive directors have direct responsibility for the
business operations of the Company, the non-executive directors are responsible for bringing independent and objective
judgement to Board decisions and the Chairman’s primary responsibility is for the effective running of the Board. The non-
executive directors’ duties include helping to develop the Company’s strategy, shaping proposals on succession planning and
constructively challenging the executive directors where they consider it appropriate.
The time commitment of the non-executive directors depends on the number of committees that they are a member of but the
expectation is that they would normally work approximately two days per month, subject to any increased demand driven by
business activity.
Roles and responsibilities
The Board
The Board is collectively responsible for the success of the Company and specifically to:
ISet the Company’s strategic objectives and policies.
IEnsure the necessary financial and human resources are in place to support strategy.
IDetermine the significant risks that the Company is willing to take to achieve its strategic aims and ensuring effective risk
management controls are in place.
IReview management and Company performance.
IEnsure the proper discharge of the Company’s statutory and other legal and regulatory responsibilities.
IAgree and oversee the application of an appropriate corporate governance framework.
The Chairman
The Chairman is responsible for creating conditions for overall Board and individual director effectiveness, to promote
constructive debate and for ensuring the following:
IThat the Board devotes adequate time to the right agenda issues, such as its role in shaping strategy.
IA robust decision making process is in place by ensuring appropriate high-quality information is made available to the Board
in a timely manner.
IThe Board discharges its responsibilities with respect to risk management.
IBoard Committees are properly structured with appropriate terms of reference.
INecessary relationships of mutual respect and open communication are fostered between the executive and non-executive
directors, providing support and advice while respecting the executive responsibility.
IEffective communication with shareholders and other stakeholders.
50 Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
The Senior Independent Director (SID)
The Senior Independent Director is responsible for:
ISupporting the Chairman’s delivery of objectives, and leading his evaluation.
IWorking with the Chairman, other directors and shareholders at times of conflict or stress to resolve significant issues.
Executive directors
The executive directors are responsible for leading, overseeing and managing the whole business, they are also responsible for:
ICommunicating to the Board their views on business issues to improve the standard of Board discussion and, prior to final
decision on an issue, explaining in a balanced way any divergence of view in the executive team.
IEncouraging the non-executive directors to thoroughly test proposals put forward to the Board in the light of their wider
experience.
IProviding input to the strategy formulation process to enable an effective and evidence based approach and to ensure that the
Board is well informed about all aspects of the business and its operation which bear on its strategy.
IDelivering high-quality information to the Board to enable it to monitor the performance of the whole business including the
management of risk, and to make critical decisions, e.g. on remuneration and investments.
Directors’ conflicts of interest
To address the effect of Section 175 of the Companies Act 2006 (directors’ conflicts of interest), the Company’s Articles enable
the Board to authorise situations that might give rise to directors’ conflicts of interest. Directors complete a declaration form in
order to determine whether any actual or potential conflicts need authorisation. The forms are reviewed annually to ensure that
the information provided is up-to-date and includes any disclosures made during the past year.
At the March 2013 Board meeting all directors were asked to review and make any necessary amendments to their existing
declarations. The Company Secretary has reviewed the latest declarations and has confirmed that no conflicts have arisen.
Board members are reminded at regular intervals to disclose any conflicts should they arise.
Any such notifications are kept in a conflicts register maintained by the Company Secretary. Any director who considers they
may have a potential conflict of interest is required to report this to the Chairman in the first instance, who may consult the
Nomination Committee and report their findings to the Board.
Information, training & support, performance evaluation and re-election of directors
Information, training and support
Using an electronic device based application, the directors are sent an agenda and a full set of papers for each item to be
discussed, in advance of each Board or Committee meeting. Additional information is provided as appropriate and senior
executives regularly make presentations at Board meetings on the results and strategies in their areas of responsibility.
Board meetings are occasionally held at different office locations enabling non-executive directors an additional opportunity
to visit other Company sites.
Upon joining the Company, each director receives a comprehensive induction package, including written information and
opportunities to meet appropriate members of staff. All directors refresh their knowledge regularly through publications and
conferences and through information provided by the Company and its advisers.
There is an agreed procedure for directors to take independent professional advice, if necessary, at the Company’s expense.
Directors have direct access to the advice and the services of the Company Secretary who is responsible for ensuring that
Board procedures are followed. The Company also provides appropriate directors’ and officers’ liability insurance.
Performance evaluation
The CEO is responsible for appraising the performance of the CFO. The Chairman and non-executive directors review the
performance of the CEO. The non-executive directors, led by the SID and following input from the executive directors, evaluate
the performance of the Chairman each year. The Committees also review their performance and report the results to the
Chairman and the Board as a whole. The non-executive directors meet at least once a year without the executive directors in
order to discuss the performance of the executive directors and any concerns over their management of the Company’s affairs.
Last year, inline with the requirement of the Code for an external evaluation at least every three years, external consultants,
SCT Consultants Ltd, were appointed to assist with the review.
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Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
51
Corporate governance
continued
This year, the Board carried out an annual evaluation of its own effectiveness and that of its Committees, both through
measuring performance against annual objectives and through an individual process, using a web-based tailored questionnaire.
The results of the process confirmed that the Board provided effective leadership of the Group. The directors reported
progress had been made against recommendations set out following last year’s external evaluation, in particular:
IA significant increase in the strategic content of the Board agenda and discussions, focusing on those matters which will
contribute to the ongoing transformation of the Group.
IMembership and operation of the Committees were refreshed last year allowing greater focus on key issues. That included
supplementing the experience of the Audit Committee with the addition of Richard Wohanka. The risk management process
was enhanced and included a more in-depth analysis of selected significant risks as well as the usual periodic reviews of all
material risks.
IGreater focus was placed on the development needs of the organisation as a whole, having regard to the capacity and
capabilities needed to ensure that the needs of the business can be met and it can deliver on its existing objectives and future
strategic objectives. As part of this ongoing process 69 additional employees have been hired during the course of the year,
with a focus on commercial activities (22 account managers) and key areas of functional support such as quality assurance
(21 employees), regulatory and medical science liaisons (7 employees).
In light of the results of this year’s evaluation the Board objectives are to:
IContinue to enhance the transparency and rigour of the risk management process, to ensure a greater understanding of the
source and quality of the assurance over the effectiveness of the risk controls.
IFully draw on the experience and expertise of all Board directors, in part to be addressed by the provision of one-to-ones with
the CEO.
IEnsure better benchmarking of the operation and performance of the business against appropriate peers.
Board membership and election of directors
Peter Chambré retired from the Board as non-executive director on 25 September 2012, having served since 2006.
Richard Wohanka joined the Board as non-executive director on 1 January 2013. Following these changes the Board
continued to comprise a non-executive Chairman, five independent non-executive directors and two executive directors.
As reported in the Nomination Committee report on pages 61 to 62, the Committee reviews the composition of the Board
on a regular basis to ensure that, as the business evolves, the Board continues to have the necessary skills to support
the development of the business.
Richard Wohanka, having been appointed to the Board since the last AGM is standing for election for the first time while all the
other directors are standing for re-election at this year’s AGM. Following the formal evaluation process, the Chairman is satisfied
that each of the directors continues to perform effectively and demonstrates commitment to their role, including time for Board
and Committee meetings and their other duties.
Further information on the directors is shown in their biographies on pages 42 to 43.
Financing reporting and internal control
The statement of directors’ responsibilities in relation to the preparation of the financial statements is set out on page 82 and
the auditor’s statement on the respective responsibilities of directors and the auditor is included within its report set out on
pages 83 and 84.
Communications with shareholders, be they results announcements, interim reports, annual reports or AGM and trading
updates, are reviewed carefully and approved by the Board, or a sub-committee thereof, in order to ensure they are transparent
and balanced in the view they give of the Company’s progress and prospects.
The Board has overall responsibility for ensuring that the Group maintains an adequate system of internal control and risk
management and for reviewing its effectiveness. The Audit Committee on behalf of the Board undertakes the detailed monitoring
of the controls, at least annually, and reports to the Board on its findings. The Board has reviewed the system of internal controls
including financial controls for the year under review and up to the date of approval of this Annual Report and Accounts. Such a
system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide
reasonable and not absolute assurance against material misstatement or loss.
52 Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
The criteria applied by the directors, in judging the effectiveness of these controls, are that they allow the maximisation
of shareholder value by exploiting business opportunities whilst ensuring that risks are properly identified and managed.
The controls are regularly reviewed to ensure that they enable the proper management of business risks without so restricting
efficiency and entrepreneurial nature that they inhibit proper running of the business.
To strengthen the control framework of the business, the Group has a dedicated full-time internal auditor. Further information
can be found in the Audit Committee report on pages 57 to 60.
Structure and reporting
The Group has a management structure with clear lines of responsibility and accountability, staffed by appropriate personnel.
The Board is responsible for setting the overall strategy and reviewing the performance of the Group.
The Company’s Leadership Team, chaired by the CEO, is responsible for the day-to-day running of Group operations. Other
team members include the CFO and senior staff members from the business. The team is also responsible for making
recommendations to the Board on the Company’s strategy and subsequent implementation. Other responsibilities include
ensuring that appropriate internal controls are in place to manage and assess risk and that they are fully complied with. The
fundamental elements of the Group’s internal control and risk management framework are described below.
The Group has well defined management structures and processes for the assessment, evaluation, and acquisition of business
opportunities, and development and execution of commercialisation strategies. A number of committees that monitor various
parts of the business report to the Leadership Team on a regular basis:
IInnovation Leadership Team: Investigates new products, product line extensions and new indications to address identified
unmet needs, providing strategic and operational leadership of innovation activities up to proof of principle in man.
IOperational Leadership Team: Responsible for ensuring that the manufacturing and supply chain are tightly controlled and
their operations are optimised, (as far as practicable), meeting all applicable regulatory requirements.
I Development Leadership Team: Evaluates new development opportunities, and is intimately involved in the definition and
execution of development activities, beyond proof of principle in man, to support the Company’s commercial strategies.
I Performance Management Review: Monthly meeting of the Leadership Team and senior staff to review progress against
business plans and targets, both financial and operational.
IRisk Committee: Responsible for monitoring risks throughout the organisation and assessing the effectiveness of the risk
control and mitigation measures implemented by the Group, reporting findings to the Audit Committee twice-yearly. In-depth
analysis of key risks is undertaken periodically to ensure a degree of independent assessment of the operational application of
the risk management process and to seek to identify opportunities to apply alternative or enhanced risk mitigation strategies.
ICompliance Steering Committee: Responsible for maintaining and overseeing a compliance system to ensure that the Group is
fully compliant with all applicable laws (including US Federal and State requirements) that relate to the commercial operations
of the Group, including its US sales and marketing teams. This committee reports to the Audit Committee at least twice-yearly.
ICorporate Responsibility Committee: Ensures the Group maintains high standards in this area.
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The Leadership Team generally meets weekly and more formally on a monthly basis to review business performance measured
against annual budgets, longer-term plans, an agreed set of objectives and performance criteria for each business unit as well
as to assess and respond to issues arising across the Group. Forecasts are monitored monthly on the basis of detailed reviews
of progress and prospects. Reporting to the Board is based on the information provided to and reviewed by the Leadership Team
as well as their assessment and recommendations regarding how to deliver the Group’s objectives. The reports include non-
financial as well as financial information and a review of progress within the development portfolio.
Compliance and the review of risk and risk management are embedded throughout the Group. The Audit Committee has
reviewed the detailed reports of the Risk, Internal Audit, and Compliance Committees and reported its findings to the whole
Board. For further details see the Audit Committee report on pages 57 to 60. The Board has reviewed the risk management
process and confirms that ongoing processes and systems ensure that the Group continues to be compliant with the guidance
on internal control issued by the Code.
The Group has a system and key expert personnel responsible for supporting the protection and maintenance of patents and
other intellectual property rights. The Group also actively monitors its royalty revenue streams and from time-to-time audits its
major licensees to ensure compliance with the terms of the relevant agreements.
Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
53
Corporate governance
continued
Approval procedures
The Group has delegated authority structures that ensure that decisions are taken at an appropriate level, with an appropriate
level of input by internal and external expert advisers. The delegated authority structure prescribes financial limits of approval
at each level and requires decisions with significant financial, legal or reputational impact for the Group to be approved by
the Board.
Corporate policies, values and compliance
All employees within the Group continue to receive periodic training on the key requirements of the Group’s Code of Conduct
which covers all aspects of ethics, business practices and compliance, including a whistle-blowing policy, an anti-bribery and
corruption policy and policies related to the ethical conduct of research and development and interactions with doctors and
other healthcare professionals. Relevant employees meet regularly to discuss external changes in the regulatory, legal and
financial environments in which the Group operates to ensure it remains fully compliant with new legislation and best practice.
The Group also runs periodic ‘lunch and learn’ sessions updating staff on key issues affecting the business.
The Board, through the Audit Committee, has reviewed the effectiveness of the internal controls of the Group. The controls
described above operate and are embedded within the day-to-day business. There is an ongoing process for identifying,
evaluating and managing significant risks faced by the Group. A reporting structure has been in place throughout the year,
up to the date of approval of the financial statements and is regularly reviewed by the directors in accordance with the Code.
Further information is given in the Audit Committee report on pages 57 to 60.
Related parties and conflicts of interest
The Group maintains robust procedures to ensure that related party transactions and potential conflicts of interest are identified,
disclosed and managed. Directors declare interests in other businesses on appointment to the Board and thereafter complete
an annual self-certification. Where it is identified that a related party relationship exists, the Board agrees specific additional
procedures to ensure the effective management of potential conflicts of interest.
Giles Kerr, a non-executive director of the Board, is also the Director of Finance for Oxford University and a director of Isis
Innovations Limited, a wholly-owned subsidiary of Oxford University. Wholly-owned subsidiaries of the Company entered into
technology commercialisation and revenue sharing agreements with these organisations prior to Giles Kerr joining the Board.
The Group has licensed the intellectual property rights covered by these agreements to independent third-party companies that
are developing and/or selling the licensed products. Under these licence agreements, the Group is entitled to receive milestone
payments and/or royalties on sales of the products sold by the third-party licensees.
Under the various revenue sharing agreements, the Group pays a share of any income it receives to Oxford University or Isis
Innovations, depending on the specific technology that generated the income. As the revenue sharing agreements do not permit
these organisations to have any input over the commercialisation of the licensed products or the amount payable under the
relevant revenue sharing agreement, Giles Kerr is not able to influence the amounts received in his position outside the Group.
Because he has no influence over any aspect of these agreements in his role outside the Group, the Company considers that his
independence in relation to the BTG Group is not compromised.
Within the BTG Group, to avoid any possible conflict of interest, it has been agreed that Giles Kerr will not participate in any
discussions or decisions concerning the relevant agreements either within the Board or in any other discussions or meetings
with the executives of its subsidiaries.
The Board has considered, and is satisfied with, this separation of duties. See note 30 on page 131 for additional related party
disclosures.
Market abuse directive
The Company has a Disclosure Committee, as required by the Market Abuse Directive, comprising the CEO, CFO and the Director
of Investor Relations. The Committee reviews all significant items of business within the Group regularly, and on an ad hoc basis
if required, and maintains an Insider List recording both those employed within the Group and at external advisers who may have
access to inside information. Whenever individuals are placed on or removed from the List they are notified accordingly and
advised of their responsibilities.
54 Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
Relations with shareholders and constructive use of the Annual General Meeting (AGM)
Relations with shareholders
The Group endeavours to maintain good communications with shareholders through formal and informal dialogue. The Company
formally reports its results twice a year with full year results announced in May and interim results in November. The CEO and
CFO give presentations of these results to the Company’s institutional shareholders, analysts and the media. The presentations
are broadcast live on the internet for the information of all shareholders. The presentations are available thereafter as an archive
on the Company’s website and a webcast of the event on the website for approximately a year. In addition, the Company
prepares interim management statements in January and July that are released to a regulatory news service and are available
on the Company’s website.
The CEO and CFO meet regularly with institutional investors with support from the Investor Relations department. The Chairman,
Senior Independent Director (SID) and other directors are available to meet with major shareholders on request. As part of his
role as the Senior Independent Director, Giles Kerr is available to shareholders when contact with the executive directors or the
Chairman may not be appropriate. Two requests have been received from major shareholders to meet with the Chairman, during
the year. The Investor Relations department acts as a contact point for investors throughout the year.
The directors receive a report from the Investor Relations department at each Board meeting giving information on the changes
in shareholdings and any feedback from the Company’s brokers and investors. Following the twice-yearly results announcements
and any subsequent shareholder meetings held by management, detailed feedback from external advisers and brokers is
provided to the Board, outlining the views and reactions of investors and analysts. This enables the Board to develop an
understanding of the issues and concerns of major shareholders.
The Annual Report contains a full business review and the Interim Report, which is available on the Company’s website, gives
an update at the half year. Extensive information, including Annual and Interim Reports, interim management statements and
all press releases, is published on the Group’s website (www.btgplc.com) for access by all shareholders. In addition, through
the website, individuals can register to receive electronic copies of all Company announcements on the day they are issued.
Annual General Meeting
The AGM is the principal opportunity for private shareholders to meet and discuss the Group’s business with the directors and
other senior management. A full business presentation is given and there is an open question and answer session during which
shareholders may ask questions both about the resolutions being proposed and the business in general. The directors are
available after the meeting for an informal discussion with shareholders.
The AGM will be held at 10.30 am on 16 July 2013, at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London
EC2M 7SH. The Notice convening the meeting is distributed separately to shareholders at least 20 working days before the
meeting. It is also available on the Company’s website: www.btgplc.com, where a copy can be viewed or downloaded in ‘PDF’
format by following the link to Investor Relations and then Report & Accounts. The letter accompanying the AGM Notice includes
details of the resolutions and explanatory notes thereon.
As a result of the review by the Remuneration Committee of the remuneration policy applicable to the executive directors, a
revised policy and associated arrangements will be put to shareholders for approval at the AGM. A summary of the new policy
can be found in the remuneration report on pages 63 to 81 and is described in more detail in the explanatory notes in the
AGM Notice.
Members of the Company unable to attend the meeting may elect to vote electronically or using the proxy form accompanying
the Notice. In order to vote electronically, members should log on to Capita Registrar’s website (www.capitashareportal.com)
and follow the instructions on the screen. Crest members may send their proxy votes to the Company’s registrars electronically.
At the AGM the number of proxy votes cast in favour, against and withheld in respect of each resolution will be disclosed and
subsequently published in a market announcement and on the Company’s website. The Chairmen of the Audit, Remuneration
and Nomination Committees will be present at the AGM to answer shareholders’ questions.
At this time the Company does not consider it appropriate to introduce mandatory poll voting on all resolutions put to the AGM
but will continue to keep that position under evaluation in future years.
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Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
55
Corporate governance
continued
Audit Committee and auditor
The Company has an established Audit Committee with the principal responsibilities of overseeing financial reporting and
internal control matters and maintaining appropriate relations with the Company’s auditor. A report on the work of the Committee
is set out on pages 57 to 60.
Appointments to the Board
The Company has a Nomination Committee with responsibilities that include reviewing the size and composition of the Board;
making recommendations to the Board on the appointment of executive and non-executive directors, and the re-appointment
of non-executive directors when their terms of appointment expire; and for ensuring that succession planning is in place.
The Committee also advises the Board on matters generally relating to Board appointments and meets as required but at
least twice a year. A report on the work of the Committee is set out on pages 61 and 62.
Compliance with the provisions of the UK Corporate Governance Code (the Code)
The Board considers that the Company complied in full with the principles set out in the Code throughout the year ended
31 March 2013. Details of directors’ remuneration, as required by the Code and Schedule 8 to the Large- and Medium-Sized
Companies and Groups (Accounts and Reports) Regulations 2008, are set out in the remuneration report on pages 63 to 81.
The Company’s auditor, KPMG Audit Plc, is required to review whether this corporate governance statement reflects the
Company’s compliance with nine of the Code’s provisions as specified in the Listing Rules of the FSA, relating to Accountability
and Audit. Having conducted such a review KPMG is obliged to report if it considers this statement of corporate governance does
not reflect such compliance. The Company confirms that no such report has been made.
56 Directors and governance
Corporate governance
BTG plc Annual Report and Accounts 2013
Audit Committee
report
Dear Shareholder
The role of the Audit Committee is to monitor, review and enhance the integrity of the Group’s internal controls, its financial
reporting and the way the Group assesses, manages and reports risk. A significant part of the Committee’s time is spent on
these areas, and as the business continues to become more complex, it presents an increasing number of challenges for the
Committee to address. The uncertain economic climate only enhances the need to ensure our processes remain fit for purpose.
The following report sets out the activities of the Committee over the past year and how it has discharged its responsibilities.
Giles Kerr
Chairman of the Audit Committee
The Committee and its membership
The Committee, established by the Board, is responsible for monitoring all aspects of financial reporting and management
of risk. The Committee’s full terms of reference, reviewed and updated during the year, are available on the Company’s website,
or from the Company on request, and are summarised below:
Summary of the Committee’s terms of reference
IAdvising the Board whether the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
IReviewing the effectiveness of the Group’s financial reporting, internal control policies and procedures for the identification,
assessment and reporting of risk.
IMonitoring the integrity of the Group’s financial statements and any formal announcements relating to the Company’s
performance.
IReviewing significant financial reporting issues and judgements.
IMonitoring the role and effectiveness of the internal audit function.
IProviding the Board with objective advice and assurance as to the effective operation of risk management.
IApproving an annual programme of internal audit work.
IConsidering and making recommendations to the Board on the appointment of the auditor.
IAgreeing the scope of the auditor’s annual audit programme and reviewing the output.
IKeeping the relationship with the auditor under review, including terms of engagement, fees, their independence and
expertise, resources and qualifications; and assessing the effectiveness of the audit process.
IDeveloping and implementing a policy on the engagement of the auditor to supply non-audit services.
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Members
Members
Giles Kerr (Committee Chairman)
Peter Chambré1
Ian Much
James O’Shea2
Richard Wohanka
1 Peter Chambré retired from the Committee and the Board on 25 September 2012.
2 James O’Shea retired from the Committee on 19 March 2013.
Details of attendance at meetings are shown in the table on page 49.
Committee member since
6 November 2007
1 November 2010
1 November 2010
25 September 2012
1 January 2013
Directors and governance
Audit Committee report
BTG plc Annual Report and Accounts 2013
57
Audit Committee report
continued
Committee members’ qualifications
The composition of the Committee was reviewed during the year and the Board is satisfied that the members have the breadth
of knowledge and experience necessary to effectively fulfil the Committee’s responsibilities. Giles Kerr is a Fellow of the Institute
of Chartered Accountants and Director of Finance at Oxford University. He is considered by the Board to have the necessary
significant recent and relevant financial experience to qualify him to be the Chairman of the Committee. He receives additional
remuneration to compensate him for his additional responsibilities, as set out on page 72. Other members bring substantial
experience in international business areas as well as financial expertise to the deliberations of the Committee. In particular
Richard Wohanka has more than 20 years’ experience in the finance and asset management industry. For further information,
see the directors’ biographies on pages 42 and 43.
Other attendees at Audit Committee meetings
The Chief Executive Officer, Chief Financial Officer, Group Director of Finance, Group Financial Controller and Internal Auditor
normally attend meetings. The external auditor usually attends the meetings.
The Company Secretary or his deputy serves as secretary to the Committee.
Activities
A summary of matters considered at the Committee since the last Annual Report and actions taken is shown below:
I Review of the Group’s half year results to 30 September 2012 and full year results to 31 March 2013.
I Review of the reports from the external auditor on the half year and full year results.
I Review of the Internal Auditor’s work plan and review of internal audit reports produced throughout the year.
I Consideration of accounting issues, prospective changes in accounting standards and their impact on Group reporting.
I Review of the scope, nature, resource planning and fee estimate for the full year audit.
I Review of trading updates issued by the Group and amendments thereto.
I Assessment of the going concern basis.
I Review of risk management systems, internal controls and fraud procedures. Assessment of detailed risk review of the Group’s
supply chain.
I Review of the disclosures relating to material risks in the business review.
I Review of the Group’s compliance systems and policies and the results of internal compliance monitoring and auditing.
I Review of the Group’s whistle-blowing policy.
I Review of the Group’s tax affairs.
I Review and amendment of Committee terms of reference.
I Completion of an effectiveness review.
Financial results review
A key role of the Committee is to undertake detailed monitoring of the interim and annual financial statements. As part of this
review it discusses the audit findings and auditor’s report with management and the external auditor and considers significant
judgements and issues contained in them, whether the financial statements comply fully with the relevant statutes and
accounting standards and if they present a balanced assessment of the Company’s financial position and prospects. Following
this discussion the Chairman of the Committee reports the results of its review to the full Board. The external auditor meets with
the non-executive directors in the absence of management at the time when the half and full year results are discussed.
Internal control and risk review
The Board has overall responsibility for ensuring that the Group maintains an adequate system of internal control and risk
management and for reviewing its effectiveness. The Committee, on behalf of the Board, undertakes the detailed monitoring
of the controls and reports to the Board on its findings twice-yearly. The Committee has reviewed the system of internal controls
including financial, operational, healthcare law compliance and risk for the year under review and up to the date of approval of
this Annual Report and Accounts. Such a system is designed to appropriately manage rather than eliminate the risk of failure
to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement
or loss.
The criteria applied by the directors in judging the effectiveness of these controls are that they allow the maximisation of
shareholder value by exploiting business opportunities whilst ensuring that risks are properly identified and managed. The
controls are regularly reviewed to ensure that they enable the proper management of business risks without so restricting
efficiency and entrepreneurial nature that they inhibit proper running of the business.
58 Directors and governance
Audit Committee report
BTG plc Annual Report and Accounts 2013
The Committee has reviewed the effectiveness of the material controls of the Group, which are embedded within the day-to-day
business. The Committee with the Board has an ongoing process for identifying, evaluating and managing significant risks faced
by the Group. A reporting structure has been in place throughout the year and up to the date of approval of the financial
statements and is regularly reviewed by the directors in accordance with the Code.
The Risk Committee, chaired by the CFO and including staff from the appropriate sections of the business, reviews the risks
throughout the business and identifies and evaluates risks which may impact on the Group’s strategic and business objectives.
The Risk Committee maintains a risk management plan that is designed to assess the probability of those risks occurring, the
impact should they occur, how such risks are being appropriately mitigated and monitored and the actions and individuals
responsible for delivering the mitigations. The Committee continues to monitor this process including a consideration of what
comprises an acceptable level of risk in key areas and the optimal mitigation strategy, having regard to the costs, timelines and
likelihood of success of the mitigation options. The Committee reports its findings twice-yearly to the Board.
The Audit Committee received a risk report in November 2012 which sought to provide a more detailed risk assessment of
the Group’s external supply chain given that has for some time comprised one of the most material business risks to continuity
of product supply and therefore revenue. This process sought to assess the merits of the current risk mitigation strategies in
this area and assess the potential cost, likelihood of success and business impact of additional or alternative risk mitigation
options. The Committee supported the ongoing implementation of certain risk mitigation activities. The Audit Committee
received the latest report at its May 2013 meeting, and was satisfied with actions being taken to control and mitigate risks
identified. The Group also has a Compliance Steering Committee, which is responsible for maintaining a compliance system to
ensure that the Group is compliant with all applicable healthcare compliance laws (such as US Federal and State requirements)
that relate to the commercial operations of the Group including the activities of the US sales and marketing team. The results
are reported to the Audit Committee alongside the twice-yearly risk management report. Compliance remains a material
business risk and work throughout the year focused on ensuring compliance policies were effectively understood, implemented,
trained on and embedded into the business as an integral part of business operations. Certain policies were modified in order
to clarify policy requirements and ensure business team accountability for delivering business initiatives in accordance with
those requirements. For details of principal risks and uncertainties that may affect the business, see pages 32 to 35 in the
business review.
There is an internal audit function in the Group and a full-time auditor who has direct access to the Chairman of the Audit
Committee, in addition to a reporting line within the Head Office finance function. The Committee receives regular reports
on the work of the internal audit group. Last year, in the initial period since establishment of the function, the internal auditor
concentrated on internal financial reviews and visited all major sites. Additional internal audits included a review of the scope
of the Compliance policies adopted by the Group and subsequently the effectiveness of their implementation and operation.
The work carried out by the Internal Auditor did not identify any material weaknesses in internal controls but approved proposals
to enhance control procedures. The Committee proposed that the internal audit work plan be expanded to increase the focus
on key control risks and sales compliance audit over the past year in addition to the work on financial controls.
Whistle-blowing
The Committee is responsible for ensuring that arrangements under which employees may, in confidence, raise concerns
about possible improprieties in matters of financial performance or other matters are operating effectively and that appropriate
follow-up action takes place. Included within the Code of Conduct are details of the Group’s whistle-blowing policy and there are
posters and pamphlets prominently displayed at each site giving details of what employees should do if they have concerns
regarding any aspect of the business. Employees are encouraged to report any concerns without fear of recrimination and an
independent telephone line is available should staff wish to use it. The arrangements were reviewed by the Committee during
the year.
UK Bribery Act
The Group has continued to operate its anti-bribery and anti-corruption policy introduced in 2010 in response to the UK Bribery
Act 2010. This has included the conduct of due diligence on new key business partners who may act on behalf of the Group in
higher risk areas of business.
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Directors and governance
Audit Committee report
BTG plc Annual Report and Accounts 2013
59
Audit Committee report
continued
Review of external auditor
The Committee reviews the overall performance of the auditor annually and approves its terms of engagement and
remuneration. The Committee discussed the auditor’s proposed work plan prior to the commencement of the audit of the results
for the year to 31 March 2013 and also reviews the non-audit work carried out by the Company’s auditor, KPMG Audit Plc (KPMG),
to ensure that such services do not impair its independence or objectivity. The Committee agreed a new process for approving
the use of the auditor for non-audit work detailing areas where the auditors may not be used, areas where they may be used
subject to the agreement of the Committee and areas where prior approval is not required. Areas where prior approval is not
required include audit-related services as specified in the APB Ethical Standards for Auditors and other services, that are routine
in nature, where the fee is not significant in the context of the audit fee and where the conduct of such services will not adversely
impact auditor independence or objectivity. The Committee receives a written Annual Report describing the fees paid to the
auditors for non-audit work and whether such services were pre-approved or specifically approved by the Committee.
The Committee has reviewed the recent changes to the UK Corporate Governance Code, published in September 2012,
which include the requirement for FTSE 350 companies to put the external audit contract out to tender at least every ten years.
KPMG have been the Group’s sole external auditors since the Company listed in 1995 and the audit contract has not been put
out to tender since their appointment. David Bills, the current audit engagement partner will have completed his five-year term
at the conclusion of this audit and his successor, Richard Broadbelt will replace David for the 2013/14 year end audit.
While considering partner rotation, the Committee considered whether it would be an appropriate time to engage in an external
audit tender process. In considering this, the current speed of change and complexity of the business, and the services offered
by the current auditors were assessed, together with the recent guidance issued by the Financial Reporting Council (FRC).
The Committee concluded that it would not be in the Company’s interests to commence a tender process at the current time,
however this decision would be reviewed annually. The Committee and the Board therefore recommend the reappointment
of KPMG as external auditor, and to authorise the directors to determine the auditor’s remuneration.
Our auditor, KPMG Audit plc has instigated an orderly winding down of the business which will then be undertaken by KPMG LLP.
The Board has decided to put KPMG LLP forward to be appointed as auditors and a resolution concerning their appointment will
be put to the forthcoming AGM of the Company on 16 July 2013.
The auditor was employed to carry out the following non-audit work during the year:
Audit Committee approval
Task
Pre-approval required
US tax compliance services
Tax advisory services
Transaction services
Fees
£’000
71
42
30
Total fees paid to the Company’s auditor, KPMG, are shown in note 6 on page 104. The Committee believes that the use of
KPMG was appropriate and efficient in the circumstances and that independence was preserved as a partner other than the
audit partner was responsible for the work and the fees paid were insignificant in the context of the size of KPMG as a whole.
Committee evaluation
As part of corporate governance, the Committee also carried out a review of its effectiveness and reported the results and its
recommendations for improvement to the Board. The Committee was found to be functioning well, however, a recommendation
for further enhancement to the risk management process was identified as a Board objective, see page 52 of the corporate
governance report for further detail.
60 Directors and governance
Audit Committee report
BTG plc Annual Report and Accounts 2013
Nomination
Committee report
The Committee, established by the Board, is responsible for appointments and reviewing the structure of the Board and its
Committees. The Committee’s full terms of reference, reviewed during the year, are available on the Company’s website, or
from the Company on request, and are summarised below:
The Committee and its membership
Summary of the Committee’s terms of reference
I To review regularly the structure, size and composition of the Board looking at its balance of skills, experience, independence
and knowledge as well as its diversity (including gender diversity) and make recommendations to the Board on any appropriate
changes.
I To identify and nominate, for the Board’s approval, suitable candidates to fill any vacancies for non-executive directors and,
with the assistance of the Chief Executive Officer, executive directors.
I To plan for the orderly succession of directors to the Board.
I To recommend to the Board the membership and chairmanship of the Audit and Remuneration Committees.
Members
Members
Garry Watts (Committee Chairman)
Peter Chambré1
Giles Kerr
Ian Much
James O’Shea
1 Peter Chambré retired from the Committee and the Board on 25 September 2012.
Details of attendance at meetings are shown in the table on page 49.
Other attendees at Nomination Committee meetings
IThe Chief Executive Officer may attend meetings by invitation.
IThe Company Secretary or his deputy serves as secretary to the Committee.
Committee member since
1 January 2012
22 May 2007
16 July 2008
1 January 2012
13 May 2009
Activities
The principal activities during the year related to the recruitment of a new non-executive director, as outlined below.
At the start of the process for appointing new directors, the Committee prepares a full description of the role, desired skills
and capabilities required for the appointment. External search consultants are usually appointed to assist with finding suitable
candidates. The Committee interviews candidates and then produces a shortlist for a subsequent interview by all Board
members. In assessing candidates for Board roles, the Committee has regard to the objective of ensuring appropriate diversity
(including gender diversity) of Board composition.
Around the time of Peter Chambré leaving the Board the Committee commenced a search for a new non-executive director.
The Committee instructed Saxonbury Limited to find suitable candidates for interview. Saxonbury were chosen, given their
experience of fulfilling such roles, and have not provided any other recruitment services to the Company. The Committee carried
out a rigorous interview and selection process and their shortlisted candidates were also interviewed by the other non-executive
directors and the Chief Executive Officer. The Committee, taking into account the views of the other directors, the Board’s
requirements with respect to skills and experience and diversity, including gender diversity, then recommended to the Board that
Richard Wohanka be appointed as a non-executive director and also as a member of the Audit Committee, given his specific
expertise in the finance and asset management industry. Following a discussion, the Board accepted the recommendation and
Richard Wohanka was appointed to the Board and as a member of the Audit Committee with effect from 1 January 2013.
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Directors and governance
Nomination Committee report
BTG plc Annual Report and Accounts 2013
61
Nomination Committee
report continued
Following the appointment of new non-executive directors, the Committee ensures that they receive a full induction programme.
As part of the induction process the new director is given a full briefing on the financial history of the Company and details of its
strategy, operating plans, budgets and forecasts for future years. Arrangements are also made for the new director to meet with
the heads of the various business units for a briefing on the areas of business in which the Company is involved. A briefing
on corporate governance and directors’ responsibilities may also be given and the opportunity to attend external courses
is also available.
The Committee reviews succession plans and plans for emergency cover of key managers and directors on a regular basis.
Committee evaluation
As part of corporate governance, the Committee also carried out a review of its effectiveness and reported the results and its
recommendations for improvement to the Board. The Committee was found to be functioning effectively. Focus would continue
on ensuring necessary capability and capacity of the Board having regard to the changing needs of the business.
Garry Watts
Chairman of the Nomination Committee
62 Directors and governance
Nomination Committee report
BTG plc Annual Report and Accounts 2013
Remuneration
Committee report
Dear Shareholder
At the time of last year’s report I informed shareholders that the Committee intended to undertake a detailed review of its
remuneration policy for executive directors to ensure that it remains appropriate as the Company develops. This review has
now concluded and as a result the Committee intends to make a number of changes to its remuneration policy. I summarise
these below and they are described in more detail later in this report.
In the last four years the Company has been transformed from a technology company, primarily dependent on licensing fees,
milestone payments and licensing royalties, to a specialist healthcare company with a portfolio of pharmaceutical and medical
device products directly marketed by the Company and additional products in late stage development. This has come about
through the acquisition of both Protherics in 2008 and Biocompatibles in 2011, the launch of Voraxaze® together with the
completion of the US development of PEM.
With the submission of the PEM NDA filing to the FDA in February this year and its acceptance in April, the Company is gearing
up for the planned launch of the product in the US during 2014.
The next three to five years will continue to represent a period of significant change and challenge for the Company as it
continues to seek to grow and develop, both in scale of operations, product base and international reach.
It is crucial that the executive directors maintain the correct balance between short-term smart execution with respect to
marketed products, successful introduction of PEM and the development of longer term value enhancing product development
programmes and acquisition opportunities. It is, therefore, essential that the remuneration policy achieves the right balance
between rewarding short-term execution whilst encouraging the long-term creation of value through significant rewards for
delivery of significant value to shareholders. As a result the Committee intends to make the following changes to the
remuneration arrangements for executive directors:
I The Chief Executive’s salary has been increased by 16.5% from £472,032 to £550,000 with effect from 1 April 2013. This
represents a one-off re-alignment of Louise Makin’s salary, to ensure that it remains positioned at a broadly mid-market level,
and reflects BTG’s growth in size and complexity and Louise Makin’s strong performance in the role over a number of years.
IThe Chief Financial Officer’s salary which was re-positioned as part of the 2011/12 review will be increased by 3%, inline with
average increases awarded to the wider workforce, from £350,000 to £360,500.
I Going forwards, executive directors will be required to build and maintain very significant levels of shareholding in the Company
(250% of salary for the CEO and 150% of salary for the CFO). As the executive directors increase their shareholdings, the
requirement to defer a proportion of their annual bonus will be progressively relaxed, with no deferral once the requirements
are met.
IOptions will not be granted to executive directors going forwards, instead their annual awards of performance shares will be
increased from 100% to 150% of salary. This change is not anticipated to result in any increase in overall levels of
remuneration.
I In order to make the long-term incentive performance condition more transparent for participants and shareholders, relative
TSR performance will be measured against the FTSE 250 index as a whole, rather than the current approach of comparing
performance against a peer group selected from companies in the FTSE 250.
IThe cumulative trading profit performance measure used in the long-term incentive will be replaced by a measure based
on adjusted earnings per share (EPS) performance measured in the final year of the three-year performance period.
IIn addition, in order to increase the focus on longer-term sustained value creation going forwards, executive directors will be
given the opportunity to put at risk up to 100% of PSP awards vesting at year three by converting them into a ‘multiplier’ award
based on BTG’s total shareholder return (TSR) under/outperformance of the FTSE 250 index measured at the end of five years
from the grant of the original award. For awards granted from 2013 onwards, if BTG outperforms the index by 100% at the end
of five years, the number of shares vesting could be doubled. The shares vesting at year five will be at risk and would be
reduced (potentially to zero) to the extent that BTG underperforms the index at the end of that period. It is intended that the
multiplier mechanism would be introduced for future PSP awards and also for the PSP awards made in 2011 and 2012. The
multiplier for the 2011 and 2012 awards could vary the number of shares vesting by between zero and two-and-a-half times.
There will be no opportunity to apply the multiplier to existing share options.
The changes to PSP award levels and performance conditions and the introduction of multiplier awards require shareholder
approval at BTG’s AGM in July. Full details are provided in the Notice of AGM.
Ian Much
Remuneration Committee Chairman
Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
63
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Remuneration Committee
report continued
Introduction and compliance
This report has been prepared by the Remuneration Committee on behalf of the Board in accordance with the requirements of
Schedule 8 to the Large- and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 (Regulations),
and explains how the Company has applied the principles of the UK Corporate Governance Code (the Code) in respect of
directors’ remuneration.
In preparing this year’s report, the Committee has paid regard to the new reporting requirements announced by The Department
for Business, Innovation and Skills (BIS) that will come into force with effect from next year’s Annual Report, and has sought
to adopt a number of the new requirements where it is practical to do so whilst still remaining compliant with the existing
regulations, in particular the Company has chosen to include a detailed letter from the Committee Chairman, separate policy
and implementation sections, a detailed pay policy table, references to how employees’ pay influences directors’ pay, results
of the 2012 AGM, level of share ownership and details of directors’ contracts.
The report has been divided into two sections: Part A, which describes the Company’s policy for the remuneration of executive
and non-executive directors for the coming year (subject to approval of the components to be put to the AGM) and which is not
subject to audit; and Part B, parts of which are subject to audit, which describes how the existing policy has been applied during
the year under review and provides details of the directors’ emoluments, shareholdings, long-term incentive awards and
pensions for that year.
In accordance with the Regulations, a resolution inviting shareholders to approve the report will be put to the Annual General
Meeting (AGM) on 16 July 2013.
Part A:
Remuneration policy
The policy for remuneration for executive directors is to enable the Company to offer a package of rewards that:
IIs sufficiently competitive to enable the Company to attract and retain the management talent it needs to ensure the Group
is successful.
I Supports the achievement of the Company’s strategy by providing the potential to receive significant rewards linked to the
long-term performance of the Company.
I Aligns executives with shareholders and helps to retain them by delivering a significant element of remuneration in shares.
IIs flexible enough to cope with the Company’s changing needs as it grows and the strategy evolves.
The Committee believes that the bonus opportunity aligned with the deferral into shares and forfeiture provisions, together
with other elements of the long-term incentive plans, provides a balanced market-competitive package for the executive team.
However the Committee keeps such targets under regular review in order to ensure they remain appropriate.
Inline with the Association of British Insurers’ Guidelines on Responsible Investment Disclosure, the Committee will ensure that
the incentive structure for executive directors and senior management will not raise environmental, social or governance (ESG)
risks by inadvertently motivating irresponsible behaviour. More generally, the Committee will ensure that the overall remuneration
policy does not encourage inappropriate operational risk-taking. New Bridge Street (NBS) report to the Committee towards the
end of each year on risks associated with the executive directors’ remuneration policy.
64 Directors and governance
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BTG plc Annual Report and Accounts 2013
The Committee’s specific policy for each element of remuneration is as follows:
Maximum
N/A
Performance targets
Change from 2012/13
N/A
–
Element
Purpose and link to strategy
Operation
Base
salary
Provides market
competitive fixed
remuneration that takes
account of individual
responsibilities.
Set at a broadly
mid-market level and
reviewed annually taking
account of individual
responsibilities and
performance.
Benchmarked using data
for a general industry
group selected on the
basis of market
capitalisation and a
sector group of UK-listed
pharmaceutical and
biotechnology
companies.
Increases are determined
by the Committee, taking
account of planned
increases and bonus
levels for the rest of the
Group, as well as salary
increases in the wider
economy.
Benefits
Relatively modest
benefits are offered as
the emphasis is on
variable reward.
The main benefits
provided comprise
medical benefits and
permanent health
insurance.
N/A
N/A
Pension
Provides competitive
retirement benefits.
Defined benefit provision:
1/60ths accrual up to
cap, normal retirement
age of 60.
N/A
Defined contribution or
cash allowance: 20% of
salary.
Pension provision
consists of a combination
of, for a limited number of
longer serving
employees, participation
in contributory defined
benefit pension
arrangements up to a cap
and, for more recent hires
a provision above the
cap, defined contribution
pension provision and/or
cash allowances.
–
–
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Annual
bonus
Links reward to the
Company's short-term
aims.
All employees including
the executive directors
participate.
Deferral of part of bonus
under the Deferred share
bonus plan provides an
element of lock-in and
alignment with
shareholders.
Deferred share bonus
plan awards are
structured as conditional
awards over shares, to be
held for three years.
Maximum of 100% of
salary for executive
directors with 50%
payable for on-target
performance.
The level of deferral is
linked to the achievement
of the Company’s
shareholding guidelines.
The level of shareholding
guidelines has been
increased so that the
percentage of maximum
bonus above which bonus
must be deferred
increases proportionately
to the extent that the
guidelines have been
achieved and no deferral
is required once the
guideline is met.
Performance targets for
the executive directors
focus on Company
financial performance
(70%) against three
financial metrics, being
revenue (1/3 weighting),
trading profit (1/3
weighting), operating
cash (1/3 weighting) and
performance against a
number of corporate and
individual objectives
intended to stimulate
future growth (30%).
Deferred share bonus
plan awards are subject
to clawback.
The level of deferral is
linked to the
achievement of the
Company’s shareholding
guidelines. Previously
this provided that:
Holding less than 50%
of guideline – 50% of
any bonus deferred
Holding equal to 50%
of guideline – all bonus
in excess of 50% of the
maximum deferred.
Holding between 50%
and 100% of guideline
– defer all bonus in
excess of percentage
of guideline achieved
(i.e. if achieved 75% of
guideline, only bonus in
excess of 75% of
maximum deferred).
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BTG plc Annual Report and Accounts 2013
65
Remuneration Committee
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Element
Purpose and link to strategy
Operation
Maximum
Performance targets
Change from prior year
Maximum PSP award
of 150% of salary
(200% in exceptional
circumstances). Award
can be increased to up
to 300% of salary
(subject to further
performance measures)
if executive directors
elect to forego vesting
of PSP award in exchange
for a 'multiplier' award.
Long-term
incentives
Support the strategy to
transition the business
from an R&D-focused
specialist healthcare
company to an earnings-
driven international
specialist healthcare
company.
Annual awards of
performance shares,
vesting of which is
subject to the
achievement of relative
TSR and adjusted EPS
targets measured over
three years.
Ensures remuneration
includes a strong
emphasis on the delivery
of growth, superior
shareholder returns and
sustained financial
performance.
Executives will be offered
the opportunity to roll
over up to 100% of PSP
awards up to 150% of
salary vesting in year
three in return for a
‘multiplier’ award, vesting
of which is subject to
performance measured
over five years from the
date of grant of the
original award.
TSR performance is
measured over three
years from grant by NBS.
Change to Performance
Shares only instead of a
mix of Performance
Shares and Options.
Change to FTSE 250
index instead of a peer
group of FTSE 250
companies excluding
certain sectors.
Change to adjusted EPS
measure instead of
cumulative trading profit
with 25% rather than
20% vesting at
threshold.
Introduction of a
multiplier award.
Awards prior to 2013:
50% relative TSR vs FTSE
250 less certain sectors
and 50% cumulative
trading profit over three
years.
PSP awards from 2013
onwards: 50% TSR
versus companies in the
FTSE 250 index (25%
vests at median rising to
full vesting at upper
quartile).
50% adjusted EPS in the
final year of the
performance period (25%
vests at a threshold level
of performance rising to
full vesting at a stretch
level of performance)
Subject to clawback.
Multiplier awards –
2013 PSP awards
onwards: Each 1%
outperformance/
underperformance of
the FTSE 250 index at
the end of five years
increases or decreases
the total number of
shares that would have
vested under the PSP
by 1%. I.e. to the extent
rolled over awards could
be increased or
decreased by ±100%
(i.e. the number of
shares, the subject of the
award, could be doubled
or be reduced to zero).
Multiplier awards – 2011
and 2012 PSP awards
onwards: Each 1%
outperformance/
underperformance of the
FTSE 250 index at the
end of five years
increases or decreases
the total number of
shares that would have
vested under the PSP by
1.5%. I.e. to the extent
rolled over awards could
be increased by +150%
of reduced by -100%
(down to zero).
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Element
Purpose and link to strategy
Operation
Maximum
Performance targets
Change from prior year
All-employee
share plans
Encourages employees to
acquire shares in BTG,
increasing alignment with
shareholders.
N/A
–
Executive directors can
participate in BTG's
HMRC-approved
Save As You Earn scheme
which is open to all UK
employees.
A US Internal Revenue
Service 423 Plan with
standard terms is
operated for US
employees.
The Sharesave Plan has
standard terms under
which participants can
enter a savings contract
with a three-year life. Up
to £250 per month can
be saved in return for
which they are granted
options at a discount of
up to 80% to the market
value of the shares.
Shareholding
guidelines
Provide alignment
between Executives and
shareholders.
Executive directors are
required to build
significant shareholdings
in the Company.
Subject to approval of
the changes to the PSP
at the AGM. These will
increase to:
N/A
Previous shareholding
guidelines were:–
CEO: 100% of salary
CFO: 100% of salary
CEO: 250% of salary
CFO: 150% of salary
Provided that executive
directors have achieved
and continue to maintain
the guideline level,
executive directors will be
permitted to sell shares
in addition to those
required to meet their tax
liabilities within a 30-day
period from the
announcement of the
Company’s results and
completion of investor
road-shows for any
period.
Non-executive directors
receive fees paid monthly
in cash.
N/A
When reviewing fee
levels; account is taken
of market movements in
non-executive director
fees, Board Committee
responsibilities, ongoing
time commitments and
the general economic
environment.
Non-executive
directors and
Chairman
Takes account of
recognised practice and
set at a level that is
sufficient to attract and
retain high-calibre
non-executives.
N/A
–
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Comparison of directors’ 2012/13 and 2013/14 remuneration packages
Louise Makin
Rolf Soderstrom
2012/13
2013/14
Change
2012/13
2013/14
Change
Base salary as at 1 April
On-target bonus (% of salary)
Maximum bonus (% of salary)
PSP award (% of salary)1
Share option award (% salary)1
Shareholding guidelines – target (% of salary)1
Value of current shareholding at 31 March 2013
(% of salary)
50%
100%
100%
£472,032 £550,000
50%
100%
150%
(300% with
Multiplier)
–
250%
100%
100%
16.5% £350,000 £360,500
50%
50%
100%
100%
150%
100%
(300% with
Multiplier)
–
150%
–
–
+50%
(+200% with
Multiplier)
–100%
+150%
100%
100%
3%
–
–
+50%
(+200% with
Multiplier)
–100%
+50%
291%
n/a
117%
n/a
Contract
12 month rolling contract
12 month rolling contract
1 Changes will take place if AGM approves changes to the PSP.
2 The increase for Rolf Soderstrom is broadly inline with the level of increases awarded in the rest of the Group, which will be approximately 3% on average.
Louise Makin’s salary was rebased to £550,000 effective from 1 April 2013 following a review of her remuneration which indicated that her salary was
significantly below the Committee’s assessment of the mid-market level for her role.
How employees’ pay is taken into account in setting the remuneration of the executive directors
The Committee also considers the base salaries for ten other senior executives. In addition, the Committee receives information
on general pay levels across the Group. The Committee, therefore, has due regard to salary levels across the Group in applying
its remuneration policy.
BTG’s workforce includes a high proportion of highly-qualified scientists, technicians and professionals whose skills are highly
sought after by competitors. Ensuring that levels of remuneration for the general workforce are competitive is important to BTG’s
ongoing success and this is reflected in the level of salary increases awarded to employees. As a result BTG is required to
benchmark and rebase salaries from time to time. The average salary increases awarded to BTG’s general workforce for
2013/14 will be higher than for the general UK employment market but competitive among the companies with which BTG
competes for talent. General workforce increases effective from June 2013 will range between 2% and 15%.
How executive directors’ remuneration policy relates to the wider Group
The remuneration policy described above provides an overview of the structure that operates for the most senior executives in
the Company. Lower incentive opportunity is available below executive level, with levels driven by market comparatives and the
impact of the role.
As explained above, salaries for the Company’s wider workforce are benchmarked externally against comparable companies
within the sector and wider industry. The Company aims to ensure that all employees’ salaries are positioned at a mid-market
level for the role taking account of performance and individual responsibility.
Employees are provided with a competitive package of benefits that includes participation in the Group’s pension arrangements.
All employees are eligible to participate in the bonus arrangements with targets aligned to the financial performance of the
Group and their individual performance within their specific area of responsibility.
The Company believes that broad-based employee participation in share schemes is an important tool in delivering value for
shareholders. Other senior staff are also able to receive awards of long-term incentives at a lower maximum percentage of
salary. Long-term incentives are provided to the most senior executives and those anticipated as having the greatest potential to
influence performance levels within the Company. However, in order to encourage wider employee share ownership, the Company
operates a Sharesave Plan in the UK, with an international section for employees in Australia and Germany, and a Stock
Purchase Plan in the US. These are described in more detail on page 71.
68 Directors and governance
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BTG plc Annual Report and Accounts 2013
How shareholders’ views are taken into account
The Remuneration Committee considers shareholder feedback received in relation to the Annual General Meeting each year and
guidance from shareholder representative bodies more generally. Shareholders’ views are key inputs when shaping
remuneration policy.
Over the last few years we have received a variety of comments from shareholders following the publication of the remuneration
report in the Annual Report. These comments informed the Committee’s thinking during its recent review of its remuneration
policy for BTG’s executive directors and have included:
IA dislike of two long-term incentive plans with the same performance metrics.
IA suggestion that more significant executive director shareholding requirements would be appropriate.
IA comment that greater emphasis on long-term incentives and value creation would be relevant.
IA request for the introduction of clawback on performance awards (which we have already implemented).
During the year, the Committee engaged with its largest shareholders regarding changes to the executive directors incentive
arrangements and the rebasing of Louise Makin’s salary for 2013/14.
Proposed changes to the long-term incentive arrangements
Executive directors and senior managers, together with all other employees, are eligible to participate in the Company’s share
schemes as operated from time-to-time. Following its review of its remuneration policy for executive directors, the Committee
intends to make the following changes to the long-term incentive arrangements.
Subject to approval at BTG’s AGM in July 2013 future long-term incentive awards to BTG’s executive directors would consist
of two elements:
IA ‘core’ Performance Share Plan (PSP) award over shares that vest subject to performance over three years.
IA potential ‘multiplier’ applied to up to 100% of awards vesting under the core PSP at year three, giving the executive directors
the opportunity to receive enhanced awards over a five-year period. This mechanism enables executive directors to put 0%,
50% or 100% of the vesting amounts of the three-year award at risk for a further two years for a potential increase (or
decrease) in the number of shares based on performance measured at the end of five years.
The PSP rules would be amended, as follows:
IThe individual annual limit on core awards will be increased from 100% of salary p.a. to a maximum of 150% of salary p.a. in
normal circumstances and up to 200% of salary in exceptional circumstances, such as on recruitment. The increase in the
normal limit would result in no increase in overall value of ‘core’ awards for executives as share options will be discontinued.
IThe individual annual limit for awards to executive directors, taking account of ‘core’ and ‘multiplier’ awards, will be increased
to 300% of salary p.a.
The performance condition applying to multiplier awards will be based on a single condition measuring the Company’s relative
performance against the FTSE 250 Index over a five-year period commencing on the date of grant of the initial core award. The
Multiplier Performance Condition would only apply to that part of the award that would have vested to an executive director at
year three and then only to the extent that the executive director has elected for a multiplier award.
For PSP awards granted in 2013 onwards each 1% outperformance/underperformance of the FTSE 250 index would increase
or decrease the total number of shares that would have vested under the Core Award performance condition by 1%. Rolled over
core awards subject to the multiplier would be at risk and could be increased or decreased by ±100% (i.e. it could be doubled
or be reduced to zero) based on TSR performance to the end of year five.
For PSP awards granted in 2011 and 2012 each 1% outperformance/underperformance of the FTSE 250 index would increase
or decrease the total number of shares that would have vested under the Core Award performance condition by 1.5%. Rolled
over core awards subject to the multiplier would be at risk and could be increased by +150% or decreased by -100% (based on
TSR performance to the end of year five). The higher leverage reflects the fact that BTG’s policy in 2011 and 2012 was to grant
a mix of options and PSPs and that the multiplier would only apply to PSP awards.
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PSP performance targets for 2013/14
Vesting of the PSP awards granted in 2013/14 will be subject to achievement of performance conditions based on a
combination of an Earnings per share target (as described below) (50%) and total shareholder return (TSR) (50%) measured over
three financial years.
Performance for the TSR element will be measured from the date of grant and compared with that of a peer group comprising the
constituents of the FTSE 250 index with opening and closing TSR values averaged over three months prior to the start and end
of the performance period. The FTSE 250 index as the comparator group has been chosen as it is represents a broad range of
similar sized companies and is transparent for shareholders and participants.
The performance scale for this award is shown in the table below.
TSR performance against the comparators
Percentage of TSR element that vests
Below median
Median
0%
25%
Between median and upper quartile
25% – 100% on a straight line basis
Above upper quartile
100%
For the 2013/14 awards an EPS measure will be used for the remaining 50% of PSP awards. This replaces the cumulative
trading profit measure going forwards. In introducing EPS, the Committee has recognised that any share awards made in 2013
will be measured on results for the financial year ending March 2016. While BTG is not yet an earnings based company, the
Committee believes that the Company will be substantially along the road to that position by 2016 and it is appropriate to
recognise this in the choice of metric.
For the awards made in 2013/14 EPS will be defined as “EPS adjusted for acquisition adjustments and reorganisation costs”
(e.g. amortisation of acquired intangible assets; impairment of acquired intangible assets; transaction costs; and costs of a
major business reorganisation undertaken as a result of an acquisition).
EPS targets for the awards made during 2013/14 will be measured in the final year of the three-year period (the 2015/16
financial year). The percentage vesting at threshold will be increased from 20% to 25% of this part of the award to bring it into
line with the TSR performance condition, however the Committee considers that the EPS targets have been made
commensurately more demanding to take account of this change.
In setting the EPS targets, the Committee has compared them to the Group’s approved Three-Year Plan and considers them to be
demanding. The targets represent 40% growth (at Threshold) and 90% growth (at Stretch) respectively against adjusted EPS of
12.7p for the 2012/13 financial year. In arriving at the opening baseline value of 12.7p the Committee has sought to exclude the
one off effects of the CytoFab™ development termination. Accordingly underlying EPS of 14.5p (which already excludes the effect
of £22.5m asset writedowns) has been adjusted by 1.8p to exclude also the associated deferred income release and contract
termination compensation of £8.6m. Note 29 on page 131 explains the accounting treatment on the termination more fully.
EPS in the year ending 31 March 2016
Percentage of EPS element that vests
Below Threshold
Less than 17.7p
Threshold
17.7p
0%
25%
Between Threshold and Stretch
17.7p to 24.1p
25% – 100% on a straight line basis
Stretch
24.1p or higher
100%
Payouts for performance between
Threshold and Stretch calculated on
a straight line basis
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Other share plans
The Company operates other shares plans as follows:
IAn HMRC-approved Save As You Earn scheme, open to all eligible employees (including executive directors), with a 36-month
savings period enabling UK employees to acquire shares at a price not less than 80% of the market value of the shares at the
date of grant. The Scheme provides an international section to allow for the participation of Australian and German employees.
IA US Internal Revenue Service 423 Plan with a 24-month savings period under which its US employees are able to acquire
shares at not less than 85% of the market value of the shares at the date of grant.
IThe non-shareholder approved Senior Management Performance Share Plan enables awards over market purchased shares to
be granted to certain senior employees below Board level where it is not appropriate to make awards under the PSP. Awards
under this plan can be made over market purchase shares only and are normally subject to different performance criteria to
awards made under the PSP.
External appointments
The Board believes that it may be beneficial to the Company for executives to hold non-executive directorships outside the
Group. Any such appointments are subject to approval by the Board and the director may retain any fees payable. Louise Makin
received fees from her position at Premier Foods plc until she retired from the Board on 30 September 2012 of £31,875
(2011: £67,500). She joined the Board of Intertek Group plc on 1 July 2012 and received fees of £37,500 during the year
to 31 March 2013 (2012: n/a). Rolf Soderstrom does not currently hold any outside directorships.
Service contracts
Executive directors have rolling service contracts, details of which are summarised in the table below:
Provision
Contract dates
Notice period
Termination payment
Remuneration entitlements
Detailed terms
Louise Makin – 19 October 2004
Rolf Soderstrom – 4 December 2008
12 months from both the Company and from the executive
The Company may terminate the contracts of the executive directors with immediate
effect by making a payment in lieu of notice.
Any payments made would be determined by reference to normal contractual
principles with mitigation being applied as wherever relevant or appropriate.
The directors’ contracts do not provide for automatic entitlement to bonus or
share-based payments.
Louise Makin’s contract contains the following remuneration related entitlements:
Salary; membership of Company pension scheme or contribution to a personal
pension; medical benefits; and permanent health insurance.
Rolf Soderstrom’s contract contains the following remuneration related
entitlements: Salary; contribution to a personal pension; medical benefits; and
permanent health insurance.
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The Company’s policy on directors’ service contracts is that, inline with the best practice provisions of the Code, they should be
terminable by the Company on a maximum of one-year’s notice and contracts do not provide for pre-determined compensation in
the event of termination or provision for enhanced payments in the event of a takeover of the Company.
The non-executive directors do not have service contracts, but have letters of appointment for an initial period of three years,
which may be renewed by mutual agreement, normally for a further three-year term. The terms of appointment provide for a
notice period in the event of early termination of six months for the Chairman and three months for other non-executive directors,
other than if they are not re-elected at an AGM.
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Remuneration Committee
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Details of contracts and letters of appointment, for directors serving at the date of this report, are as set out below.
Non-executive
Garry Watts
Giles Kerr
Ian Much
Melanie Lee
James O’Shea
Richard Wohanka
Date of
appointment
Notice
period
Date of expiry
of current contract
1 January 2012 6 months
1 October 2007 3 months
1 August 2010 3 months
29 November 2010 3 months
2 April 2009 3 months
1 January 2013 3 months
31 December 2014
30 September 2013
31 July 2013
28 November 2013
1 April 2015
31 December 2015
Non-executive directors’ fees
The Chairman, in consultation with the executive directors, is responsible for proposing changes to the non-executive directors’
fees. The Senior Independent Director, in consultation with the executive directors, is responsible for proposing changes to the
Chairman’s fees. In each case this follows advice on appropriate fee levels supplied by NBS. In proposing such fees, account
is also taken of the time commitments of the Company’s non-executive directors. The decision on fee changes is taken by the
Board as a whole. Individual non-executive directors do not take part in discussions on their remuneration. Non-executive
directors do not receive benefits or pension contributions from the Group and do not participate in any Group incentive scheme.
Set out in the table below are the fees paid for the year ended 31 March 2013 and proposed fees for the year ended
31 March 2014.
Director
Chairman1
Non-executive director
Senior Independent director fee
Audit Committee chairmanship fee
Remuneration Committee chairmanship fee
1 The fee is fixed for the first three years of his appointment.
Proposed
year ended
Year ended
31 March 2014 31 March 2013
£
£
175,000
41,000
3,000
6,000
6,000
175,000
39,264
3,000
6,000
6,000
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Part B (elements subject to audit):
Directors’ emoluments, shareholdings, share awards and pensions
About the Remuneration Committee and its advisers
The Remuneration Committee has been established by the Board and is responsible for executive remuneration. During the year
the Committee reviewed and updated its terms of reference, which are available in full on the Company’s website or from the
Company on request, and are summarised below:
Summary of the
Committee’s terms
of reference
Members
ITo make recommendations to, and determine on behalf of the Board,
remuneration packages for each of the executive directors in accordance with
current best practice.
I To give advice and make recommendations on the framework and broad policy for
all aspects of the remuneration of senior management and on the overall policy
for total compensation for all other employees.
I To determine policy and advise on equity participation schemes, employee share
trust matters, pensions and other benefits.
Member
Ian Much (Chairman)
Giles Kerr
Melanie Lee
Member since
28 September 2010
3 November 2009
23 March 2011
Other attendees at Remuneration
Committee meetings
The Chairman, Chief Executive Officer, Chief Financial Officer and HR Director may
attend meetings by invitation, other than when their own remuneration is being
considered.
Details of attendance at meetings are shown in the table on page 49.
Committee advisers
The Company Secretary or his deputy serves as secretary to the Committee.
The Committee appoints its own advisers as it sees fit and has appointed New
Bridge Street (NBS) (a brand of Aon Hewitt Limited, part of Aon plc) to act as
advisers to the Committee and a representative usually attends the meetings.
NBS advises the Committee on all remuneration issues including the vesting of
long-term incentive arrangements.
The Group continues to use NBS to advise on other matters including remuneration
matters in general. The firm also assists with the total shareholder return (TSR)
performance measurement and the implementation of employee share schemes
and, through Aon plc’s Radford brand, provides the Company with advice on matters
specific to the US employment market. The Group also uses Mercer Ltd and
PricewaterhouseCoopers to advise on remuneration issues, particularly in relation
to pension schemes.
The fees paid to the Committee’s advisers in 2012/13 were: New Bridge Street
£132,000 (2011/12: £112,00).
Shareholder voting at the Annual General Meeting
At last year’s Annual General Meeting held on 17 July 2012, the directors’ remuneration report received the following votes from
shareholders:
For
Against
Total votes cast (for and against – excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)
257,406,952
3,311,500
260,718,452
360,792
261,079,244
98.73
1.27
100
Total number of votes
% of votes cast
1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ and ‘against’ a resolution.
Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
73
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Remuneration Committee
report continued
Directors’ emoluments
Executive directors
Louise Makin
Rolf Soderstrom3
Non-executive directors
Garry Watts4
Giles Kerr
Melanie Lee
Ian Much
James O’Shea
Richard Wohanka5
Ex-directors
John Brown6
Peter Chambré7
Salary/
fees
£’000
472
458
350
298
175
44
48
47
39
38
45
44
39
38
10
–
–
144
20
38
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
Cash
in lieu of
pension 2
£’000
67
66
77
24
Bonus 1
£’000
472
435
350
283
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
Benefits 8 emoluments
£’000
£’000
DC pension
contributions
£’000
1
2
1
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,012
961
778
607
175
44
48
47
39
38
45
44
39
38
10
–
–
144
20
38
–
–
31
43
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 In 2012 Louise Makin and Rolf Soderstrom received £206,000 and £134,000 of their bonuses respectively as share awards under the DSBP. In 2013 up to
half of their total bonuses will be will be deferred, depending on the extent to which the share ownership guidelines have been met at the time of payment.
2 The additional payments represent a cash supplement in lieu of employer pension contributions following the changes to pension legislation.
3 Pension contributions shown for Rolf Soderstrom represent amounts paid to a defined contribution pension scheme for his benefit.
4 Fees paid to Garry Watts in 2012 were for the period from his appointment to the Board on 1 January 2012.
5 Fees paid to Richard Wohanka in 2013 were for the period from his appointment to the Board on 1 January 2013.
6 Fees were paid to John Brown for the period to his retirement from the Board on 31 December 2011. Included in his fees for 2011/12 was an additional sum
of £57,500 paid in lieu of notice.
7 Fees were paid to Peter Chambré for the period to his retirement from the Board on 25 September 2012.
8 Benefits shown above for Louise Makin and Rolf Soderstrom relate principally to the provision of life assurance and medical benefits.
9 All directors’ fees, salaries and bonuses are subject to UK income tax.
10 As disclosed in previous years, in 2010/11 an administrative error was found in respect of payments made under the defined benefit pension fund to Rusi
Kathoke, a former director. The overpayment of benefits for 2012/13 was £4,127. The additional payments ceased when he attained 65 years in December
2012. The additional payments are covered by contributions to the fund by the Company.
74 Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
Annual bonus for the year to 31 March 2013
For the year ended 31 March 2013 bonuses were subject to a maximum of 100% of base salary for executive directors and up
to 75% for other senior staff.
Bonus targets were set at the start of the financial year for both Louise Makin and Rolf Soderstrom, based on the achievement
of certain objectives. These were the achievement of targets for revenue growth, a trading profit measure, cash generation and
individual KPIs intended to drive future growth in the business. The Committee set threshold and stretch as well as intermediate
target levels for the various targets. The bonus is calculated on base salary with a percentage pay out of between 20% and
100% for various performance levels.
The trading profit measure, used for both bonuses and long-term incentives, is a normalised measure relating to earnings before
amortisation of intangibles, restructuring and acquisition costs, group foreign exchange movements and movements in
derivatives. The cashflow measure adjusts for restructuring and acquisition costs only. For the year ended 31 March 2013 the
Committee also considered it appropriate to exclude the positive financial impact that one-off income recognised in relation to
the termination of AZD9773 (CytoFab™) has had on the financial performance of the business (see note 29 on page 131 for
further details). The metrics are calculated as follows:
Revenue/profit before tax/operating cash flow
Adjustments:
AZD9773 one-off income
Forward exchange contracts and derivatives
Amortisation and impairment of business combination intangibles
Restructuring costs
Trading profit/operating cash flow for bonus purposes
Revenue
£m
233.7
(8.6)
–
–
–
225.1
The performance achieved against the bonus targets are summarised as follows:
Trading profit
£m
Operating cash flow
£m
24.1
(8.6)
1.8
43.4
(0.1)
60.6
Revenue
Trading profit
Operating cashflow
Individual KPIs
Weighting
(% of total bonus)
Threshold
(£m)
Stretch
(£m)
Actual
(£m)
180.0
208.0
225.1
33.6
14.1
47.6
28.1
60.6
45.7
231/3
231/3
231/3
30
Note: The above table shows the financial targets set for the threshold and stretch levels.
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46.2
–
–
–
(0.5)
45.7
Pay out
(% of
maximum)
100%
100%
100%
100%
Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
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Remuneration Committee
report continued
Directors’ share awards
The directors have the following interests in BTG plc shares under the Company’s various plans. Full details of their holdings at
the start and end of the financial year and at 17 May 2013 are set out below.
Louise Makin
Date of grant/award
Share options
31 Jul 20091
Exercise
price (p)/market
price on date of
award (p)
At 1 April
2012
Granted
in year
Exercised
Lapsed
At 31 March
2013
Exercise
period/
vesting date
Share
price on
exercise (p)
179.25 233,974
13 Jul 20102
201.30 216,816
6 Jul 2011
298.90 163,356
–
–
–
1 Jun 2012
386.00
– 122,288
Sharesave
2 Sep 20093
146.70
2,474
1 Sep 2010
146.67
2,454
4 Jul 2011
219.52
822
–
–
–
30 Jul 2012
320.16
–
1,124
Total option awards
–
–
–
–
2,474
–
–
–
Performance share awards
22 Jul 20091
13 Jul 20102
6 Jul 2011
1 Jun 2012
174.00 246,633
201.30 218,751
286.60 149,831
380.54
– 197,306
–
–
–
–
–
– 124,042
46,795
187,179
–
–
–
–
–
–
–
49,327
–
–
–
216,816
163,356
122,288
–
2,454
822
1,124
694,039
–
218,751
149,831
124,042
31 Jul 2012 –
30 Jul 2019
13 Jul 2013 –
12 Jul 2020
6 Jul 2014 –
5 Jul 2021
1 Jun 2015 –
31 May 2022
1 Oct 2012 –
31 Mar 2013
1 Sept 2013 –
1 Mar 2014
1 Sept 2014 –
1 Mar 2015
1 Oct 2015 –
1 Apr 2016
22 Jul 2012
13 Jul 2013
6 Jul 2014
1 Jun 2015
Deferred share awards
22 Jul 2009
28 May 2010
22 Jul 2011
1 Jun 2012
Total other awards
Total awards
174.00 105,808
98,386
201.30
53,288
286.60
–
380.54
– 105,808
–
–
–
–
–
54,192
–
–
–
–
–
98,386
53,288
54,192
22 Jul 2012
28 May 2013
22 Jul 2014
1 Jun 2015
698,490
1,392,529
352.40
393.24
393.24
1 Following measurement of the TSR performance condition by NBS (which placed BTG in the 4th decile against the comparators) and the measurement of the
performance against the profit measure, the Committee approved the vesting of 187,179 shares to Louise Makin under the 2009 ESOP award and 197,306
shares under the 2009 PSP award, the balance of 96,122 shares lapsed. The shares vested on 22 July 2012. The total gain on the vesting of PSP awards
in the year was £775,886.
2 Following measurement of the TSR performance condition by NBS (which was measured at 83.8% against the comparators) and the measurement of the
performance against the profit measure, the Committee approved the vesting of 199,253 shares to Louise Makin under the 2010 ESOP award and 201,032
shares under the 2010 PSP award, the balance of 35,282 shares will lapse. The shares will vest on 13 July 2013.
3 The aggregate gain on the exercise of sharesave options in the year was £5,089.
4 See table on page 78 for details of performance conditions for share awards.
76 Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
Rolf Soderstrom
Date of grant/award
Share options
31 Jul 20091
Exercise
price (p)/market
price on date of
award (p)
At 1 April
2012
Granted
in year
Exercised
Lapsed
At 31 March
2013
Exercise
period/
vesting date
Share
price on
exercise (p)
179.25 145,048
29,011
116,037
13 Jul 20102
201.30 140,930
6 Jul 2011
298.90
99,658
1 Jun 2012
386.00
–
90,673
–
–
–
–
–
–
–
–
–
–
Total option awards
Performance share awards
22 Jul 20091
13 Jul 20102
6 Jul 2011
1 Jun 2012
174.00 152,896
201.30 142,188
286.60 103,913
–
380.54
– 122,316
–
–
–
–
–
91,974
30,580
–
–
–
Deferred share awards
22 Jul 2009
28 May 2010
22 Jul 2011
1 Jun 2012
Total other awards
Total awards
174.00
201.30
286.60
380.54
45,476
60,954
34,637
–
–
–
–
35,225
45,476
–
–
–
–
–
–
–
31 Jul 2012 –
30 Jul 2019
13 Jul 2013 –
12 Jul 2020
6 Jul 2014 –
6 Jul 2021
1 Jun 2015 –
31 May 2022
22 Jul 2012
13 Jul 2013
6 Jul 2014
1 Jun 2015
22 Jul 2012
28 May 2013
22 Jul 2014
1 Jun 2015
393.24
393.24
140,930
99,658
90,673
447,298
–
142,188
103,913
91,974
–
60,954
34,637
35,225
468,891
916,189
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1 Following measurement of the TSR performance condition by NBS (which placed BTG in the 4th decile against the comparators) and the measurement of the
performance against the profit measure, the Committee approved the vesting of 116,037 shares to Rolf Soderstrom under the 2009 ESOP award and 122,316
shares under the 2009 PSP award, the balance of 59,591 shares lapsed. The shares vested on 22 July 2012. The total gain on the vesting of PSP awards in
the year was £480,995.
2 Following measurement of the TSR performance condition by NBS (which was measured at 83.8% against the comparators) and the measurement of the
performance against the profit measure, the Committee approved the vesting of 129,514 shares to Rolf Soderstrom under the 2010 ESOP award and 130,670
shares under the 2010 PSP award, the balance of 22,934 shares will lapse. The shares will vest on 13 July 2013.
3 See table on page 78 for details of performance conditions for share awards.
Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
77
Remuneration Committee
report continued
Performance conditions for share awards
Plan
Date of award
Performance measure
Percentage
Parameters
Option
PSP
31 July 2009
22 July 2009
EBITDA and TSR
Combined matrix
measure
Option
PSP
13 July 2010
13 July 2010
Cumulative trading profit 50%
TSR
50%
Option
PSP
6 July 2011
6 July 2011
Cumulative trading profit 50%
TSR
50%
Option
PSP
1 June 2012
1 June 2012
Cumulative trading profit 50%
TSR
50%
Three-year normalised EBITDA period
between Threshold and Stretch; range
£38m–£76m and TSR range between
1st and 10th decile.
Three-year normalised trading profit period
between Threshold and Stretch; range
£24m–£60m.
Three-year comparison with index between
median and upper quartile.
Three-year normalised trading profit period
between Threshold and Stretch; range
£56m–£97m.
Three-year comparison with index between
median and upper quartile.
Three-year normalised trading profit period
between threshold and stretch; range
£121m–£165m.
Three-year comparison with index between
median and upper quartile.
Unless otherwise stated the Company’s TSR will be compared with that of a peer group comprising FTSE 250 companies excluding investment trusts, companies
in the financial services sector (banks, life and non-life insurance, equity and non-equity investment trusts, financial services, real estate investment and services,
and real estate investment trusts etc.) and companies in the consumer discretionary sector (general retailers, media, travel and leisure, and leisure goods) with
opening and closing TSR values averaged over three months prior to the start and end of the performance period.
Share options and performance shares were granted for nil consideration. The price used for calculating the number of shares
awarded under the PSP and DSBP was based on average of the closing share prices over the five days immediately prior to the
award date. Share options are awarded using the closing mid-market price on the date before grant. Sharesave options were
granted on the condition that participants agreed to enter into a monthly savings contract.
For all awards granted post 1 July 2011, awards made under the DSBP, PSP and ESOP are subject to clawback in the event of
a material misstatement of the financial results of the Company for the financial year to which an award relates is discovered,
an error in the calculation of performance for an award or individual misconduct resulting in dismissal.
In the event of a takeover of the Company, performance conditions will continue to apply to the release of share awards and
the extent to which they have been achieved will be decided by the Committee on such reasonable basis as it decides.
Awards other than DSBP awards are normally satisfied using new issue shares. The Company’s share plans comply with
recommended guidelines on dilution limits and the Company has always operated within these limits. Assuming none of the
extant options lapse and will be exercised and, having included all exercised options, the Company has utilised 2.8% of the
10% in ten years and 2.5% of the 5% in ten years in accordance with the Association of British Insurers (ABI) guidance on
dilution limits.
The Committee, with advice from NBS, is responsible for assessing whether the relevant performance conditions have
been achieved.
78 Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
Directors’ pensions
Louise Makin is a member of the BTG Pension Fund. The Fund is a contracted-out defined benefit arrangement which provides
a pension based on an accrual rate of either one sixtieth or one eightieth of basic salary (up to the HMRC Earnings Cap),
depending on the level of contributions paid by members of 7% or 5% respectively. Members are able to retire at any time from
age 60 without any actuarial reduction to the pension payable. Under current legislation, if members continue to work beyond
age 60, they may continue to pay contributions and enhance their pension entitlement, subject to a maximum of 40 years
pensionable service. Pension payments post-retirement are increased annually by inflation for pensionable service earned up
to 5 April 2006 and inflation subject to a ceiling of 2.5% for pensionable service earned after that date. Members may take early
retirement, once they have reached 55 years of age, although any pension paid will be subject to an actuarial reduction. Ill-health
retirements may be permitted from an earlier age subject to meeting certain medical conditions. In the event of the death of a
member, the Fund provides for a spouse’s pension to be payable equal to two-thirds of the deceased member’s pension. For
current active members, a lump sum death benefit equal to four times basic salary (up to the earnings cap) plus refund of the
member’s contributions is also payable.
During the year Louise Makin contributed £9,618 (2012: £9,072) to the Fund, representing 7% of her salary up to the earnings
cap and the Company contributed £30,915 (2011: £26,827).
Details of the value of her individual pension entitlement and information relating to defined benefits available as required under
the Regulations and the Listing Rules, are shown below:
Increase
in accrued
pension during
year ended
31 March
2013
(including RPI
inflation)2
£
Accrued
pension
at 31 March
2013 1
£
Increase
in accrued
pension during
year ended
31 March
2013
(excluding RPI
inflation)
£
Transfer value
of the increase
in accrued
pension
(excluding
RPI inflation)
at 31 March
2013 less
director’s
contributions
£
Increase in
transfer value
less directors’
contributions3
£
Transfer value Transfer value
of accrued
benefits
at 31 March
2012
£
of accrued
benefits
at 31 March
2013
£
Louise Makin
18,264 p.a. 2,738 p.a.
403,483
300,671
93,194 2,335 p.a.
39,769
1 The accrued pension at 31 March 2013 is the leaving service benefit to which Louise Makin would have been entitled to if she had left the BTG Pension
Fund at that date.
2 This equals the accrued pension as at 31st March 2013 less the equivalent pension as at 31st March 2012 disclosed in the 2012 Annual Report.
3 This is the transfer value as at 31 March 2013 less the transfer value as at 31 March 2012 less the contributions paid by the director in the year.
During the year the Committee has recommended changes to Rolf Soderstrom’s pension arrangements. Compensatory cash
payments were made to him to take account of the impact of recent changes in pension legislation.
Directors and governance
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BTG plc Annual Report and Accounts 2013
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Remuneration Committee
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Directors’ shareholdings
The directors’ beneficial interests, including interests of connected persons, in the shares of the Company at the end of the
financial year and at 17 May 2013 are shown below. None of the directors had any non-beneficial interest at any time in the
period 1 April 2012 to 17 May 2013. None of the directors who held office at the end of the financial period had any beneficial
interest in the shares of other Group companies.
Legally owned (Number of
ordinary 10p shares)
31 Mar 2013 31 Mar 2012
(or date of
resignation
if earlier)
Vested
un-exercised un-exercised
LTIP awards share options
Vested
Vested un-exercised
deferred
shares
Unvested
LTIP
awards
Unvested
share
options
% of salary
held in
Unvested shares under
deferred shareholding
guideline1
shares
Guideline
met?
Executive directors
Louise Makin
Rolf Soderstrom
Non-executive directors
Garry Watts
Peter Chambré
Giles Kerr
Melanie Lee
Ian Much
James O’Shea
387,229 478,308
114,997 90,283
– 187,179
– 116,037
– 492,624 506,860 205,866
– 388,075 331,261 130,816
291%
117%
10,000
3,000
–
–
–
–
–
3,000
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
1 Based on the number of shares legally owned, the net of taxes value of unexercised vested LTIP and deferred share awards, prevailing base salary and share
price (£3.55), at 31 March 2013.
The executive directors have a beneficial interest in ordinary shares of the Company by direct holdings and by virtue of their
entitlements in the Company’s employee share option schemes. As employees of the Group, all executive directors also have
an interest in any unallocated shares held on behalf of all employees in the BTG Employee Share Trust, which at 31 March 2013
amounted to 715,129 ordinary shares in the Company. The non-executive directors are not entitled to participate in any of the
Company’s employee share schemes.
The Committee operates shareholding guidelines requiring executives to build and maintain a holding of Company shares worth
at least 100% of salary. If the PSP changes are approved at the AGM, these are due to increase to 250% of salary in the case
of the CEO and 150% of salary in the case of the CFO.
A formal trading plan exists to enable the executive directors to sell shares from their holdings from time-to-time. Provided
that executive directors have achieved and continue to maintain a minimum level of holding required under the shareholding
guidelines, executive directors will be permitted to sell shares in addition to those required to meet their tax liabilities at any
time permitted under the Company’s share dealing rules.
80 Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
Total shareholder return
The performance of the Company’s ordinary shares compared with the FTSE 250 (excluding Investment Trusts) (the Index)
for the five-year period ended on 31 March 2013 is shown in the graph below.
)
£
(
l
e
u
a
V
450
400
350
300
250
200
150
100
50
0
31 March
2008
31 March
2009
31 March
2010
31 March
2011
31 March
2012
31 March
2013
BTG plc
FTSE 250 (excl. Investment Trusts)
Source: Thomson Reuters
This graph shows the value at 31 March 2013 of £100 invested in BTG plc on 31 March 2008 compared with £100 invested
in the Index. The other points plotted are the values at intervening financial year-ends.
The Company has chosen the Index as a comparator as it believes that it gives shareholders a reasonable comparison with
the total shareholder return (TSR) of other equity investments in companies of a broadly similar size across all sectors.
The TSR performance has been measured by NBS.
The middle market price of an ordinary share on 31 March 2013 was 354.98p. During the year the share price ranged from
a low of 297.00p to a high of 426.00p.
Directors’ interests in contracts
Except as described in note 30 to the financial statements, ‘Related party transactions’, during or at the end of the financial
year no director or connected person had any material interest in any contract of significance in relation to the Group’s business
with a third-party.
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This report was approved by the Board on 17 May 2013 and signed on its behalf by
Ian Much
Chairman of the Remuneration Committee
Directors and governance
Remuneration Committee report
BTG plc Annual Report and Accounts 2013
81
Statement of directors’ responsibilities
in respect of the Annual Report and Accounts 2013 and
the financial statements
The directors are responsible for
preparing the Annual Report and
Accounts 2013 and the Group and
Parent Company financial statements
in accordance with applicable law
and regulations.
Company law requires the directors to
prepare Group and Parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with IFRSs as adopted by
the European Union (EU) and applicable
law and have elected to prepare the
Parent Company financial statements
on the same basis.
Under company law the directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the Group and Parent Company and
of their profit or loss for that period.
In preparing each of the Group and
Parent Company financial statements,
the directors are required to:
Iselect suitable accounting policies
and then apply them consistently;
I make judgements and estimates
that are reasonable and prudent;
I state whether they have been prepared
in accordance with IFRSs as adopted
by the EU, subject to any material
departures disclosed and explained
in the Group and Parent Company
financial statements; and
I prepare the financial statements
on the going concern basis unless
it is inappropriate to presume that the
Group and the Parent Company will
continue in business.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Parent Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
Group and of the Parent Company and
enable them to ensure that the financial
statements comply with the Companies
Act 2006. They have general
responsibility for taking such steps
as are reasonably open to them to
safeguard the assets of the Group
and to prevent and detect fraud and
other irregularities, and have adopted
a control framework for application
across the Group.
Under applicable law and regulations,
the directors are also responsible for
preparing a directors’ report, directors’
remuneration report and corporate
governance statement that complies
with that law and those regulations.
The directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Directors’ responsibility statement
pursuant to DTR 4
Each director confirms that to the
best of our knowledge:
Ithe Group and parent company
accounts, prepared in accordance
with the IFRS as adopted by the EU,
give a true and fair view of the assets,
liabilities, financial position and
profit or loss of the Company and
the undertakings included in the
consolidation taken as a whole; and
Ithe directors’ report includes a
fair review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
The directors’ report comprising pages
44 to 47, and including the sections of
the Annual Report and Accounts referred
to in these pages, has been approved by
the Board and signed on its behalf by:
Louise Makin
Chief Executive Officer
Rolf Soderstrom
Chief Financial Officer
17 May 2013
82 Directors and governance
Statement of directors’ responsibilities
BTG plc Annual Report and Accounts 2013
Independent auditor’s report
to the members of BTG plc
(b) Opinion on financial statements
In our opinion:
Ithe financial statements give a true
and fair view of the state of the Group’s
and of the parent company’s affairs as
at 31 March 2013 and of the Group’s
profit for the year then ended;
Ithe Group financial statements have
been properly prepared in accordance
with IFRSs as adopted by the EU;
Ithe parent company financial
statements have been properly
prepared in accordance with IFRSs
as adopted by the EU and as applied
in accordance with the provisions
of the Companies Act 2006; and
Ithe financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006 and, as regards the group
financial statements, Article 4 of the
IAS Regulation.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
I the part of the directors’ remuneration
report to be audited has been properly
prepared in accordance with the
Companies Act 2006;
I the information given in the directors’
report for the financial year for which
the financial statements are prepared
is consistent with the financial
statements; and
I information given in the corporate
governance statement set out on
pages 48 to 56 in BTG plc’s Annual
Report and Accounts 2013 with
respect to internal control and risk
management systems in relation to
financial reporting processes and
about share capital structures is
consistent with the financial
statements.
D
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We have audited the financial
statements of BTG Plc for the year
ended 31 March 2013 set out on
pages 86 to 139. The financial reporting
framework that has been applied in
their preparation is applicable law
and International Financial Reporting
Standards (IFRSs) as adopted by the
EU and, as regards the parent company
financial statements, as applied in
accordance with the provisions of the
Companies Act 2006.
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 auditor’s 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.
(a) Respective responsibilities of
directors and auditor
As explained more fully in the directors’
responsibilities statement set out on
page 82, the directors are responsible
for the preparation of the financial
statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit, and
express an opinion on, the financial
statements in accordance with
applicable law and International
Standards on Auditing (UK and Ireland).
Those standards require us to comply
with the Auditing Practices Board’s
Ethical Standards for Auditors.
Scope of the audit of the financial
statements
A description of the scope of an audit
of financial statements is provided on
the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.
Directors and governance
Independent auditor’s report
BTG plc Annual Report and Accounts 2013
83
Matters on which we are required to
report by exception
We have nothing to report in respect
of the following:
Under the Companies Act 2006 we
are required to report to you if, in our
opinion:
Iadequate accounting records have
not been kept by the parent company,
or returns adequate for our audit have
not been received from branches not
visited by us;
Ithe parent company financial
statements and the part of the
directors’ remuneration report to
be audited are not in agreement with
the accounting records and returns;
Icertain disclosures of directors’
remuneration specified by law are
not made;
I we have not received all the
information and explanations
we require for our audit; and
Ia corporate governance statement has
not been prepared by the Company.
Under the Listing Rules we are
required to review:
I the directors’ statement, set out on
page 46 in relation to going concern;
Ithe part of the corporate governance
statement on pages 48 to 56 in BTG
plc Annual Report and Accounts 2013
relating to the Company’s compliance
with the nine provisions of the UK
Corporate Governance Code
specified for our review; and
I certain elements of the report to
shareholders by the Board on
directors’ remuneration.
David Bills
(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
17 May 2013
Independent auditor’s
report to the members
of BTG plc continued
84 Directors and governance
Independent auditor’s report
BTG plc Annual Report and Accounts 2013
Financials
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Financials
86 Consolidated income statement
87 Consolidated statement of comprehensive income
Consolidated statement of financial position
88
Consolidated statement of cash flows
89
Consolidated statement of changes in equity
90
Notes to the consolidated financial statements
91
133 Company statement of financial position
134 Company statement of cash flows
135 Company statement of changes in equity
136 Notes to the Company financial statements
140 Five-year financial record
142 Shareholder information
144 Cautionary statement and Trade marks
Consolidated income statement
Year ended 31 March 2013
Year ended 31 March 2012
Results before
acquisition
adjustments and
reorganisation
costs
£m
Note
Acquisition
adjustments
and
reorganisation
costs
£m
4
4
233.7
(67.2)
166.5
–
–
–
Results before
acquisition
adjustments and
reorganisation
costs
£m
Total
£m
Acquisition
adjustments
and
reorganisation
costs
£m
233.7
(67.2)
197.2
(54.2)
(0.2)
(2.1)
Total
£m
197.0
(56.3)
166.5
143.0
(2.3)
140.7
–
3.1
(58.0)
(54.9)
(41.2)
0.4
(1.8)
–
–
69.0
1.1
(2.7)
(43.4)
–
–
(43.4)
–
–
–
0.1
–
(43.3)
–
–
(43.4)
3.1
(58.0)
(98.3)
(41.2)
–
2.6
(48.9)
(46.3)
(39.7)
(30.7)
–
–
(30.7)
–
(30.7)
2.6
(48.9)
(77.0)
(39.7)
0.4
0.2
–
0.2
(3.0)
–
(0.2)
54.0
3.6
(1.6)
–
(1.1)
–
(34.1)
1.1
–
(1.8)
0.1
–
25.7
1.1
(2.7)
24.1
(7.7)
16.4
5.0p
5.0p
(3.0)
(1.1)
(0.2)
19.9
4.7
(1.6)
23.0
(8.4)
14.6
4.5p
4.4p
14
5
6
8
9
10
11
11
Revenue
Cost of sales
Gross profit
Operating expenses:
Amortisation and impairment of acquired
intangible assets
Foreign exchange gains
Selling, general and administrative expenses
Operating expenses: total
Research and development
Profit on disposal of intangible assets
and investments
Amounts written off property,
plant and equipment
Acquisition and reorganisation costs
Amounts written off investments
Operating profit
Financial income
Financial expense
Profit before tax
Tax
Profit for the year
Basic earnings per share
Diluted earnings per share
All activity arose from continuing operations.
The notes on pages 91 to 132 form part of these financial statements.
86 Financials
Consolidated income statement
BTG plc Annual Report and Accounts 2013
Consolidated statement of comprehensive income
Profit for the year
Other comprehensive income
Foreign exchange translation differences
Actuarial gain/(loss) on defined benefit pensions scheme
Deferred tax on defined benefit pension scheme asset
Other comprehensive income for the year
Total comprehensive income for the year
The notes on pages 91 to 132 form part of these financial statements.
Note
19
22
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
16.4
14.6
4.2
0.1
(1.6)
2.7
19.1
(0.3)
(2.9)
–
(3.2)
11.4
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Financials
Consolidated statement of comprehensive income
BTG plc Annual Report and Accounts 2013
87
Consolidated statement of financial position
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Other investments
Deferred tax asset
Employee benefits
Biological assets
Current assets
Inventories
Trade and other receivables
Taxation
Derivative instruments
Held to maturity financial assets
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium account
Merger reserve
Other reserves
Retained earnings
Total equity attributable to equity holders of the parent
LIABILITIES
Non-current liabilities
Trade and other payables
Employee benefits
Deferred taxation
Provisions
Current liabilities
Trade and other payables
Derivative instruments
Taxation
Provisions
Total liabilities
Total equity and liabilities
31 March
2013
£m
31 March
2012
£m
Note
12
13
14
15
10
22
16
17
10
21
18
18
19
20
22
10
25
20
21
10
25
59.2
209.2
25.4
3.0
0.9
4.7
–
59.2
246.0
22.0
3.0
1.0
–
0.3
302.4
331.5
23.3
54.5
0.4
–
–
158.7
236.9
539.3
21.8
40.1
–
0.5
5.0
106.9
174.3
505.8
32.8
188.6
317.8
0.2
(108.4)
32.7
188.3
317.8
(4.0)
(128.6)
431.0
406.2
0.5
–
41.8
0.4
42.7
61.6
2.2
1.2
0.6
65.6
108.3
5.0
0.1
35.2
1.0
41.3
55.4
–
2.1
0.8
58.3
99.6
539.3
505.8
The notes on pages 91 to 132 form part of these financial statements.
The financial statements were approved by the Board on 17 May 2013 and were signed on its behalf by:
Louise Makin
Chief Executive Officer Chief Financial Officer
Rolf Soderstrom
Registered No: 2670500
88 Financials
Consolidated statement of financial position
BTG plc Annual Report and Accounts 2013
Consolidated statement of cash flows
Profit after tax for the year
Tax
Financial income
Financial expense
Operating profit
Adjustments for:
Profit on disposal of intangible assets and investments
Amounts written off investments
Amortisation and impairment of intangible assets
Amounts written off property, plant and equipment
Depreciation on property, plant and equipment
Share-based payments
Pension scheme funding
Other
Cash from operations before movements in working capital
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Cash from operations
Taxation paid
Net cash inflow from operating activities
Investing activities
Interest received
Purchases of intangible assets
Purchases of property, plant and equipment
Net proceeds from disposal of investments and intangible assets
Net expenditure on investments
Net inflow from held to maturity financial assets
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of finance leases
Proceeds of share issues
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of year
The notes on pages 91 to 132 form part of these financial statements.
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
Note
16.4
7.7
(1.1)
2.7
25.7
(0.4)
–
45.1
1.8
3.1
4.7
(4.6)
0.3
75.7
(1.5)
(14.4)
2.0
(0.8)
14.6
8.4
(4.7)
1.6
19.9
(0.2)
0.2
31.9
3.0
3.2
2.4
(4.8)
0.2
55.8
(1.8)
(7.5)
3.0
(1.2)
61.0
48.3
(5.5)
55.5
(1.1)
47.2
0.7
(2.6)
(7.6)
–
–
5.0
(4.5)
(0.2)
0.4
0.2
0.8
(6.0)
(3.7)
0.3
(0.5)
5.2
(3.9)
(0.3)
0.1
(0.2)
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14
14
18
51.2
106.9
0.6
43.1
63.7
0.1
18
158.7
106.9
Financials
Consolidated statement of cash flows
BTG plc Annual Report and Accounts 2013
89
Consolidated statement of changes in equity
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2011
32.7
188.2
317.8
(3.7)
(142.7)
392.3
Profit for the year
Foreign exchange translation differences
Actuarial gain on defined benefit pension scheme
Total comprehensive income for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Share-based payments
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
(0.3)
–
(0.3)
14.6
–
(2.9)
11.7
14.6
(0.3)
(2.9)
11.4
–
–
–
2.4
0.1
2.4
At 31 March 2012
32.7
188.3
317.8
(4.0)
(128.6)
406.2
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2012
32.7
188.3
317.8
(4.0)
(128.6)
406.2
Profit for the year
Foreign exchange translation differences
Actuarial gain on defined benefit pension scheme
Deferred tax on defined benefit pension scheme asset
Total comprehensive income for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
–
–
–
–
–
0.1
–
–
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
–
–
–
4.2
–
–
4.2
–
–
–
16.4
–
0.1
(1.6)
14.9
–
0.6
4.7
16.4
4.2
0.1
(1.6)
19.1
0.4
0.6
4.7
At 31 March 2013
32.8
188.6
317.8
0.2
(108.4)
431.0
The notes on pages 91 to 132 form part of these financial statements.
90 Financials
Consolidated statement of changes in equity
BTG plc Annual Report and Accounts 2013
Notes to the consolidated financial statements
1 General information
BTG plc (the ‘Company’) is a company incorporated and domiciled in the United Kingdom and listed on the London Stock
Exchange. The consolidated financial statements of the Company for the year ended 31 March 2013 comprise the results
of the Company and its subsidiary undertakings (together referred to as the ‘Group’) and the Group’s interest in associates.
The financial statements were approved for issue by the Board on 17 May 2013.
The financial statements have been prepared in accordance with the Group’s accounting policies as approved by the Board
and described below.
Accounting standards adopted in the year
No accounting standards adopted in the year have had a significant impact upon the financial statements.
Other accounting standards adopted in the year
Other amendments and standards have been adopted, but have had no significant effect on the reported results or financial
position of the Group.
Accounting standards issued but not yet effective
IAS 19 (Amended): ‘Employee benefits’ changes a number of disclosure requirements for post employment arrangements
and restricts the options currently available on how to account for defined benefit pension plans. The amendment requires
the expected returns on pension plan assets, currently calculated based on management’s estimate of expected returns,
to be replaced by a gain on the pension plan assets calculated at the liability discount rate. In future years, this change is
expected to result in a decrease in finance income on pension scheme assets, recognised in the income statement, and
an equal and opposite increase in the actual returns less expected returns on pension scheme assets credited to other
comprehensive income. The Group does not expect this change to impact the Group’s net assets. The amendment also
removes the option to include an expense reserve in pension scheme liabilities. This change is expected to result in a
one-off credit to other comprehensive income, a one-off credit to opening reserves and a corresponding increase in net
assets in the 2013 comparatives disclosed in the financial statement for the year ending 31 March 2014, to release the
expense reserves previously recognised within pension scheme liabilities as detailed in note 22.
The amendment to IAS 19 is effective from 1 January 2013 and will be adopted by the Group in the accounting year beginning
1 April 2013.
All other standards and interpretations recently adopted by the EU not discussed above did not have or are not expected to
have a significant impact on the Group.
Going concern basis
After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
This conclusion has been reached having considered the effect of liquidity risk on the Group’s ability to operate effectively.
Currently, liquidity risk is not considered a significant business risk to the Group given its level of net cash and cash flow
projections. The Group does not currently require significant levels of debt financing to operate its business. Further details
of the Group’s policies and objectives around liquidity risk are given in note 26 to the Accounts and are discussed in the
business review on pages 17 to 26. The key liquidity risks faced by the Group are considered to be the failure of banks
where funds are deposited and the failure of key licensees, distribution partners, wholesalers or insurers.
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In addition to the liquidity risks considered above, the directors have also considered the following factors when reaching
the conclusion to continue to adopt the going concern basis:
I The Group’s principal licensees are global industry leaders in their respective fields and the Group’s royalty-generating
intellectual property consists of a broad portfolio of licensees.
IThe Group does not have a significant exposure to the Eurozone.
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
91
Notes to the consolidated financial statements
1 General information continued
IThe Group’s marketed products are life-saving in nature, providing some protection against an uncertain economic outlook.
I The Group remains in a cash generative position for the year with cash and cash equivalents totalling £158.7m as at
31 March 2013.
ISubsequent to the year end, the Group signed a £60m multi-currency revolving credit facility providing access to funds
for a period of three years to 30 April 2016.
Acquisition adjustments and reorganisation costs
The consolidated income statement includes a separate column to disclose significant acquisition adjustments
and reorganisation costs arising on corporate acquisitions. Adjustments relate to the acquisitions of:
IBiocompatibles International plc on 27 January 2011.
IProtherics PLC on 4 December 2008.
The costs relate to the following:
I The release of the fair value uplift of inventory acquired.
I Amortisation and impairment arising on intangible assets acquired.
I Transaction costs incurred with professional advisers in relation to the completion of the acquisition.
I Reorganisation costs comprising acquisition related redundancy programmes, property costs, and asset impairments.
IFair value adjustments to contingent consideration on corporate acquisitions.
2 Significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied to all years presented unless otherwise stated.
(a) Basis of accounting and preparation of financial statements
The Group financial statements have been prepared and approved by the directors in accordance with International Financial
Reporting Standards as adopted by the EU (Adopted IFRSs). The consolidated financial statements also comply fully with IFRSs
as issued by the International Accounting Standards Board.
The Group financial statements are presented in Sterling and all values are rounded to the nearest £0.1m except where
otherwise indicated and have been prepared on the historical cost basis modified to include revaluation to fair value of
certain financial instruments and business combination assets as set out below.
The preparation of the financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. Judgements made by the directors in the application of these accounting policies that have significant effect
on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.
(b) Basis of consolidation
(i) Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiary
undertakings are included in the consolidated financial statements from the date that control commences until the date that
control ceases.
(ii) Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating
policies. The consolidated financial statements include the Group’s proportionate share of the total recognised gains and
losses of associates on an equity-accounted basis, from the date that significant influence commences until the date that
significant influence ceases. When the Group’s share of losses exceeds the carrying value of its interest in an associate,
the Group’s carrying amount is reduced to nil and no further losses are recognised except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of an associate.
92 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
2 Significant accounting policies continued
(iii) Acquisition accounting
The purchase method is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured
as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values on the
date of acquisition, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value
of the Group’s share of identifiable net assets, including intangible assets acquired, is recorded as goodwill. If the cost of
acquisition is less than the fair value of the Group’s share of net assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into
line with those used by the Group.
(iv) Merger reserve
A merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.
(v) Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations.
(vi) Fair value reserve
The fair value reserve includes the cumulative net change in the fair value of available-for-sale investments. If an investment
suffers impairment due to a prolonged or significant decline in the fair value below acquisition cost, its share of the reserve is
recycled to the income statement and any further declines in fair value of that investment are no longer charged to the reserve
but immediately taken to the income statement.
(vii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are
eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
(c) Operating segments
An operating segment is defined as a component of the Group (i) that engages in business activities from which it may earn
revenues and incur expenses; (ii) whose operating results are regularly reviewed by the Group’s chief operating decision maker
(the Leadership Team) to make resource allocation decisions and monitor its performance; and (iii) for which discrete financial
information is available.
(d) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value are translated at foreign exchange rates ruling at the dates the fair value was determined. Exchange gains/losses on
retranslation of foreign currency transactions and balances within trading intercompany balances are recognised in the income
statement within ‘Operating expenses’.
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(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation,
are translated into sterling at exchange rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated into sterling at rates approximating to the exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on retranslation are recognised directly in the translation reserve.
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
93
Notes to the consolidated financial statements
2 Significant accounting policies continued
(iii) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations are taken to the translation
reserve. They are released into the income statement upon disposal of the investment.
(e) Derivative financial instruments
Derivative financial instruments are recognised at fair value and are designated as being measured at fair value through the
income statement on inception. The gain or loss on remeasurement to fair value is recognised immediately in the income
statement through ‘Financial income’ or ‘Financial expense’ as appropriate.
The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value
of the quoted forward price.
(f) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on
the acquisition of subsidiary undertakings and associates. In respect of business combinations that have occurred since
1 April 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the identifiable assets,
including intangible assets, liabilities and contingent liabilities acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested
annually for impairment (see 2(m)). In respect of associates, the carrying value of goodwill is included in the carrying value of the
investment in the associate.
(g) Intangible assets
(i) Initial recognition
Intangible assets acquired as a result of a business combination are initially recognised at their fair value in accordance
with IFRS3 – ‘Business Combinations’.
Other intangible assets are initially recognised at cost. Cost includes the cost of obtaining patent protection for intellectual
property rights, the cost of acquisition of patents and the costs of the internal patent attorney specific to obtaining the initial
grant of a patent. Income from patents is derived through licensing and other agreements.
(ii) Amortisation
Intangible assets are amortised in a manner calculated to write off the cost, on a straight-line basis, over the effective life of the
asset. In determining the appropriate life of the asset, consideration is given to the expected cash generating life of the asset or
remaining patent life if different.
The effective life of each class of asset is determined as follows:
IDeveloped technology: expected cash-generating life, taking into account specific product and market characteristics for each
developed technology.
IContractual relationships: period to expiry of the contract.
IIn-process research and development: amortisation is not charged until the asset is generating an economic return, at which
point the effective life is assessed by reference to the remaining patent life.
IComputer software: the shorter of the licence period and three years.
IPatents: period to patent expiry.
IPurchase of contractual rights: period to expiry of the contract.
In the event that an intangible asset is no longer used or a patent is abandoned, the balance of unamortised expenditure is
written off immediately.
The following useful economic lives are applied:
Developed technology
Contractual relationships
In-process research and development
Computer software
Patents
Purchase of contractual rights
2 to 25 years
2 to 15 years
12 to 25 years
3 years
20 years
2 to 10 years
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(iii) Income statement disclosure
Amortisation and impairment of intangible assets is included within ‘Operating expenses’ in the income statement.
(iv) Subsequent expenditure
Expenditure subsequent to the initial acquisition of intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
(v) Impairment
If an intangible asset is considered to have suffered impairment in value it is written down to its estimated recoverable amount
in accordance with the Group’s policy on impairment (see note 2(m)).
(h) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses
(see note 2(m)).
(ii) Depreciation
Depreciation is charged to the income statement on a straight-line basis to write assets down to their residual value using
the following useful economics lives:
Buildings and improvements
Leasehold improvements
Plant and machinery
Furniture and equipment
Motor vehicles
Computer hardware
10 to 20 years
2 to 10 years
3 to 15 years
2 to 15 years
5 years
3 to 5 years
Depreciation is not charged until the asset is brought into use. The residual value is reassessed annually.
(iii) Income statement disclosure
Depreciation and impairment of tangible fixed assets is included within ‘Operating expenses’ in the income statement.
Profits and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in
profit/loss on sale of tangible assets in the income statement.
(iv) Subsequent expenditure
Expenditure subsequent to the initial acquisition of a tangible fixed asset is capitalised only when it is probable that the
Group will realise future economic benefits from the asset.
(v) Impairment
If a tangible asset is considered to have suffered impairment in value it is written down to its estimated recoverable amount
in accordance with the Group’s policy on impairment (see note 2(m)).
(i) Investments
Investments in debt and equity securities held by the Group, classified as being available-for-sale, are stated at fair value,
with any resultant gain or loss being recognised directly in equity, except for impairment losses and, in the case of monetary
items such as debt securities, foreign exchange gains and losses which are taken to the income statement. When these
investments are no longer recognised as assets, the cumulative gain or loss previously recognised directly in equity is
recognised in the income statement. Where these investments are interest-bearing, interest calculated using the effective
interest method is recognised in the income statement.
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(j) Inventories
Inventories are valued at the lower of cost and net realisable value. The first in, first out method of valuation is used.
Cost comprises materials, direct labour and a share of production overheads appropriate to the relevant stage of production.
Provision is made for obsolete, slow-moving or defective items where appropriate. Net realisable value is determined at the
balance sheet date on commercially saleable products based on estimated selling price less all further costs to completion
and all relevant marketing, selling and distribution costs.
Inventories relating to research and development projects are fully written down in the income statement unless the Group
considers it probable to realise economic value from their sale or use. If the circumstances that previously caused these
inventories to be written down below cost subsequently change and there is clear evidence of an increase in realisable value,
the write down is reversed.
(k) Trade and other receivables
Trade and other receivables do not carry interest and are stated at amortised cost less impairment losses (see 2(m)).
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management and for which the Group has a legal right of set-off are included as a
component of cash and cash equivalents for the purpose of the statement of cash flows.
Cash deposits with a maturity of greater than three months are classified as held to maturity financial assets.
(m) Impairment
Impairment testing is performed for all assets when there is an indicator of impairment.
In addition, for goodwill and unamortised intangible assets, impairment testing is performed both in the year of acquisition
and annually at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount.
Other specific categories of asset are treated as follows:
(i) Equity investments
Impairment is deemed to arise when there is a significant or prolonged decline in the fair value of the equity instrument.
Impairment losses are recognised in the income statement.
(ii) Property, plant and equipment
Property, plant and equipment are subject to impairment testing at each balance sheet date and whenever there are events
that indicate that an impairment may have occurred. An impairment loss is recognised if an asset’s carrying amount exceeds
the greater of its value in use and fair value less costs to sell. Impairment losses are recognised in the income statement.
(iii) Amortised intangible assets
Amortised intangible assets are also tested for impairment whenever there are indications that the carrying value may
not be recoverable. Intangible assets are grouped at the lowest level for which there are separately identifiable cash flows.
Any impairment losses are recognised immediately in the income statement. When assessing the recoverable amount
of an intangible asset the Group uses a risk adjusted discounted cash flow model.
(iv) Available-for-sale assets
When a decline in the fair value of an available-for-sale asset has been recognised directly in equity and there is objective
evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the income
statement. The amount of the cumulative loss that is recognised in the income statement is the difference between the
acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the income
statement.
An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through
the income statement. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment
loss shall be reversed, with the amount of the reversal recognised in the income statement.
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(n) Government grants
Government grants towards staff retraining costs are recognised as income over the periods in which the related costs are
incurred and are deducted in reporting the related expense.
Government grants relating to property, plant and equipment are treated as deferred income and released to the income
statement over the useful lives of the assets concerned.
(o) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement
as incurred. Payments made to state-managed retirement benefit schemes are dealt with in the same manner as payments
to defined contribution plans where the Group’s obligations under the plans are equivalent to a defined contribution retirement
benefit plan. The funds of the schemes are independent of the Group’s finances.
(ii) Defined benefit plan
For the Group’s defined benefit pension plan, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at each balance sheet date. Allowance is made in the assessment of the defined
benefit obligation for future costs of administering the scheme. The assumptions used to determine the valuation are shown
in note 22. Actuarial gains and losses are recognised in full in the period in which they occur. Actuarial gains and losses are
recognised outside the income statement and presented in the consolidated statement of comprehensive income.
Past service cost is recognised immediately to the extent that the benefits have already vested, and otherwise is amortised
on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation,
reduced by the fair value of scheme assets. The retirement benefit obligation includes an allowance for future administrative
costs of running the scheme. Any asset resulting from this calculation is limited to past service cost, plus the present value of
available refunds and reductions in future contributions to the scheme.
Assets of the pension scheme are held separately from the Group’s assets.
(iii) Share-based payments
In accordance with the transition provisions of IFRS1 (First-time Adoption of International Financial Reporting Standards),
IFRS2 (Share-based Payment) has been applied to all share-based grants made to employees after 7 November 2002 that
had not vested as of 1 January 2005.
The share option programme allows Group employees to acquire shares of the Company, subject to certain criteria.
The fair value of options granted is recognised as an expense of employment in the income statement with a corresponding
increase in equity. The fair value is measured at the date of grant and spread over the period during which the employees
become unconditionally entitled to the options. The fair value of the options granted is measured using a binomial lattice
model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an
expense in any year is adjusted to reflect the actual number of share options that vest. However if share options fail to
vest due to share prices not achieving the designated performance threshold for vesting, no such adjustment takes place.
(p) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect
is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are
lower than the unavoidable cost of meeting its obligations under the contract.
A charge for reorganisation costs is taken to the income statement when the Group has approved a detailed and formal
reorganisation plan, and the reorganisation has either commenced or the Group has a constructive obligation, for example
having made an announcement publicly to the employee or the Group as a whole.
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(q) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortised cost except for the contingent value note which
is recognised at fair value.
(r) Revenue recognition
Revenue represents amounts received or receivable in respect of the sale of marketed products to customers during the year,
net of trade discounts given and value added tax, and in respect of royalty arrangements.
A description of the various elements of revenue and the associated accounting policies is given below:
(i) Marketed Products
The Group recognises revenue for marketed product sales when each condition of IAS18, paragraph 14 is wholly-satisfied.
Where sales arrangements specify a second element of revenue contingent upon a specified event, this revenue is not
recognised until this event has occurred and it is certain that the economic benefit triggered by this event will flow to the Group.
In cases where product is sold to a customer with a right of replacement, the Group views the transaction as a multi-element
arrangement and a portion of the value from the sale is deferred and allocated to the replacement right based on the fair value
of the replacement right. Revenue is recognised net of any trade discounts that may be given from time-to-time.
(ii) Royalties
Revenues from the Group’s licensed programmes are generated following the grant of a licence to a third-party to undertake
additional development and commercialisation of a research and development programme or other intellectual property rights.
In addition to an upfront payment, BTG may be entitled to additional revenues such as milestone payments or royalties on
revenues generated by the licensee. Revenues associated with royalty arrangements may in turn be linked to additional
obligations on BTG. These revenues are accounted for inline with IAS18 as follows:
Upfront and milestone payments
Non-refundable upfront and milestone payments are recognised as the earnings process is completed. This may result in full
recognition in the year in which the income is received. However, where the Group has ongoing performance obligations such
as the delivery of products or services, upfront payments are deferred over the period in which these obligations are satisfied.
Associated costs of performance obligations are expensed in the period to which they relate. In determining the performance
obligations under the contract, consideration is given as to whether elements of the obligations meet the criteria for separate
accounting. The Group applies the substantive milestone method in accounting for subsequent milestone payments. Milestone
payments that are considered substantive are recognised into income in the year in which they are received. Milestones that do
not satisfy the criteria to be considered as substantive are amortised over the remaining period in which the Group expects to
fulfil its performance obligations under the agreement. The Group considers the following when assessing whether a milestone
is considered substantive:
IAre the milestone payments non-refundable?
IDoes the achievement of the milestone involve a degree of risk that was not reasonably assured at the inception
of the arrangement?
IIs substantive effort involved in achieving the milestone?
I Is the amount of the milestone payment reasonable in relation to the effort expended or the risk associated with the
achievement of the milestone?
IHow does the time that passes between the payments compare to the effort required to reach the milestone?
Outlicensed product royalties
Royalty income is generated by sales of products incorporating the Group’s proprietary technology. Royalty revenues are
recognised once the amounts due can be reliably estimated based on the sale of underlying products and recoverability
is assured. Where there is insufficient historical data on sales and returns to fulfil these requirements, for example in the
case of a new product, the royalty revenue will not be recognised until the Group can reliably estimate the underlying sales.
(iii) Sales/assignments of IPR
Outright sales or assignments of IPR are treated as disposals of non-current assets.
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2 Significant accounting policies continued
(iv) Revenues received in relation to development programmes
Revenue received in relation to development programmes is recognised based on the percentage of completion of the
programme. Where payments may be earned in such programmes based on the achievement of uncertain milestones,
revenue is restricted to the cumulative cash receivable for the programme.
(s) Research and development
Research and development expenditure is charged to the income statement in the period in which it is incurred. Expenditure
incurred on development projects (relating to the design and testing of new or improved products) is recognised as intangible
assets when it is probable that the project will generate future economic benefit, considering factors including its commercial
and technological feasibility, status of regulatory approval, and the ability to measure costs reliably. Other development
expenditures are recognised as an expense as incurred. Development expenditure previously recognised as an expense
is not recognised as an asset in a subsequent period. Development expenditure that has a finite useful life and which has
been capitalised is amortised from the commencement of the commercial production of the product on a straight-line basis
over the period of its expected benefit.
No development expenditure has been capitalised in either the current or prior year.
Property, plant and equipment used for research and development is depreciated in accordance with the Group’s policy
and the cost is included within ‘Research and development’ in the income statement.
(t) Cost of sales
Cost of sales includes the direct costs incurred in manufacturing and bringing products to sale in the market and revenue
sharing costs.
Revenue sharing costs represent amounts due under royalty arrangements to licensors or assignees of technology and similar
directly attributable items. Amounts are recognised upon recognition by the Group of amounts due from a licensee. They are
recognised on an accruals basis in accordance with the individual agreements relating to the relevant technology, inline with
revenue recognition.
(u) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly against income. Such assets are depreciated over the shorter of their estimated useful lives or
the length of the lease. Assets purchased under hire purchase agreements are accounted for similarly, except that these assets
are depreciated over their estimated useful lives.
Rentals under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease
within the appropriate functional expenditure heading.
(v) Net financial income/expense
Net financial income/expense comprises interest income less interest payable during the year, calculated using the effective
interest rate method, and fair value adjustments relating to foreign exchange forward contracts, contingent considerations
payable upon corporate and non-corporate acquisitions and borrowings.
(w) Tax
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement 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 on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous years.
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Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying value
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in subsidiaries
and associates, where it is probable that the temporary differences will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying value
of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
(x) BTG Employee Share Trust
Included within the Group’s financial results are those of the BTG Employee Share Trust, the costs of which are expensed
within the financial statements of the Trust as incurred.
In the Company accounts the cost of BTG shares held by the Trust is deducted from shareholders’ funds.
(y) Financial guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its
Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the
Company treats the guarantee contracts as a contingent liability until such time as it becomes probable that the Company
will be required to make a payment under the guarantee.
(z) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in
the statement of comprehensive income over the period of the borrowings using the effective interest rate.
(aa) Biological assets
Biological assets are recognised when the asset is controlled by the Group and it is probable future economic benefit will a
rise from activities associated with the asset. Biological assets are measured at fair value less estimated point-of-sale costs.
Any gains or losses in fair value are recognised in the income statement.
3 Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
In the process of applying the Group’s accounting policies, described in note 2, management and the Audit Committee
discussed and agreed the selection, application and disclosure of the Group’s critical accounting policies and the estimates
used in the preparation of the accounts.
Revenue recognition
As described in note 2, it is the Group’s policy to recognise non-refundable upfront payments over the period in which any
performance obligations are satisfied. On 4 December 2008, the Group acquired Protherics which had received £16.3m
from AstraZeneca UK Ltd in a Patent and Know How Licence Agreement for AZD9773 (CytoFab™). The Group considered
that its obligations under the licence agreement consisted of the licence, provision of development services, regulatory support
and steering committee participation. The Group considered that the development services and the regulatory support it could
supply would cease with the approval of AZD9773 by the FDA and while the steering committee would have continued to operate
after product approval by the FDA, the Group had received confirmation that its participation after this date would become
voluntary. Based on the clinical development plan to be undertaken by AstraZeneca, the Group currently estimated that its
performance under the agreement would be completed over the period to 31 December 2015 and, therefore, was recognising
the £16.3m on a straight-line basis, over the estimated performance period.
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BTG plc Annual Report and Accounts 2013
3 Critical accounting judgements and key sources of estimation uncertainty continued
As detailed in note 29, on 8 August 2012 BTG announced the top-line data form a Phase IIb study of AZD9773 in patients
with severe sepsis and/or septic shock, conducted by AstraZeneca. The study failed to meet primary or secondary endpoints.
AstraZeneca has terminated its licence agreement and associated arrangement with BTG and has handed back the asset to
BTG. BTG does not anticipate conducting any further development of AZD9773. Consequently revenue of £8.6m has been
recognised within milestones and one-off income in the Licensing & Biotechnology operating segment. The components of
this revenue are:
I The release of the deferred income associated with previous received milestones from AstraZeneca in relation to AZD9773
work streams totalling £6.1m.
ICompensation for early contract termination of £2.5m.
In determining the revenue recognition period, management considered the detailed criteria for the recognition of revenue per
IAS18, Revenue, and is satisfied that all requirements have been met by the Group.
Acquisitions
Judgements have been made in respect of the identification of intangible assets made on acquisitions based on pre-acquisition
forecasts, analysis and negotiations. In addition to the judgements and estimates made in establishing the intangible assets
acquired and their value, in certain instances these assets are in development and are only amortised once the development
phase has been completed, although these assets are subjected to impairment review in accordance with the accounting policy
described in note 2(m).
In addition to significant fair value adjustments in relation to intangible assets, the Group has recognised other fair value
adjustments on assets and liabilities acquired. Each adjustment has been calculated inline with the requirements of IFRS3
(revised). The most significant of these relate to:
IInventory; where inventory acquired has been uplifted in value to be held at estimated selling price less costs to complete,
costs of disposal and a reasonable profit allowance.
IDeferred tax; where estimates of deferred tax liabilities arising on acquired intangible assets have been recognised. Where
appropriate an associated deferred tax asset, representing management’s estimation of the value of tax losses that would
be available to the Group to offset the deferred tax liability (see below), has also been recognised.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year,
are discussed below.
Impairment of goodwill and other intangibles
Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-generating
units to which goodwill or other intangible assets have been allocated. The value in use calculation requires estimation of future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. There
is a risk of a material adverse impact on the income statement should an impairment adjustment be required to be reflected in
the financial statements. See note 2(m) for further details.
Fair value of listed and unlisted investments
Note 15 explains the basis for estimating the fair value of listed and unlisted investments.
Pension assumptions
Note 22 details the key actuarial assumptions used to establish the pension funding position. These represent management’s
best estimates and are chosen based on historic experience and future expectations. Should the discount rate used to establish
scheme liabilities or the long-term expected rate of return on investment vary significantly then the pension fund valuation would
be impacted.
Deferred tax
The Group has significant deferred tax assets principally in relation to tax losses. The assets have been recognised on the basis
that management estimates demonstrate that it is more likely than not that future taxable profit will arise in the jurisdictions in
which the losses are available. If actual events differ from management’s estimates or the estimates are changed in the future
this could have a significant effect on the balance sheet net asset position of the Group. In recognising deferred tax assets and
liabilities, management has taken into account expected changes in tax rates in each relevant jurisdiction.
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4 Operating segments
Following the acquisition of Biocompatibles International plc on 27 January 2011, the Group aligned behind three reportable
segments, being Specialty Pharmaceuticals, Interventional Medicine and Licensing & Biotechnology.
In assessing performance and making resource allocation decisions, the Leadership Team (which is BTG’s chief operating
decision-making body) reviews “Contribution” by segment. Contribution is defined as being gross profit less directly attributable
selling, general and administrative costs (SG&A). The Licensing & Biotechnology operating segment includes SG&A relating
to the Group’s centrally managed support functions and corporate overheads. This reflects the management structure and
stewardship of the business. No allocation of central overheads is made across the Specialty Pharmaceuticals or Interventional
Medicine operating segments. Research and development continues to be managed on a global basis, with investment decisions
being made by the Leadership Team as a whole. It is not managed by reference to the Group’s operating segments, though each
programme within the pipeline would ultimately provide revenues for one of the operating segments if successful.
There are no inter-segment transactions that are required to be eliminated on consolidation.
Year ended 31 March 2013
Specialty
Pharmaceuticals
£m
Interventional
Licensing &
Medicine Biotechnology
£m
£m
Total
£m
233.7
(67.2)
Revenue
Cost of sales
Gross profit
97.2
(21.6)
75.6
36.1
(5.6)
30.5
100.4
(40.0)
60.4
166.5
Selling, general and administrative expenses
(20.2)
(17.5)
(20.3)
(58.0)
Contribution
55.4
13.0
40.1
108.5
Amortisation and impairment of acquired intangibles assets
Foreign exchange gains
Research and development
Amounts written off property, plant and equipment
Profit on disposal of intangible assets and investments
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax
Profit for the year
Unallocated assets
(43.4)
3.1
(41.2)
(1.8)
0.4
0.1
25.7
1.1
(2.7)
24.1
(7.7)
16.4
539.3
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BTG plc Annual Report and Accounts 2013
4 Operating segments continued
Year ended 31 March 2012
Specialty
Pharmaceuticals
£m
76.7
(18.7)
58.0
(18.6)
39.4
Revenue
Cost of sales1
Gross profit
Selling, general and administrative expenses
Contribution
Amortisation and impairment of acquired intangibles assets
Foreign exchange gains
Research and development
Amounts written off property, plant and equipment
Profit on disposal of intangible assets and investments
Acquisition and reorganisation costs
Amounts written off investments
Operating profit
Financial income
Financial expense
Profit before tax
Tax
Profit for the year
Unallocated assets
Interventional
Licensing &
Medicine Biotechnology
£m
£m
28.7
(8.6)
20.1
(13.3)
91.6
(29.0)
62.6
(17.0)
Total
£m
197.0
(56.3)
140.7
(48.9)
6.8
45.6
91.8
(30.7)
2.6
(39.7)
(3.0)
0.2
(1.1)
(0.2)
19.9
4.7
(1.6)
23.0
(8.4)
14.6
505.8
1 2012 includes a £2.1m release of the fair value uplift of inventory purchased on the acquisition of Biocompatibles International plc on 27 January 2011 within
the Interventional Medicine segment representing the reversal of a fair value uplift applied to inventory purchased on acquisition recognised through the income
statement when the product was sold.
Revenue analysis
Analysis of revenue, based on the geographical location of customers and the source of revenue is provided below:
Geographical analysis
USA
UK
Europe (excluding UK)
Other regions
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
202.8
21.2
5.3
4.4
168.1
10.0
15.1
3.8
233.7
197.0
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
103
Notes to the consolidated financial statements
4 Operating segments continued
Revenue from major products and services
Product sales
Royalties
Other
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
134.3
90.8
8.6
106.7
79.2
11.1
233.7
197.0
Major customers
Products that utilise the Group’s intellectual property rights are sold by licensees. Royalty income is derived from over 70
licences. One licence individually generated royalty income in excess of 10% of Group revenue of £49.9m (2012: Two licences
generated £29.4m and £24.4m respectively).
The Group’s marketed products are sold both directly and through distribution agreements in the USA, Europe and Asia Pacific
region. Two customers individually generated income in excess of 10% of Group revenue, being £25.2m and £24.8m respectively
(2012: Two customers generated £22.3m and £21.9m respectively).
5 Acquisition and reorganisation costs
BTG plc and Biocompatibles International plc costs
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
(0.1)
1.1
The Group considers ‘acquisition and reorganisation costs’ to include transaction costs of completing the acquisition and those
costs resulting directly from decisions to rationalise operating sites and business operations.
6 Operating profit
Operating profit has been arrived at after charging/(crediting):
Depreciation and other amounts written off property, plant and equipment
Amortisation and impairment of intangible assets
Amounts written off investments
Net foreign exchange gains
Research and development expenses
Staff costs
Operating lease rentals payable on property
Reorganisation costs, including release of onerous lease provision
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
4.9
45.1
–
(3.1)
41.2
49.8
1.7
(0.1)
6.2
31.9
0.2
(2.6)
39.7
40.6
1.9
1.1
Note
14
13
7
5
104 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
6 Operating profit continued
The analysis of the auditor’s remuneration is as follows:
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor and its associates for other services:
Audit of the company’s subsidiaries persuant to legislation
Audit related assurance services
Taxation compliance services
All taxation advisory services not covered above
Internal audit services
All assurance services not covered above
All services relating to corporate finance transactions entered into or proposed
to be entered into by or on behalf of the Company or any of its associates
All other non audit services
Year ended
31 March
2013
£’000
Year ended
31 March
2012
£’000
121
265
53
71
42
–
–
30
–
153
265
50
46
–
–
–
–
–
A description of the work of the Audit Committee is set out in the corporate governance statement on pages 57 to 60 and
includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided
by the auditor.
7 Staff costs
Staff costs (including directors’ emoluments and reorganisation costs) are as follows:
Salaries
Social security costs
Defined contribution pension costs
Defined benefit pension costs
Equity-settled transactions
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
38.6
4.3
1.9
0.3
4.7
49.8
32.8
3.3
1.7
0.4
2.4
40.6
Key management personnel are considered to be the directors and their remuneration is disclosed within the remuneration
report on pages 63 to 81. In addition to the disclosures in the remuneration report, the charge to income in respect of equity-
settled transactions of key management personnel, in accordance with IFRS2, was £1.2m (2012: £0.9m).
The average number of persons employed by the Group during the year (including executive directors), analysed by category,
was as follows:
Management
Research and production
Sales, administration and business support
Year ended
31 March
2013
Number
Year ended
31 March
2012
Number
42
326
201
569
50
312
136
498
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
105
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Notes to the consolidated financial statements
8 Financial income
Interest receivable on money-market and bank deposits
Fair value changes on Contingent Value Notes1
Fair value changes of borrowings2
Financial income
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
1.1
–
–
1.1
0.7
1.1
2.9
4.7
1 Contingent Value Notes
As part of BTG’s acquisition of Biocompatibles in January 2011, 487 Biocompatibles shareholders elected to receive in aggregate
10,722,465 Contingent Value Notes (CVNs) providing a right to a payment of the Sterling equivalent of €0.56 per Biocompatibles
share if AstraZeneca exercised its option to enter a licence agreement relating to CM-3 on the pre-agreed terms. In May 2011
AstraZeneca decided to terminate the development and option agreement. The payment obligation would only have arisen if
BTG entered into another form of licence, sale or other disposal of the GLP-1 asset to AstraZeneca prior to 31 December 2012.
The BTG Board did not believe that there was any realistic possibility that this would occur. Accordingly, in the prior year, the Group
derecognised a liability of £1.1m in relation to the CVNs through the income statement in financial income in the acquisition
adjustments and reorganisation costs column. Subsequently no qualifying form of agreement was entered into by the Group.
2 Borrowings
In the prior year, following the withdrawal of the Novabel® product from the market, termination of the supply agreement with
Merz and subsequent impairments recognised within tangible and intangible assets, the Group derecognised a £2.8m loan
from Merz as there was no obligation for this to be repaid. The loan was received to fund the purchase of tangible assets for
use in the manufacture of Novabel® and was repayable out of revenues.
9 Financial expense
Fair value changes of foreign exchange forward contracts
Others
Financial expense
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
2.6
0.1
2.7
1.5
0.1
1.6
106 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
10 Tax
An analysis of the tax charge in the income statement for the year, all relating to current operations, is as follows:
Current tax
UK corporation tax charge
Overseas corporate tax charge
Adjustments in respect of prior years
Total current taxation
Deferred taxation
Deferred tax
Adjustments to tax rates
Total tax charge for the year
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
3.6
2.6
(2.1)
4.1
1.8
1.8
7.7
2.8
0.9
0.2
3.9
5.3
(0.8)
8.4
In addition to the tax charge in the income statement, a deferred tax charge of £1.6m has been recognised in the consolidated
statement of other comprehensive income.
UK corporation tax is calculated at 24% (2012: 26%) of the estimated taxable profit for the year. Taxation for other jurisdictions
is calculated at the rates prevailing in the respective jurisdictions.
Reconciliation of the effective tax rate:
Profit before tax
Tax using UK corporation tax rate of 24% (2012: 26%)
Effect of overseas tax rates
Change in unrecognised deferred tax assets
Non-deductible expenses
Additional tax credit for research and development expenditure
Adjustments to tax rates
Adjustments in respect of prior years
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
24.1
23.0
5.8
2.9
(1.3)
2.3
(0.3)
1.8
(3.5)
7.7
5.9
2.9
2.1
0.3
(0.6)
(0.8)
(1.4)
8.4
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
107
Notes to the consolidated financial statements
10 Tax continued
An analysis of amounts included in the consolidated statement of financial position in respect of income taxes is shown below:
Current assets
Overseas corporate tax receivable
Current liabilities
UK corporation tax payable
Overseas corporate tax payable
31 March
2013
£m
31 March
2012
£m
0.4
0.4
0.8
1.2
–
0.9
1.2
2.1
Deferred taxation
The movements in the deferred tax asset and liabilities (prior to the offsetting of balances within the same jurisdiction
as permitted by IAS12, Income Taxes) during the year are as shown below. The deferred tax asset and liabilities are only
offset where there is a legally enforceable right of offset and there is an intention to settle the balance net.
Deferred tax asset
Deferred tax asset recognised at 1 April
Income statement (charge)/credit
Deferred tax asset recognised at 31 March
2013
£m
1.0
(0.1)
0.9
2012
£m
0.9
0.1
1.0
The deferred tax asset relates to short-term timing differences in Australia. It has been recognised using a tax rate of 30%
(2012: 30%) because the directors are of the opinion, based on recent and forecast trading, that the level of profits in Australia
in the forthcoming years will lead to the realisation of this asset.
Deferred tax liability
The deferred tax liability of £41.8m (2012: £35.2m) represents the net position after taking into account the offset of
deferred tax assets against deferred tax liabilities in each jurisdiction. Deferred tax liabilities of £62.4m arise on intangible
assets recognised at fair value on acquisitions, £1.6m on pension fund surplus and £0.1m on accelerated capital allowances.
Deferred tax assets relate to brought forward trading losses. The table below summarises the gross and net position at each
balance sheet date:
Deferred tax
assets
£m
Deferred tax
liabilities
£m
Net deferred
tax liability
£m
55.4
(1.4)
(16.2)
0.1
–
37.9
1.3
(17.4)
–
0.5
(86.1)
2.8
9.9
(0.1)
0.4
(73.1)
–
12.5
(1.6)
(1.9)
(30.7)
1.4
(6.3)
–
0.4
(35.2)
1.3
(4.9)
(1.6)
(1.4)
22.3
(64.1)
(41.8)
At 1 April 2011
Adjustments re prior years
Income statement (debit)/credit
Exchange differences
Other
At 1 April 2012
Adjustments re prior years
Income statement (debit)/credit
Other comprehensive income debit
Exchange differences
At 31 March 2013
108 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
10 Tax continued
The 2013 Budget on 20 March 2013 announced that the UK corporation tax rate will reduce to 20% by 2015. A reduction in
the rate from 24% to 23% (effective from 1 April 2013) was substantively enacted on 3 July 2012. The further reductions to
21% from 1 April 2014 and to 20% from 1 April 2015 have not yet been substantively enacted. This will reduce the Company’s
future current tax charge accordingly. The UK deferred tax assets and liabilities at 31 March 2013 have been calculated based
on the rate of 23% substantively enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated
effect of the announced further 3% rate reduction, although this will further reduce the Company’s future current tax charge and
reduce the Company’s deferred tax asset and liability accordingly.
Unrecognised tax losses
In addition to the losses on which a deferred tax asset has been recognised, the Group has additional tax losses and other
timing differences in the UK and the US which arose principally as a result of the research and development incurred during
the start up of the Group’s activities. These losses and timing differences are shown below. The UK tax losses can be carried
forward indefinitely. The US tax losses can be carried forward for 20 years and the first year in which they expire is 2032.
A deferred tax asset has not been recognised in respect of the losses and timing differences shown below as there is
uncertainty as to whether such losses and timing differences can be used.
The total amount of tax losses and timing differences not recognised is shown below:
Tax losses
Deductible temporary differences
31 March
2013
£m
120.0
30.4
31 March
2012
£m
157.4
15.9
150.4
173.3
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
109
Notes to the consolidated financial statements
11 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Profit for the financial year (£m)
Profit per share (p)
Basic
Diluted
Number of shares (m)
Weighted average number of shares – basic
Effect of share options on issue
Weighted average number of shares – diluted
The basic and diluted earnings per share from underlying earnings are based on the following data:
Profit for the financial year (£m)
Add back:
Fair value adjustment on acquired inventory1
Fair value adjustment on royalty income
Amortisation of acquired intangible fixed assets2
Acquisition and reorganisation costs including CVN writeback3
Reorganisation of US corporate structure4
Underlying earnings
Underlying profit per share (p)
Basic
Diluted
Year ended
31 March
2013
Year ended
31 March
2012
16.4
14.6
5.0
5.0
4.5
4.4
326.9
4.0
325.9
3.4
330.9
329.3
Year ended
31 March
2013
Year ended
31 March
2012
16.4
14.6
–
–
31.1
(0.1)
–
47.4
14.5
14.3
2.1
0.1
19.3
(0.1)
1.0
37.0
11.4
11.2
Adjustments to profit are shown after taking into account the tax effect of such adjustments on the results as shown in the
consolidated income statement as follows:
1 No tax adjustment was required on the fair value of acquired inventory in the prior year.
2 The release of deferred tax liability of £12.3m (2012: £11.4m) has been deducted from the amortisation and impairment
of acquired intangible assets of £43.4m (2012: £30.7m) as shown in the consolidated income statement.
3 In the year ended 31 March 2013 there was nil tax impact on reorganisation credits of £0.1m that have been adjusted.
In the year ended 31 March 2012, £0.1m of tax effect of reorganisation costs was adjusted on the basis that the tax charge
would have been £0.1m higher had it not been for deductions available against reorganisation costs paid in the financial year.
4 An adjustment was made for the deferred tax credit recognised at 31 March 2011 as a result of the completion of a tax-free
reorganisation and subsequent review of such items in the year ended 31 March 2012.
110 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
12 Goodwill
At 1 April 2011
At 1 April 2012
At 31 March 2013
Accumulated impairment losses
At 1 April 2011, 1 April 2012 and 31 March 2013
Net book value at 31 March 2013
Net book value at 1 April 2012
Net book value at 1 April 2011
£m
59.2
59.2
59.2
–
59.2
59.2
59.2
Impairment review – goodwill and intangible assets
An impairment review of the carrying value of goodwill and unamortised intangible assets was conducted as at 31 March 2013.
Goodwill arose on the acquisitions of Protherics PLC and Biocompatibles International plc. This has been allocated across
the Group’s cash generating units, being its operating segments (see note 4). Goodwill recognised on acquisitions has been
allocated across operating segments in proportion to the anticipated benefits of that goodwill on the operating segment,
having regard for the assets and liabilities acquired. The carrying value of goodwill has been allocated as relating to Specialty
Pharmaceuticals, £16.4m (2012: £16.4m), as relating to Interventional Medicine, £22.6m (2012: £22.6m) and in relation
to Licensing & Biotechnology, £20.1m (2012: £20.1m).
The impairment review required the estimation of the recoverable amount based on the value in use of the underlying cash
generating unit. Near-term projections are based on the Group’s approved three-year plan. Longer-term projections through
to the end of an asset’s estimated useful economic life are included due to the long-term nature of pharmaceutical product
development and product life cycles.
The main assumptions on which the forecast cashflows were based include market share and gross margin for the marketed
products, individual probability-adjusted cash flow models for all in-process research and development and an assessment of
the net present value of future net royalty income for licensed patents.
Cash flow projections for all assets were included for a period equal to the estimated useful economic life of the assets.
No terminal values were applied. All cashflows were discounted back to present value using a pre-tax discount rate of between
8% (2012: 7%) for net royalty income and 22% (2012: 28%) for in-process research and development, which takes into account
the individual risk characteristics of each particular asset and related income stream.
For developed technology, the Group uses its approved three-year budget for near-term sales projections, adjusting for expected
changes in future conditions, including those anticipated as a result of our knowledge of competitor activity and our assessment
of future changes in the pharmaceutical industry for long-term projections.
For contractual relationships, the Group uses the same basic methodology as for developed technology but limits the projection
period to the appropriate useful economic life of the contractual relationship.
For in-process research and development the key assumptions are the chance of product launch, market share and overall
market size. Industry average statistics are used to assess the chance of product launch, taking in to account the stage of
development of the asset, the therapeutic area targeted and any known specific characteristics of the asset. Market share
and overall market size are assessed by reference to independent industry market reports.
In assessing whether there has been an impairment the net present value of future cashflows is compared to the carrying
value in the accounts.
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
111
Notes to the consolidated financial statements
13 Intangible assets
Group
Cost
At 1 April 2011
Additions
Transfers
Disposals
Currency movements
At 1 April 2012
Additions
Disposals
Currency movements
At 31 March 2013
Amortisation
At 1 April 2011
Provided during the year
Impairments
Writeback on disposals
Currency movements
At 1 April 2012
Provided during the year
Impairments
Writeback on disposals
Currency movements
At 31 March 2013
Net book value
At 31 March 2013
At 1 April 2012
At 1 April 2011
Developed
technology
£m
Contractual
relationships
£m
In-process
research and
development
£m
Computer
software
£m
Purchase
of contractual
rights
£m
Patents
£m
230.2
–
3.9
–
–
234.1
–
(4.8)
5.8
235.1
12.0
12.3
5.0
–
(0.2)
29.1
12.5
–
(4.8)
0.8
37.6
197.5
205.0
218.2
40.0
–
–
–
0.1
40.1
–
(0.2)
1.6
41.5
8.8
4.7
–
–
–
13.5
2.0
24.0
(0.2)
1.3
40.6
0.9
26.6
31.2
18.8
–
(3.9)
–
(0.1)
14.8
–
(8.9)
(0.1)
5.8
0.9
–
8.8
–
–
9.7
–
5.0
(8.9)
–
5.8
–
5.1
17.9
0.3
0.3
–
–
–
0.6
0.2
–
–
0.8
–
0.1
–
–
–
0.1
0.1
–
–
–
0.2
0.6
0.5
0.3
13.2
0.3
–
(0.2)
–
13.3
0.7
(0.6)
1.1
14.5
9.8
0.6
0.3
(0.2)
0.1
10.6
0.8
0.3
(0.6)
1.0
12.1
2.4
2.7
3.4
Total
£m
312.0
6.7
–
(0.2)
0.1
318.6
2.7
(14.5)
9.3
316.1
41.0
17.8
14.1
(0.2)
(0.1)
72.6
15.8
29.3
(14.5)
3.7
9.5
6.1
–
–
0.1
15.7
1.8
–
0.9
18.4
9.5
0.1
–
–
–
9.6
0.4
–
–
0.6
10.6
106.9
7.8
6.1
–
209.2
246.0
271.0
Amortisation relating to acquired intangibles is shown on the face of the income statement within ‘Amortisation
of acquired intangibles’. All other amortisation and impairment is shown within ‘Selling, general and administrative
expenses’ in ‘Operating expenses’.
112 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
13 Intangible assets continued
Developed technology
Developed technology relates to both the antidote assets acquired in Protherics PLC comprising principally of the rights to
CroFab® and DigiFab® and the bead assets acquired in Biocompatibles International plc comprising principally of the rights
to the DC Bead®and LC Bead™. The carrying value of individually significant assets within developed technology is:
CroFab®
DigiFab®
DC Bead®and LC Bead™
31 March
2013
£m
73.1
23.6
91.2
31 March
2012
Remaining
amortisation
period at 31
£m March 2013
72.8 20.7 years
23.5 20.7 years
98.3 12.8 years
Contractual relationships
Contractual relationships relates to contracts acquired in Protherics PLC and Biocompatibles International plc. The carrying
value and remaining amortisation period of individually significant contracts is:
Licence agreement with AstraZeneca for AZD9773 (CytoFab™)
31 March
2013
£m
31 March
2012
Remaining
amortisation
period at 31
£m March 2013
–
22.9
–
An impairment charge of £22.5m has been recognised in amortisation and impairment of acquired intangibles in the acquisition
adjustments and reorganisation costs column in the income statement in relation to AZD9773 (see note 29).
Purchase of contractual rights
In May 2012, BTG signed an agreement with Wellstat Therapeutics Corporation to acquire the rights to distribute uridine
triacetate on a name patient supply basis in Europe for an upfront payment of $3.0m, together with an option to market
uridine triacetate following EU regulatory approval, under pre-agreed financial terms including a multi-million dollar exercise fee.
In July 2011 BTG signed an agreement with Wellstat Therapeutics Corporation to acquire the US commercial rights to product
candidate uridine triacetate. BTG paid Wellstat an upfront fee of $7.5 million and will make milestone payments upon NDA
acceptance and approval and inventory purchase payments based on manufacturing costs and a significant percentage of net
sales. The fair valuation of consideration was capitalised at 6 July 2011 and will be amortised over the ten year period starting
from marketing approval representing the length of the exclusive period and point at which BTG will begin to generate economic
returns from the product.
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Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
113
Notes to the consolidated financial statements
14 Property, plant and equipment
Cost or valuation
At 1 April 2011
Additions
Transfers
Disposals
Currency movements
At 1 April 2012
Additions
Transfers
Disposals
Currency movements
At 31 March 2013
Depreciation
At 1 April 2011
Provided during the year
Impairments
Disposals
Currency movements
At 1 April 2012
Provided during the year
Impairments
Disposals
Currency movements
At 31 March 2013
Net book value at 31 March 2013
Net book value at 1 April 2012
Net book value at 1 April 2011
Leasehold
improvements
£m
Freehold land
and buildings
£m
Plant and
machinery,
Furniture and
equipment
£m
Assets in the
course of
construction
£m
1.2
–
0.2
(0.1)
–
1.3
0.1
0.3
–
–
1.7
0.2
0.2
–
(0.1)
–
0.3
0.2
–
–
–
0.5
1.2
1.0
1.0
12.9
0.2
–
–
0.1
13.2
3.4
–
–
0.8
17.4
1.5
0.6
–
–
–
2.1
0.6
0.1
–
0.1
2.9
14.5
11.1
11.4
15.3
2.0
0.2
(1.6)
–
15.9
1.8
0.6
(0.9)
0.3
17.7
6.2
2.4
3.0
(1.5)
0.1
10.2
2.3
1.6
(0.9)
0.3
13.5
4.2
5.7
9.1
3.3
1.6
(0.4)
(0.2)
(0.1)
4.2
2.2
(0.9)
–
0.1
5.6
–
–
–
–
–
–
–
0.1
–
–
0.1
5.5
4.2
3.3
Total
£m
32.7
3.8
–
(1.9)
–
34.6
7.5
–
(0.9)
1.2
42.4
7.9
3.2
3.0
(1.6)
0.1
12.6
3.1
1.8
(0.9)
0.4
17.0
25.4
22.0
24.8
The net book value of plant and machinery and furniture, fixtures and equipment includes £0.2m (2012: £0.5m) in respect
of assets held under finance lease and hire purchase agreements. Depreciation for the year on those assets was £0.1m
(2012: £0.2m).
As detailed in note 29, property, plant and equipment write downs associated with assets used in the development of AZD9773
of £1.8m have been recognised in the amounts written off property, plant and equipment. This adjustment was not reflected in
the acquisition adjustments and reorganisation costs column.
In the prior year an impairment charge of £3.0m was made against tangible fixed assets that would have been used exclusively
for production of Novabel®. The product has been withdrawn from the market since June 2010 and Merz has terminated the supply
agreement with the Group. This adjustment was not reflected in the acquisition adjustments and reorganisation costs column.
114 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
15 Other investments
At 1 April
Additions
Impairment charge
At 31 March
2013
£m
3.0
–
–
3.0
2012
£m
2.7
0.5
(0.2)
3.0
Other investments comprise non-current equity investments which are available-for-sale that are recorded at fair value at each
balance sheet date. The fair value of unlisted investments is estimated to be the valuation following the latest round of equity
funding. In the absence of specific market data the Group determines that cost is equal to fair value.
Where the fair value of an available-for-sale asset is impaired, the impairment charge is recognised in the income statement,
together with any amounts recycled from the fair value reserve (see note 19). These impairments initially arise from the
prolonged or significant decline in the fair value of the equity investments below acquisition cost, subsequent to which any
further decline in fair value is immediately taken to the income statement.
16 Inventories
Raw materials and consumables
Work in progress
Finished goods
31 March
2013
£m
31 March
2012
£m
10.0
11.6
1.7
23.3
6.6
12.4
2.8
21.8
In the prior period a fair value adjustment of £2.1m was recognised through cost of sales (see note 4) leaving £nil of fair
value uplift recognised on the acquisition of Biocompatibles International plc remaining. Inventory to the value of £1.6m
(2012: £1.5m) was written off through cost of sales.
17 Trade and other receivables
Due within one year
Revenues receivable, net of provisions
Other debtors
Prepayments and accrued income
31 March
2013
£m
31 March
2012
£m
19.2
6.5
28.8
54.5
20.4
3.6
16.1
40.1
Managing credit risk:
‘Revenues receivable, net of provisions’ represents accrued royalty income for the period to 31 March 2013 and certain other
amounts receivable under licence agreements.
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Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
115
Notes to the consolidated financial statements
17 Trade and other receivables continued
The ageing of these amounts was as follows:
Not past due
0-30 days
31-90 days
> 90 days
Total
31 March 2013
31 March 2012
Gross
£m
17.0
1.6
0.3
1.1
20.0
Provision
£m
–
–
–
(0.8)
(0.8)
Gross
£m
19.8
0.5
0.1
0.8
21.2
Provision
£m
–
–
–
(0.8)
(0.8)
Provisions for bad debts of £0.8m (31 March 2012: £0.8m) have been made to write down the value of doubtful receivables to
estimated recoverable amounts. The charge to income for the year to 31 March 2013 in respect of provisions for bad debts was
£nil (2012: £0.5m).
18 Cash and cash equivalents
Bank balances
Cash and cash equivalents in statement of cash flows
31 March
2013
£m
158.7
158.7
31 March
2012
£m
106.9
106.9
Cash deposits with a maturity of greater than three months are classified as held to maturity financial assets.
Held to maturity financial assets
Bank deposits
31 March
2013
£m
31 March
2012
£m
–
5.0
The effective interest rate on held to maturity financial assets in the prior year was 3.5% and these deposits had an average
maturity of ten months.
116 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
19 Equity
Other reserves are analysed as follows:
At 1 April 2011
Total recognised income and expense
At 1 April 2012
Total recognised income and expense
At 31 March 2013
Translation
reserve
£m
Fair value
reserve
£m
Total other
reserves
£m
(3.8)
(0.3)
(4.1)
4.2
0.1
0.1
–
0.1
–
0.1
(3.7)
(0.3)
(4.0)
4.2
0.2
The merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.
The balance on the merger reserve has arisen through the acquisitions of Biocompatibles International plc on 27 January 2011
and Protherics PLC on 4 December 2008 and includes directly attributable costs of issuing shares of £1.1m relating to the
acquisition of Biocompatibles International plc.
The issued and fully paid share capital of the Company is shown below:
Ordinary shares of 10p each
At 1 April
Issued for cash
At 31 March
2013
Number
327,292,865
984,006
328,276,871
2012
Number
326,725,906
566,959
327,292,865
£m
32.7
0.1
32.8
£m
32.7
–
32.7
The shares issued in the current and prior year were as a result of the acquisition of the Biocompatibles Group and the exercise
of share options.
Share options
Details of outstanding share options are set out in note 23.
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Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
117
Notes to the consolidated financial statements
20 Trade and other payables
Amounts falling due within one year
Trade payables
Accruals and deferred income
Other creditors
Amounts falling due after more than one year
Accruals and deferred income
Other creditors
21 Derivative financial instruments
Contracts with positive fair values
Forward foreign exchange contracts
Derivative instrument assets
Contracts with negative fair values
Forward foreign exchange contracts
Derivative instrument liabilities
31 March
2013
£m
31 March
2012
£m
9.4
47.6
4.6
61.6
0.3
0.2
0.5
6.0
45.9
3.5
55.4
4.7
0.3
5.0
31 March
2013
£m
31 March
2012
£m
–
–
2.2
2.2
0.5
0.5
–
–
The Group utilises foreign currency derivatives to hedge significant future transactions and cash flows.
At 31 March 2013 the Group had forward contracts to sell US$71m in the period to September 2013 at rates in the range
£1:US$1.56 to £1:US$1.61. The fair value of these derivative financial instruments was marked-to-market at 31 March 2013
as a liability at £2.2m.
At 31 March 2012 the Group had forward contracts to sell US$25m in the period to September 2012 at rates in the range
£1:US$1.54 to £1:US$1.60. The fair value of these derivative financial instruments was marked-to-market at 31 March 2012
as an asset at £0.5m.
At 31 March 2012 the Group had a forward contract to buy AU$1m in April 2012 at a rate of £1:AU$1.52. The fair value
of this forward contract was marked-to-market at 31 March 2012 at £nil.
The fair value loss for the year associated with these forward contracts was included within ‘Financial expense’.
A 5% strengthening of the US$ as at 31 March 2013, all other variables being unchanged, would result in an additional
£2.3m charge within ‘Financial expense’ in the income statement and a fair value liability of £4.5m within ‘Derivative
instruments’ within current liabilities. A 5% weakening of the US$ would result in a £2.3m reduction within ‘Financial income’
and a decrease in ‘Derivative instruments’ to £nil within current liabilities with the Group recognising a current asset of
£0.1m within ‘Derivative instruments’.
118 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
22 Retirement benefit schemes
Defined benefit scheme
For eligible UK employees the Group operates a funded pension plan providing benefits based on final pensionable emoluments.
The plan was closed to new entrants as of 1 June 2004. The assets of the plan are held in a separate trustee administered
fund. The plan has a history of granting increases to pensions inline with price inflation, and these increases are reflected in
the measurement of the obligation.
The results of the formal valuation of the plan as at 31 March 2010 were updated to the accounting date by an independent
qualified actuary in accordance with IAS19.
In July 2010, the government announced its intention that future statutory minimum pension indexation would be measured
by the Consumer Prices Index, rather than the Retail Prices Index (‘RPI’). The Group continues to value its pension fund liability
on the basis of RPI.
The expected rate of return on assets for the financial year ending 31 March 2013 was 4.6% pa (2012: 5.4% pa). This rate is
derived by taking the weighted average of the long-term expected rate of return on each of the asset classes that the plan was
invested in at 31 March 2012, based on the plan’s long-term investment strategy at that date.
The estimated amount of total employer contributions expected to be paid to the plan during 2013/14 is £3.9m
(2012/13 actual: £5.1m). The estimate is based on the current schedule of contributions agreed as part of the formal
valuation of the plan as at 31 March 2010.
The following table sets out the key IAS19 assumptions used for the plan:
31 March
2013
31 March
2012
31 March
2011
Retail price inflation
Discount rate
Pension increases in deferment – RPI inflation
Pension increases in payment – RPI inflation
Pension increases in payment – inflation capped at 2.5%
General salary increases
Life expectancy at age 60 of a male age 60 at the accounting date
Life expectancy at age 60 of a male age 40 at the accounting date
3.6% p.a. 3.5% p.a. 3.7% p.a.
4.4% p.a. 4.7% p.a. 5.5% p.a.
3.6% p.a. 3.5% p.a. 3.7% p.a.
3.6% p.a. 3.5% p.a. 3.7% p.a.
2.3% p.a. 2.3% p.a. 2.3% p.a.
3.6% p.a. 3.5% p.a. 3.7% p.a.
87.3
88.8
87.3
88.9
87.5
89.1
The amount included in the statement of financial position arising from the Group’s obligations in respect of the plan is as
follows:
Present value of defined benefit obligation
Fair value of scheme assets
31 March
2013
£m
31 March
2012
£m
31 March
2011
£m
(116.3)
121.0
(108.6)
108.5
(96.8)
94.8
Net asset/(liability) recognised in the statement of financial position
4.7
(0.1)
(2.0)
A net asset is presented in the statement of financial position within non-current assets. A net liability is presented in the
statement of financial position within non-current liabilities.
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
119
Notes to the consolidated financial statements
22 Retirement benefit schemes continued
The amounts recognised in the income statement in respect of the plan are as follows:
Employer’s part of current service cost
Interest cost
Expected return on plan assets
Total expense included in income statement
The expense has been included in ‘Operating expenses: Selling, general and administrative expenses’.
The allocation of the plan’s assets is as follows:
31 March
2013
£m
31 March
2012
£m
0.4
5.0
(5.0)
0.4
0.4
5.2
(5.2)
0.4
Equity instruments
Diversified growth funds
Debt instruments
Cash/net current assets
Changes in the present value of the defined benefit obligation are as follows:
Defined benefit obligation at 1 April
Employer’s part of current service cost
Interest cost
Contributions from plan members
Actuarial loss on scheme liabilities
Benefits paid
Defined benefit obligation at 31 March
Changes in the fair value of the plan assets are as follows:
Fair value of plan assets at 1 April
Expected return on plan assets
Actuarial gains on scheme assets
Contributions by the employer
Contributions by plan members
Benefits paid
Fair value of plan assets at 31 March
31 March
2013
%
31 March
2012
%
31 March
2011
%
15
14
70
1
15
14
70
1
17
14
68
1
100
100
100
2013
£m
108.6
0.4
5.0
0.1
7.0
(4.8)
2012
£m
96.8
0.4
5.2
0.1
10.6
(4.5)
116.3
108.6
2013
£m
108.5
5.0
7.1
5.1
0.1
(4.8)
2012
£m
94.8
5.2
7.7
5.2
0.1
(4.5)
121.0
108.5
The actual return on the plan’s assets over the year was £12.1m (2012: £12.9m).
The amount recognised outside profit and loss in other comprehensive income for 2013 is a gain of £0.1m (2012: loss of £2.9m).
The cumulative amount recognised outside profit and loss as at 31 March 2013 is a loss of £10.6m (2012: loss of £10.7m).
120 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
22 Retirement benefit schemes continued
The history of experience adjustment is as follows:
Present value of defined benefit obligations
Fair value of plan assets
31 March
2013
£m
31 March
2012
£m
31 March
2011
£m
31 March
2010
£m
31 March
2009
£m
(116.3)
121.0
(108.6)
108.5
(96.8)
94.8
(98.3)
89.1
(74.9)
74.9
Asset/(Deficit) in the scheme
4.7
(0.1)
(2.0)
(9.2)
–
Experience adjustments on plan assets
Amount of (gain)/loss (£m)
Percentage of plan assets (%)
Experience adjustments on plan liabilities
Amount of (gain)/loss (£m)
Percentage of the present value of plan liabilities (%)
31 March
2013
31 March
2012
31 March
2011
31 March
2010
31 March
2009
(7.1)
6
(0.9)
(1)
(7.7)
7
1.5
1
(0.9)
1
(10.4)
12
3.4
4
(2.5)
(3)
7.4
(10)
–
–
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are:
Change in assumption
Increase in
liabilities
31 March
2013
£m
31 March
2012
£m
Discount rate
Decrease of 0.1%
(1.8)
(1.8)
IAS 19 (Amended)
IAS 19 (Amended) removes the option to include an expense reserve in pension scheme liabilities. This change is expected to
result in a one-off credit to other comprehensive income, a one-off credit to opening reserves and a corresponding increase in
net assets in 2013 comparatives in the year ending 31 March 2014, to release the expense reserves previously recognised
within pension scheme liabilities. The estimated transition impact, once adopted by the Group for the period ending 31 March
2014, is shown in the tables below.
Impact on statement of financial position
IAS 19 (Current)
Present value of defined benefit obligation
Fair value of scheme assets
Net asset/(liability) recognised in the statement of financial position
IAS 19 (Amended)
Present value of defined benefit obligation
Fair value of scheme assets
Net asset recognised in the statement of financial position
Transition impact
Present value of defined benefit obligation
Fair value of scheme assets
31 March
2013
£m
31 March
2012
£m
(116.3)
121.0
(108.6)
108.5
4.7
(0.1)
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(110.7)
121.0
(103.5)
108.5
10.3
5.0
5.6
–
5.6
5.1
–
5.1
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
121
Notes to the consolidated financial statements
22 Retirement benefit schemes continued
Impact on consolidated income statement
Employer’s part of current service cost
Interest cost
Expected return on plan assets
Net interest on the net pension liability
Administrative expenses
Total expense included in income statement
Year ended 31 March 2013
IAS19
(Current)
£m
IAS 19
(Amended)
£m
0.4
5.0
(5.0)
n/a
n/a
0.4
0.4
n/a
n/a
(0.4)
n/a
–
Defined contribution schemes
The Group offers defined contribution pension schemes for its UK, US, European and Australian employees. The total income
statement charge in relation to these schemes was £1.9m (2012: £1.7m).
The Group’s defined contribution schemes are operated by external providers. The only obligation of the Group with respect
to these schemes is to make the specified contributions.
23 Share-based payments
Share options
The Group makes awards under an equity-settled share option plan that entitles employees to purchase shares in the
Company. In accordance with the rules of the plan, options are granted at the market price of the shares on the date of grant
with a vesting period of generally three years. They may only be exercised upon the attainment of certain performance criteria.
If the performance criteria are not met by the date specified at the time of grant, the options do not vest and will lapse. If the
options remain unexercised after a period of ten years from the date of grant, the options expire. Furthermore, options are
forfeited if the employee leaves the Group before the options vest unless the conditions under which they leave are such that
they are considered to be a ‘good leaver’. In this case their options remain exercisable for a limited period of time. For further
details of current awards, see the remuneration report on pages 63 to 81.
Option pricing
For the purposes of valuing options to arrive at the share-based compensation charge, a binomial lattice option pricing model
has been used. The assumptions used in the model are as follows:
Risk-free interest rate
Dividend yield
Volatility
Expected lives of options and awards granted under:
– Share option plan
– Sharesave plan
– Stock purchase plan
– Restricted share awards
– Performance share-plan
– Deferred share bonus plan
Weighted average fair value for share option plan grants in the year
Weighted average fair value for sharesave grants in the year
Weighted average fair value for stock purchase plan grants in the year
Weighted average fair value for performance share awards in the year
Weighted average fair value for deferred share bonus awards in the year
122 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
31 March
2013
31 March
2012
0.1% to 0.7%
Nil
29% to 40%
0.8% to 2.5%
Nil
27% to 41%
6 years
3.25 years
2.13 years
n/a
2 to 3 years
3 years
158.6p
129.9p
100.7p
335.7p
380.5p
6 years
3.25 years
2.13 years
n/a
2 to 3 years
3 years
119.3p
114.8p
69.4p
264.6p
298.9p
23 Share-based payments continued
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life
of the share options, restricted or performance shares), adjusted for any expected changes to future volatility due
to publicly-available information.
Share options are granted under a service condition, a non-market condition and a market condition. Service and
non-market conditions are not taken into account in calculating the fair value measurement of the services received.
Performance shares are awarded under a service condition, a non-market condition and a market condition. Service
and non-market conditions are not taken into account in calculating the fair value measurement of the services received.
Awards of share options and performance share awards made in 2009 and later years have a market condition based on a
TSR measure using the FTSE 250 companies excluding investment trusts, companies in the financial services sector (banks,
life & non-life insurance, equity & non-equity investment trusts, financial services, real estate investment & services and real
estate investment trusts etc.) and companies in the consumer discretionary sector (general retailers, media, travel & leisure,
and leisure goods). Earlier share options and performance shares used the FTSE SmallCap (excluding Investment Trusts) index.
If the Company’s share price at least matches the performance of the relevant index over the vesting period, the market-based
performance condition will be considered to have been achieved. The fair value of an award of shares under the share option
and performance share plans have been adjusted to take into account this market-based performance condition using a
pricing model based on expectations about volatility and the correlation of share price returns in the relevant index and which
incorporates into the valuation the interdependency between share price and index performance. This adjustment increases the
fair value relative to the share price at the date of grant. See the remuneration report on pages 63 to 81 for further information.
Details of options and awards under the Group’s share plans are shown in the tables below.
31 March 2013
31 March 2012
Share options
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Sharesave plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Stock purchase plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Number of
share options
(000)
Weighted
average
exercise
Number of
price share options
(000)
(p)
1,427
341
(79)
(7)
225.2
384.2
132.7
106.3
927
550
(2)
(48)
1,682
262.3
1,427
436
161.7
139
475
177
(38)
(155)
183.5
320.2
219.3
147.0
309
237
(28)
(43)
Weighted
average
exercise
price
(p)
175.8
298.9
776.5
96.6
225.2
120.9
144.9
219.5
137.9
134.0
459
245.2
475
183.5
–
–
–
–
66
56
(2)
(25)
95
–
216.4
349.5
326.3
173.2
305.3
–
49
43
(6)
(20)
66
–
166.0
243.1
202.2
156.4
216.4
–
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
123
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Notes to the consolidated financial statements
23 Share-based payments continued
Options outstanding at 31 March 2013
Share options granted in year ended 31 March
2005
2007
2010
2011
2012
2013
Sharesave plan options granted in year ended 31 March
2011
2012
2013
Stock purchase plan options granted in year ended 31 March
2012
2013
Weighted
exercise
price
(p)
Latest
exercise date
year ended
31 March
106.3
143.5
179.3
201.3
298.9
384.2
2015
2017
2020
2021
2022
2023
146.7
219.5
320.2
2014
2015
2016
243.1
349.5
2014
2015
Number
(000)
78
55
303
358
547
341
1,682
79
214
166
459
40
55
95
Performance share awards
Following approval of the Performance Share Plan by shareholders at the 2006 AGM, the Company has made awards to the
executive directors and other employees with a vesting period of two or three years.
A new Senior Management Performance Share Plan was approved by the Board in 2012 in order to award shares to certain
senior employees below board level. The shares will vest on the second anniversary of the grant date.
Movement in the number of performance share awards is as follows.
Performance share awards
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Senior Management Performance Share Plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
124 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
2013
Number of
share awards
(000)
2012
Number of
share awards
(000)
3,108
1,347
(288)
(806)
2,621
1,321
(280)
(554)
3,361
3,108
–
–
142
–
–
142
–
–
–
–
–
–
–
–
23 Share-based payments continued
Deferred share bonus plan
The Company established a deferred share bonus plan. The executive directors, members of the Leadership Team and certain
other senior staff have part of their bonus awarded in shares. The shares will vest on the third anniversary of the grant date.
Movement in the number of deferred bonus shares awarded is as follows.
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
2013
Number of
share awards
(000)
2012
Number of
share awards
(000)
682
240
(14)
(151)
757
–
591
195
(19)
(85)
682
–
For the performance share awards and the deferred share bonus plan awards are forfeited if the director or other employee
leaves the Group before the awards vest, unless the conditions under which they leave are such that they are considered to
be a ‘good leaver’; in which case their award is released following their departure. If the Remuneration Committee decide that
a departing beneficiary of an award is a ‘good leaver’, so their award may be released early, the award will only be released
subject to the achievement of the performance conditions set out at the time of the granting of the award and may be subject
to pro-ration for time, at the discretion of the Committee. For further details see the remuneration report on pages 63 to 81.
The Biocompatibles Group had a number of share schemes prior to the date of acquisition by the Company. With the exception
of the Share Incentive Plan (SIP), all share schemes ceased just prior to that date and share awards under the various schemes
vested and/or exercised to the extent to which performance conditions had been achieved. No grants or awards remained
outstanding at the date of acquisition.
Shares invested in the SIP were exchanged for BTG shares in the same ratio as other shareholders received in the acquisition:
1.6733 BTG shares for each Biocompatibles share plus 10p cash. Whilst no further contributions may be invested in the SIP
post the date of acquisition, shares already held in the SIP may remain until the date of closure of the Plan in 2016.
As at 31 March 2013 124,008 (31 March 2012: 353,456) ordinary shares in BTG plc, issued and subscribed for by the
Biocompatibles International plc Share Incentive Plan Trust, had not vested unconditionally.
24 BTG Employee Share Trust
The Group includes an employee share trust, the BTG Employee Share Trust (the ‘Trust’), which was established in Guernsey in
1992. It holds shares for the general benefit of all employees who may eventually become legally entitled to them. At 31 March
2013 the Trust held 1,063,029 (31 March 2012: 1,214,313) shares in BTG plc and a further 12,596 (31 March 2012: 12,596)
shares in Torotrak plc. The Trust may distribute these shares to employees of the Group on the recommendation of the Company.
These distributions may be as a result of awards under the Restricted Share Scheme, the Deferred Share Bonus Plan or the
recently set up Senior Management Performance Share Plan.
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At 31 March 2013 the Trust has 347,900 shares set aside under the Deferred Share Bonus Plan (31 March 2012: 499,184).
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
125
Notes to the consolidated financial statements
25 Provisions
At 1 April
Provisions utilised during year
Provisions made during year
Provisions released during the period
Difference on exchange
At 31 March
Balance due within one year
Balance due after more than one year
2013
2012
Leases Reorganisation
£m
£m
1.7
(0.4)
–
(0.5)
–
0.8
0.4
0.4
0.8
0.1
–
0.1
–
–
0.2
0.2
–
0.2
Total
£m
1.8
(0.4)
0.1
(0.5)
–
1.0
0.6
0.4
1.0
Leases Reorganisation
£m
£m
2.0
(0.3)
0.1
–
(0.1)
1.7
0.7
1.0
1.7
1.0
(0.9)
–
–
–
0.1
0.1
–
0.1
Total
£m
3.0
(1.2)
0.1
–
(0.1)
1.8
0.8
1.0
1.8
Lease provisions relate to onerous leases and represent the net present value of future obligations and where relevant,
not covered by income from tenants (see 2(p)).
The provision for reorganisation costs arose as a result of the Group’s rationalisation activities following the acquisition of
Biocompatibles International plc on 27 January 2011 and Protherics PLC on 4 December 2008. The provision principally
comprises redundancy and other site closure costs.
26 Financial risk management objectives and policies
Overview
The Group has exposure to credit, liquidity and market risks from its use of financial instruments. This note sets out the Group’s
key policies and processes for managing these risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a licensee fails to meet its contractual obligations or a customer fails to
pay for goods and services received. The Group’s primary objective with respect to credit risk is to minimise the risk of default
by licensees or customers.
A substantial element of the Group’s revenue is derived from royalties which are only payable if a licensee is generating income
from sales of licensed products. In such instances the Group’s exposure to credit risk is considered to be inherently relatively
low, although is influenced by the unique characteristics of individual licensees. The Group’s policy is to provide against bad
debts on a specific licence by licence basis.
Following the transition from a distribution agreement to direct sales during prior years, the majority of the marketed
product revenues are currently generated from sales to several key wholesalers in the US Management maintains
regular communication with the customers and monitors both sales to and payments from customers to minimise
the credit risk exposure.
126 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
26 Financial risk management objectives and policies continued
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities as they fall due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group has limited debt facilities in the form of assets held under finance leases. The Group has substantial cash balances
to fund its operations. Subsequent to the year end, the Group signed a £60m multi-currency revolving credit facility providing
access to funds for a period of three years to April 2016.
The Group’s policy is to place surplus cash resources on short- and medium-term fixed interest deposits, to the extent that cash
flow can be reasonably predicted. Term deposits are denominated in UK sterling with institutions rated as A or higher by both
Moody’s and Standard & Poor’s.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the Group’s income or the value of its holdings in financial instruments. The Group has little exposure to interest rate risk other
than that returns on short-term fixed interest deposits will vary with movements in underlying bank interest rates. The Group’s
principal market risk exposure is to movements in foreign exchange rates.
Foreign currency risk
The Group has several overseas subsidiary undertakings, the revenues and the expenses of which are denominated in local
currencies being US dollars, Euros and Australian dollars. As a result the Group’s sterling income statement, balance sheet
and cash flows may be affected by movements in Sterling exchange rates with these currencies. The Group’s primary objective
with respect to managing foreign exchange risk is to provide certainty over the value of future cash flows.
A significant element of the Group’s revenue is denominated in US dollars with the remainder split between Sterling, Euros,
Yen and other currencies. The majority of the Group’s operating expenses are in Sterling and US dollars with smaller elements
in Euros and Australian dollars. Where possible, anticipated foreign currency operating expenses are matched to foreign
currency revenues. The excess exposure over and above this natural hedge, to the extent that cash flows are predictable,
is managed using forward contracts (see note 21).
Sensitivity analysis
A 5% weakening of the US$ at 31 March 2013 would have resulted in the following decreases in equity and profit or loss:
Profit or loss
Equity
31 March
2013
£m
31 March
2012
£m
(1.3)
(4.8)
(2.7)
(3.5)
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
127
Notes to the consolidated financial statements
26 Financial risk management objectives and policies continued
Interest rate risk
The Group seeks to mitigate partially against increased interest rates whilst maintaining a degree of flexibility to benefit from
decreasing rates of interest by holding a mix of fixed and floating rate financial liabilities. The Group seeks to maximise the
amount of interest income from its cash balances by using a variety of short-term, fixed high-interest deposit and money-market
accounts. The Group does not consider the impact of interest rate risk to be material to its results or operations and accordingly
no sensitivity analysis is shown.
Market price risk
It is, on occasion, deemed appropriate to take equity stakes in early-stage companies utilising the Group’s technology as part
of the overall licensing arrangement and small loans may be granted to these companies to further technology development.
These investments will be realised at an appropriate time in the development cycle. Regular reports are made to the Board
on the status of investments. These investments form part of the Group’s overall technology portfolio and do not materially
affect liquidity.
Capital management
The Group defines the capital that it manages as the Group’s total equity. The Group’s objectives when managing capital are:
ITo safeguard the Group’s ability to continue as a going concern.
ITo provide an adequate return to investors based on the level of risk undertaken.
ITo have available the necessary financial resources to allow the Group to invest in areas that may deliver future benefits
for inventive sources and returns to investors.
ITo maintain sufficient financial resources to mitigate against risks and unforeseen events.
The Group believes it has sufficient ongoing cash and cash equivalents to meet its stated capital management objectives.
The Group’s capital and equity ratio are shown in the table below.
Total equity – capital and reserves attributable to BTG shareholders
Total assets
Equity ratio
31 March
2013
£m
431.0
539.3
79.9%
31 March
2012
£m
406.2
505.8
80.3%
The Group is not subject to regulatory capital adequacy requirements as known in the financial services industry.
Financial instruments
The Group’s financial instruments comprise cash, short- and medium-term deposits, foreign currency forward contracts,
contingent considerations and various items such as trade debtors and creditors which arise directly from operations.
In addition, a number of debt and equity investments, both quoted and unquoted, are held in technology-based companies
along with borrowings including obligations under finance leases.
128 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
26 Financial risk management objectives and policies continued
Fair values
The fair values of the Group’s financial assets and liabilities, together with the carrying values shown in the statement of
financial position, are as follows:
31 March 2012
Cash and cash equivalents
Held to maturity financial assets
Forward contracts
Other investments
Trade and other receivables
Trade and other payables
31 March 2013
Cash and cash equivalents
Forward contracts
Other investments
Trade and other receivables
Trade and other payables
Designated
at fair value
£m
Forward
contracts at
fair value
£m
Available
for sale
£m
Amortised
cost
£m
–
–
–
3.0
–
(0.7)
–
–
3.0
–
(0.8)
–
–
0.5
–
–
–
–
(2.2)
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
106.9
5.0
–
–
40.0
(59.7)
158.7
–
–
54.5
(61.3)
Total
carrying
value
£m
106.9
5.0
0.5
3.0
40.1
(60.4)
158.7
(2.2)
3.0
54.5
(62.1)
Fair
value
£m
106.9
5.0
0.5
3.0
40.1
(60.4)
158.7
(2.2)
3.0
54.5
(62.1)
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
Level 1 – quoted prices in active markets for identical assets and liabilities.
Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3 – unobservable inputs.
Fair value hierarchy of financial assets and liabilities
31 March 2012
Financial assets recognised at fair value
Investments
Forward contracts
Financial liabilities recognised at fair value
Fair value of other contingent consideration
31 March 2013
Financial assets recognised at fair value
Investments
Financial liabilities recognised at fair value
Forward contracts
Fair value of other contingent consideration
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
–
–
3.0
0.5
–
–
3.0
0.5
–
(0.7)
(0.7)
3.0
–
3.0
(2.2)
–
–
(0.8)
(2.2)
(0.8)
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Level 2 – financial assets and liabilities represent forward foreign exchange contracts to sell US$ which are marked-to-market
at each balance sheet date and other investments held at fair value as disclosed in note 15.
Level 3 – financial liabilities represent the contingent consideration payable upon the purchase of the US commercial rights of
product candidate uridine triacetate representing contingent milestone payments upon NDA acceptance and approval
of the product candidate.
Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
129
Notes to the consolidated financial statements
26 Financial risk management objectives and policies continued
Contractual maturity analysis of financial (liabilities)/assets
Forward foreign exchange contracts that mature within:
0 to 3 months
3 to 6 months
6 to 12 months
Total
31 March 2013 31 March 2012
£m
£m
(0.6)
(1.6)
–
(2.2)
0.1
0.4
–
0.5
Net gains and losses on financial assets and liabilities
Foreign exchange gains of £3.1m (2012: gains of £2.6m) were recognised within Operating profit in relation to settlement of
trade receivables and payables.
The Group recognised a fair value loss of £2.6m (2012: loss of £1.5m) relating to forward foreign exchange contracts within
‘Financial expense’ (2012: ‘Financial expense’).
Estimation of fair values
The following summarises the methods and assumptions used in estimating the fair values of financial instruments reflected
in the table.
Other investments
These comprise both listed and unlisted investments, available-for-sale. The figure recorded in the statement of financial
position (note 15) is the best estimate of fair value.
Finance leases
The fair values of such balances are estimated by discounting the future cash flows at the market rate.
Trade receivables, trade payables and cash and cash equivalents
Trade payables and receivables have a remaining life of less than one year so their value recorded in the statement of
financial position is considered to be a fair approximation of fair value. Other contingent considerations are fair valued
at each reporting period.
27 Operating leases
Total non-cancellable operating lease rentals are due in the following periods:
Within one year
Between two and five years
Greater than five years
31 March 2013 31 March 2012
Property
£m
Property
£m
1.4
2.8
0.3
4.5
1.7
4.3
0.7
6.7
Operating lease payments represent rentals payable for certain of its office properties under non-cancellable operating
lease agreements.
The Group leases a number of offices and facilities in the UK, the US, Germany, and Australia. These leases have terms
of up to six years.
The leases contain options to extend for further periods. In the event of renewal, the lease contracts contain market review clauses.
None of the property leases provide the Group with an option to purchase the leased asset at the expiry of the lease period.
130 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
28 Other financial commitments
The Group has entered into agreements with a number of early-stage companies and venture capital funds. At 31 March 2013
the Group is committed to invest £nil under these agreements (2012: £0.2m).
As with any business whose core assets are intellectual property, the Group will from time to time resort to litigation or threats
of litigation, or other legal processes, to defend its rights. Litigation costs are regarded as a cost of doing business and will vary
from year-to-year. In the current year the Group incurred £1.1m in litigation costs (2012: £2.1m).
The Company has entered into an agreement to guarantee payments under the lease of a US subsidiary undertaking.
The Company has provided a Guarantee to certain subsidiary undertakings in respect of the BTG Pension Scheme up to a
maximum amount equal to the lowest non-negative amount which, when added to the assets of the Scheme, would result in
the Scheme being at least 105% funded on the date on which any liability arose, calculated on the basis set out in section
179 of the Pensions Act 2004, were a valuation to be conducted as at that date.
The Company has also provided a Guarantee to the same subsidiary undertakings for a maximum amount of £12.7m, being
the deficit repair contributions agreed with the Trustees of the Scheme following the finalisation of the last actuarial valuation.
The Guarantee reduces as payments are made and expires in April 2014.
29 AZD9773 (CytoFab™)
On 8 August 2012 BTG announced the top-line data from a Phase IIb study of AZD9773 in patients with severe sepsis and/or
septic shock, conducted by AstraZeneca. The study failed to meet primary or secondary endpoints. AstraZeneca has terminated
its licence agreement and associated arrangement with BTG and has handed back the asset to BTG. BTG does not anticipate
conducting any further development of AZD9773. Consequently the following transactions have been recognised:
IRevenue of £8.6m has been recognised within milestones and one-off income in the Licensing & Biotechnology operating
segment. The components of this revenue are:
– The release of deferred income associated with previous received milestones from AstraZeneca in relation to AZD9773
work streams totalling £6.1m.
– Compensation for early contract termination of £2.5m.
IAn impairment charge of £22.5m has been recognised in amortisation and impairment of acquired intangibles in the
acquisition adjustments and reorganisation costs column.
IProperty, plant and equipment writedowns associated with assets used in the development of AZD9773 of £1.8m have been
recognised in the amounts written off property, plant and equipment.
30 Related parties
Identity of related parties
The Group has a related party relationship with its subsidiary undertakings (see note 2(b)), its associates (see note 2(b))
and its directors.
In relation to the related party relationship identified on page 54 concerning Giles Kerr, payments made by BTG to Oxford
University and Isis Innovations Ltd under the relevant licence agreements were £1.5m during the year ended 31 March 2013.
There are no amounts still outstanding and payable by BTG under these agreements as at 31 March 2013.
Key management personnel are considered to be the directors and their remuneration is disclosed within the remuneration
report on pages 63 to 81.
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Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
131
Notes to the consolidated financial statements
31 Group entities
The significant subsidiary undertakings of BTG plc at 31 March 2013 are all wholly-owned, incorporated in the United Kingdom
and registered in England and Wales, unless shown otherwise. All subsidiary undertakings operate in their country of
incorporation and are consolidated in the Group’s financial statements.
Class of capital
Principal activity
BTG International (Holdings) Ltd*
Provensis Ltd*
BTG International Ltd
Ordinary
Ordinary
Ordinary
Investment in IPR management companies
Development and commercialisation of IPR
Development, management and commercialisation
of IPR
BTG Employee Share Schemes Ltd
Guernsey
Ordinary
Trustee company
BTG Management Services Ltd*
Ordinary
Investment and management of group companies
Protherics Medicines Development Limited
Ordinary
BTG International Inc
Delaware, USA
Protherics UK Limited
BTG Australasia Pty Limited
Australia
Protherics Utah Inc.
Tennessee USA
Protherics Salt Lake City Inc.
Utah USA
Common stock
Ordinary
Ordinary
Common stock
Common stock
Biocompatibles International Limited*
Biocompatibles UK Limited
Ordinary
Ordinary
Development, management and commercialisation
of IPR
Research, development, manufacture and sale
of pharmaceutical products and potential drugs
Research, development, manufacture and sale
of pharmaceutical products and potential drugs
Manufacture and sale of pharmaceutical products
and potential drugs
The research, development, manufacture and sale
of pharmaceutical products and potential drugs
Development, management and commercialisation
of IPR
Investment and management of group companies
Commercialisation of Bead Products
Biopolymerix Inc.
Delaware USA
Biocompatibles Inc.
Delaware USA
BTG International Germany GmbH
(formally known as CellMed AG.)
Germany
* Indicates direct subsidiary of BTG plc.
Common stock
Research and development
Common stock
Commercialisation of Brachytherapy and
distribution of Bead products
No par value shares
Research and development
132 Financials
Notes to the consolidated financial statements
BTG plc Annual Report and Accounts 2013
Company statement of financial position
ASSETS
Non-current assets
Investment in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium account
Merger reserve
Retained earnings
Total equity attributable to equity holders of the parent
LIABILITIES
Non-current liabilities
Trade and other payables
Current liabilities
Trade and other payables
Taxation
Total liabilities
Total equity and liabilities
The notes on pages 136 to 139 form part of these financial statements.
The financial statements were approved by the Board on 17 May 2013 and were signed on its behalf by:
Louise Makin
Chief Executive Officer
Rolf Soderstrom
Chief Financial Officer
Registered No: 2670500
31 March
2013
£m
31 March
2012
£m
Note
4
369.3
5
6
6
6
6
6
7
7
365.9
365.9
217.1
–
217.1
583.0
32.7
188.3
317.8
41.1
369.3
215.7
–
215.7
585.0
32.8
188.6
317.8
43.1
582.3
579.9
–
–
2.7
–
2.7
2.7
–
–
3.0
0.1
3.1
3.1
585.0
583.0
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Financials
Company statement of financial position
BTG plc Annual Report and Accounts 2013
133
Company statement of cash flows
for the year ended 31 March 2013
Loss after tax for the year
Decrease in trade and other receivables
Decrease in trade and other payables
Decrease in provisions
Other items
Net cash outflow from operating activities
Investing activities
Other
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds of share issue
Net cash inflow from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The notes on pages 136 to 139 form part of these financial statements.
Year ended
31 March
2013
£m
Year ended
31 March
2012
£m
(3.3)
1.3
(0.3)
–
1.9
(0.4)
–
–
0.4
0.4
–
–
–
(1.1)
1.3
(0.4)
(0.8)
0.9
(0.1)
–
–
0.1
0.1
–
–
–
134 Financials
Company statement of cash flows
BTG plc Annual Report and Accounts 2013
Company statement of changes in equity
At 1 April 2011
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Share-based payments
At 31 March 2012
At 1 April 2012
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
At 31 March 2013
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Retained
earnings
£m
Total
equity
£m
32.7
188.2
317.8
39.8
578.5
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
(1.1)
–
(1.1)
–
2.4
(1.1)
–
(1.1)
0.1
2.4
32.7
188.3
317.8
41.1
579.9
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Retained
earnings
£m
Total
equity
£m
32.7
188.3
317.8
41.1
579.9
–
–
–
0.1
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
(3.3)
–
(3.3)
–
0.6
4.7
(3.3)
–
(3.3)
0.4
0.6
4.7
32.8
188.6
317.8
43.1
582.3
The notes on pages 136 to 139 form part of these financial statements.
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Financials
Company statement of changes in equity
BTG plc Annual Report and Accounts 2013
135
Notes to the company financial statements
1 Accounting policies
The accounting policies adopted in the preparation of these Company financial statements are the same as those set out in
note 2 to the Group financial statements with the addition of the following:
Investments
Investments in subsidiaries are stated at cost less provision for impairment.
Accounting for transactions under common control
Where the Company acquires or disposes of shares in another Group company either in a share for share exchange or as
disposal of part of the business, the cost is determined by reference to the fair value of the consideration received (i.e. the
fair value of the company in which shares have been received) at the date of transfer.
If the Company receives shares following the sale of its subsidiary or part of its business, any gain or loss is credited or
charged to the income statement. Where the Company issues shares following the acquisition of a subsidiary or part of
another business, any gain or loss is credited or charged to reserves.
Share-based payments
The Company has elected to apply IFRS2 to all share-based awards and options granted post 7 November 2002 that had not
vested by 1 January 2005. The carrying amount of an investment in a subsidiary is increased to the extent that share-based
payments relate to employees of that subsidiary. Share-based payment expenses relating to employees of the Company are
expensed within the income statement.
These policies have been applied consistently to the periods presented.
The functional currency of the Company is Sterling and all values are rounded to the nearest £0.1m except where otherwise
indicated.
2 Loss for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own income statement
for the year. The loss after tax of the Company amounted to £3.3m (2012: £1.1m).
The analysis of the auditor’s remuneration is as follows:
The auditing of accounts of the Company
Audit related assurance services
3 Staff costs
The employees are based in the United Kingdom.
Year ended
31 March
2013
£’000
Year ended
31 March
2012
£’000
93
50
93
50
Disclosures of individual directors remuneration and associated costs required by the Companies Act 2006 and specified by
the Financial Services Authority are on pages 63 to 81 within the remuneration report and form part of these audited accounts.
The employees of the Company are members of the Group pension schemes as detailed in note 22 of the Group financial
statements. The Company receives a charge based upon the employer contribution to the Group’s defined benefit pension
scheme. No additional contributions are paid by the Company.
136 Financials
Notes to the company financial statements
BTG plc Annual Report and Accounts 2013
4 Investment in subsidiary undertakings
Cost
At 1 April 2011
Share-based payments
At 1 April 2012
Share-based payments
At 31 March 2013
£m
364.4
1.5
365.9
3.4
369.3
A list of the Company’s principal subsidiary undertakings is shown in note 31 to the Group financial statements.
5 Trade and other receivables
Due within one year
Prepayments
Amounts owed by subsidiary undertakings
6 Capital and reserves
At 1 April 2011
Loss for financial year
Total recognised loss for the year
Other share capital issued
Share-based payments
At 1 April 2012
Loss for financial year
Total recognised loss for the year
Movement in shares held by Trust
Other share capital issued
Share-based payments
At 31 March 2013
31 March
2013
£m
31 March
2012
£m
0.4
215.3
0.4
216.7
215.7
217.1
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Retained
earnings
£m
Total
£m
32.7
188.2
317.8
39.8
578.5
–
–
–
–
–
–
0.1
–
–
–
–
–
(1.1)
(1.1)
–
2.4
(1.1)
(1.1)
0.1
2.4
32.7
188.3
317.8
41.1
579.9
–
–
–
0.1
–
–
–
–
0.3
–
–
–
–
–
–
(3.3)
(3.3)
0.6
–
4.7
(3.3)
(3.3)
0.6
0.4
4.7
32.8
188.6
317.8
43.1
582.3
The merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.
The balance on the merger reserve has arisen through:
1 The acquisition of Protherics PLC on 4 December 2008 and includes directly attributable costs of issuing the shares of £0.4m.
2 The acquisition of Biocompatibles plc on 27 January 2011 and includes directly attributable costs of issuing of shares of
£1.1m.
Details of Company share capital are disclosed in note 19 to the Group financial statements. Details of share options granted by
the Company are set out in note 23 to the Group financial statements. Details of shares in the Company held by subsidiaries are
shown in note 24 to the Group financial statements.
Financials
Notes to the company financial statements
BTG plc Annual Report and Accounts 2013
137
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Notes to the company financial statements
7 Trade and other payables
Amounts falling due within one year
Accruals and deferred income
Amounts falling due after more than one year
Other
The directors consider the fair value to be equal to the book value.
8 Financial assets and liabilities
31 March 2012
Cash and cash equivalents
Trade and other receivables
Trade and other payables
31 March 2013
Cash and cash equivalents
Trade and other receivables
Trade and other payables
31 March
2013
£m
31 March
2012
£m
2.7
3.0
–
–
Designated
at fair value
£m
Amortised
cost
£m
Total carrying
value
£m
Fair value
£m
–
–
–
–
–
–
–
217.1
(3.0)
–
215.7
(2.7)
–
217.1
(3.0)
–
215.7
(2.7)
–
217.1
(3.0)
–
215.7
(2.7)
Credit risk
The Company’s credit risk is the risk that one of its subsidiaries is unable to repay intercompany amounts owing. The recoverability
of the Company’s intercompany receivable is considered at each balance sheet date.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company does
not hold significant cash balances as Group cash is managed centrally within its subsidiaries. Accordingly the Company is
funded by its subsidiaries as its liabilities fall due. Subsequent to the year end, the Group signed a £60m multi-currency
revolving credit facility providing access to funds for a period of three years to April 2016.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the Group’s income or the value of its holdings in financial instruments. As the holding company of the BTG Group, the Company
does not have significant exposure to movements in market prices and accordingly no additional disclosure is provided. There
are no foreign currency balances within the Company’s statement of financial position.
Capital Management
Details of the Company’s objectives with respect to managing capital are disclosed in note 26 to the Group financial statements.
138 Financials
Notes to the company financial statements
BTG plc Annual Report and Accounts 2013
9 Guarantees and contingent liabilities
The Company has entered into an agreement to guarantee payments under the lease of its US subsidiary undertaking.
The Company has provided a Guarantee to certain subsidiary undertakings in respect of the BTG Pension Fund up to a
maximum amount equal to the lowest non-negative amount which, when added to the assets of the Fund, would result
in the Fund being at least 105% funded on the date on which any liability arose, calculated on the basis set out in section
179 of the Pensions Act 2004, were a valuation to be conducted as at that date.
The Company has also provided a Guarantee to the same subsidiary undertakings for a maximum amount of £12.7m,
being the deficit repair contributions agreed with the Trustees of the Scheme following the finalisation of the last actuarial
valuation. The Guarantee reduces as payments are made and expires in April 2014.
10 Related party transactions
The Company has a related party relationship with its subsidiary undertakings and its directors.
In relation to the related party relationship identified on page 54 concerning Giles Kerr, payments made by BTG to Oxford
University and Isis Innovations Ltd under the relevant licence agreements were £1.5m during the year ended 31 March 2013.
There are no amounts still outstanding and payable by BTG under these agreements as at 31 March 2013.
Key management personnel are considered to be the directors and their remuneration is disclosed within the remuneration
report on pages 63 to 81.
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Notes to the company financial statements
BTG plc Annual Report and Accounts 2013
139
Five-year financial record
for the year ended 31 March
Consolidated income statement
Revenue
Cost of sales
Gross profit
2013
£m
2012
£m
2011 1
£m
233.7
(67.2)
197.0
(56.3)
111.4
(34.1)
2010
£m
98.5
(32.8)
166.5
140.7
77.3
65.7
2009 2
£m
84.8
(37.1)
47.7
Selling, general and administrative expenses
(58.0)
(48.9)
(33.7)
(25.3)
(19.7)
Contribution
108.5
91.8
43.6
40.4
28.0
Amortisation and impairment of acquired intangibles assets
Amortisation of repurchase of contractual rights
Foreign exchange gains/(losses)
Research and development
Profit on disposal of assets and investments
Amounts written off property, plant and equipment
Amounts written off associates and investments
Acquisition and reorganisation costs
Share of results of associates
Operating profit/(loss)
Net financial (expense)/income
Profit/(loss) before tax
Tax
Profit/(loss) after tax for the year
Earnings/(loss) per share
Basic
Diluted
(43.4)
–
3.1
(41.2)
0.4
(1.8)
–
0.1
–
25.7
(1.6)
24.1
(7.7)
16.4
(30.7)
–
2.6
(39.7)
0.2
(3.0)
(0.2)
(1.1)
–
19.9
3.1
23.0
(8.4)
14.6
(10.0)
(9.6)
(2.0)
(32.1)
1.5
–
(1.4)
(3.8)
–
(13.8)
3.0
(10.8)
20.0
(9.1)
–
(4.0)
(26.7)
1.1
–
–
0.7
(0.3)
2.1
7.0
9.1
2.2
(3.0)
–
(0.9)
(21.2)
2.6
–
(3.4)
(10.9)
(0.4)
(9.2)
(2.1)
(11.3)
(1.8)
9.2
11.3
(13.1)
5.0p
5.0p
4.5p
4.4p
3.4p
3.4p
4.4p
4.4p
(7.1p)
(7.1p)
1 The results for the year ended 31 March 2011 include the results of Biocompatibles International plc from the date of acquisition, being 27 January 2011.
2 The results for the year ended 31 March 2009 include the results of Protherics PLC from the date of acquisition, being 4 December 2008.
140 Financials
Five-year financial record
BTG plc Annual Report and Accounts 2013
Consolidated statement of financial position
Goodwill
Intangible assets
Property, plant and equipment
Investment in associates
Other investments
Deferred tax asset
Employee benefits
Biological assets
Total non-current assets
Current assets
Total assets
Equity
Share capital
Share premium account
Merger reserve
Reserves
Retained earnings
Total equity
Total non-current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
2013
£m
59.2
209.2
25.4
–
3.0
0.9
4.7
–
302.4
236.9
2012
£m
59.2
246.0
22.0
–
3.0
1.0
–
0.3
331.5
174.3
2011 1
£m
59.2
271.0
24.8
–
2.7
0.9
–
0.3
358.9
129.6
2010
£m
30.3
152.7
10.6
–
3.7
0.6
–
–
197.9
113.1
2009 2
£m
30.0
165.8
11.1
0.3
3.2
0.7
–
–
211.1
118.3
539.3
505.8
488.5
311.0
329.4
32.8
188.6
317.8
0.2
(108.4)
32.7
188.3
317.8
(4.0)
(128.6)
32.7
188.2
317.8
(3.7)
(142.7)
25.8
188.1
158.1
(0.9)
(155.9)
25.5
187.3
156.5
(0.1)
(156.6)
431.0
406.2
392.3
215.2
212.6
42.7
65.6
108.3
41.3
58.3
99.6
43.9
52.3
96.2
52.4
43.4
95.8
539.3
505.8
488.5
311.0
47.1
69.7
116.8
329.4
1 The statement of financial position for 31 March 2011 includes the assets and liabilities acquired from Biocompatibles International plc during the year.
2 The statement of financial position for 31 March 2009 includes the assets and liabilities acquired from Protherics PLC during the year.
Consolidated cash flow statement
Net cash from/(used in) operating activities
Net cash (used in)/from investing activities
Net cash from/(used in) financing activities
Increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at start of year
2013
£m
55.5
(4.5)
0.2
51.2
0.6
106.9
2012
£m
47.2
(3.9)
(0.2)
43.1
0.1
63.7
2011 1
£m
(12.0)
(5.5)
(0.6)
(18.1)
(0.8)
82.6
Cash and cash equivalents at end of year
158.7
106.9
63.7
2010
£m
5.8
(2.6)
1.4
4.6
(0.2)
78.2
82.6
2009 2
£m
(1.8)
21.8
(0.1)
19.9
1.3
57.0
78.2
1 The results for the year ended 31 March 2011 include the results of Biocompatibles International plc from the date of acquisition, being 27 January 2011.
2 The results for the year ended 31 March 2009 include the results of Protherics PLC from the date of acquisition, being 4 December 2008.
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BTG plc Annual Report and Accounts 2013
141
Shareholder information
Financial calendar
Circulation of Annual Report for the year ended 31 March 2013
Annual General Meeting
Announcement of interim results for the six months ended 30 September 2013
Preliminary announcement of annual results for the year ended 31 March 2014
14 June 2013
16 July 2013
November 2013
May 2014
Shareholders
At 31 March 2013 there were 10,116 holders of ordinary shares in the Company. Their shareholdings are analysed as follows:
Size of shareholding
1 to 5,000
5,001 to 50,000
50,001 to 100,000
100,001 to 500,000
Over 500,000
Total
Shareholders are further analysed as follows:
Type of owner
Bank and nominee companies
Private shareholders
Limited companies
BTG Employee Share Trust
Insurance companies and pension funds
Number of
shareholders
Percentage
of total
number of
shareholders
Number of
ordinary
shares
Percentage
of ordinary
shares
9,310
563
66
109
68
92.0
5.6
0.6
1.1
0.7
6,399,541
8,235,782
4,783,654
25,558,769
283,299,125
1.9
2.5
1.5
7.8
86.3
10,116
100.0
328,276,871
100.0
Number of
shareholders
Percentage
of total
number of
shareholders
Number of
ordinary
shares
Percentage
of ordinary
shares
956
8,969
65
1
125
9.5
88.7
0.6
–
1.2
311,588,514
12,061,479
788,206
1,063,029
2,775,643
94.9
3.7
0.2
0.3
0.9
10,116
100.0
328,276,871
100.0
Mutual funds and other institutions, and private shareholders holding their shares within PEPs and ISAs, are included within
‘Bank and nominee companies’.
Capita share dealing services
A quick and easy share dealing service is available from Capita Registrars, to either buy or sell more shares. An online and telephone
dealing facility is available providing shareholders with an easy-to-access and simple-to-use service. For further information on this
service, or to buy and sell shares, please contact: www.capitadeal.com (online dealing) or +44 (0)871 664 0454 (telephone dealing
– calls cost 10p per minute plus network extras. Lines are open from 8 am to 4.30 pm, Monday to Friday) If calling from outside the
UK: +44 (0)203 367 2686. Full terms, conditions and risks apply and are available on request or by visiting www.capitadeal.com.
This is not a recommendation to buy or sell shares. The price of shares can go down as well as up, and you are not guaranteed
to get back the amount that you originally invested.
Shareholder change of address
The Company offers the facility, in conjunction with Capita Registrars, our Registrars, to conduct a number of routine matters via
the web including the ability to notify any change of address. If you are a shareholder and are either unable or would prefer not to
use this facility, please do not send the notification to the Company’s registered office. Please write direct to Capita Registrars,
at their address shown below, where the register is held.
142 Financials
Shareholder information
BTG plc Annual Report and Accounts 2013
Registered office and head office
Advisers
BTG plc
5 Fleet Place
London
EC4M 7RD
Tel: +44 (0)20 7575 0000
Fax: +44 (0)20 7575 0010
Email: info@btgplc.com
Website: www.btgplc.com
Registered number 2670500
Stockbrokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Tel: +44 (0)20 7742 4000
Fax: +44 (0)20 3493 0684
Deutsche Bank AG London
Winchester House
1 Great Winchester Street
London EC2N 2DB
Tel: +44 (0)20 3142 8700
Fax: +44 (0)20 3142 8735
Auditors
KPMG Audit Plc
15 Canada Square
London E14 5GL
Tel: +44 (0)20 7311 1000
Fax: +44 (0)20 7311 3311
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Callers from the UK:
Tel: +44 (0)871 664 0300
Please note that calls cost 10p per minute,
plus network extras. Lines are open from
9am to 5.30pm, Monday to Friday.
Callers from outside the UK:
Tel: +44 (0)208 639 3399
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Shareholder information
BTG plc Annual Report and Accounts 2013
143
Cautionary note regarding forward-looking statements
This Annual Report and Accounts contains certain forward-looking statements with respect to BTG’s business, performance and
prospects. Statements and other information included in this report that are not historical facts are forward-looking statements.
Words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’ and ‘potential’, variations of these
words and similar expressions are intended to identify forward-looking statements. These statements are based on current
expectations and involve risk and uncertainty because they relate to events and depend upon circumstances which may or
may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially
from those expressed or implied by these forward-looking statements. Current principal risks and uncertainties are described
on pages 32 to 35 of this report. Any of the assumptions underlying these forward-looking statements could prove inaccurate
or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved. BTG
undertakes no obligation to update publicly any forward-looking statement, whether as a result of new information, future
events or otherwise.
Trade marks
BTG and the BTG roundel logo are registered trade marks of BTG International Ltd.
The following is a non-exhaustive list of trade marks of the BTG International group of companies mentioned in this Report:
Bead Block®
CroFab®
DC Bead®
DigiFab®
LC Bead™
PARAGON Bead®
PRECISION Bead®
Varisolve®
Voraxaze®
Zytiga® is registered trade mark of Johnson & Johnson, Inc.
BeneFIX® is a registered trade mark of Genetics Institute, now part of Pfizer, Inc.
Lemtrada™ is a proprietary name submitted to health authorities for Genzyme Corporation’s investigational multiple sclerosis
agent alemtuzumab. Genzyme Corporation is a Sanofi company.
144 Financials
Cautionary note and Trade marks
BTG plc Annual Report and Accounts 2013
Printed in the UK using vegetable inks throughout.
Both the printer and the paper manufacturing mill
are registered to the Environmental Management
System ISO 14001 and are Forest Stewardship
Council® (FSC) chain-of-custody certified.
Designed and produced by
Bostock and Pollitt Limited, London
Printed by
Pureprint Group UK
www.btgplc.com
Please refer to our website
for more information on BTG
and for our contact details.
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