Baltic Classifieds Group Annual Report 2014

FY2014 Annual Report · Baltic Classifieds Group

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BTG plc Annual Report
and Accounts 2014

Imagine where we can go.

Introduction
BTG is a growing international
specialist healthcare company.
We develop innovative products
in specialist areas of medicine
where current treatment options
are limited.
Our products advance the treatment of people
with liver cancer, blood clots and varicose
veins, and of people who need antidotes if
they are overexposed to certain medications
or toxins.

Inspired by patient need, we are investing
to expand our portfolio with products that
address today’s healthcare challenges.
Partnership and innovation are at the heart
of our approach. By delivering products that
improve patient treatment, and that are valued
by clinicians and payers, we will grow our
business sustainably and will deliver
significant value to all our stakeholders.

Imagine where we can go.

Find out more online
www.btgplc.com

Strategic report
An overview of our performance
this year, our business model,
our objectives and the principal risks
we face, accompanied by relevant
performance and operating information.

Read more page 75

Our performance
Group overview
Chairman’s statement
Chief Executive’s review
Our objectives
Focus on Interventional Medicine: Vascular
Focus on Interventional Medicine: Oncology
Our business model
Corporate citizenship
Market overview
Financial review
Risk management and principal risks

Board of Directors
Corporate governance report
Audit Committee report
Nomination Committee report
Directors’ remuneration report
Directors’ report
Statement of directors’ responsibilities
Independent auditor’s report

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Consolidated income statement
76
Consolidated statement of comprehensive income 77
Consolidated statement of financial position
78
Consolidated statement of cash flows
79
Consolidated statement of changes in equity
80
Notes to the consolidated financial statements
81
Company statement of financial position
117
Company statement of cash flows
118
Company statement of changes in equity
118
Notes to the Company financial statements
119
Shareholder information
124
Cautionary statement and Trademarks
125

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BTG plc Annual Report and Accounts 2014Strategic reportOur business modelWe create value by acquiring, developing and commercialising innovative products that meet the needs of specialist physicians and their patients.

Our performance
Overview
2013/14 was a transformational year
for BTG. We acquired TheraSphere®,
a localised radiation treatment for liver
tumours, and EKOS Corporation, which
makes advanced treatments for
blood clots. We also gained US approval
for Varithena™, a new treatment for
varicose veins.
We now have a leading international portfolio with
the vision to build a $1bn+ Interventional Medicine
business by 2021.

With the continued strong financial underpin
from our Specialty Pharmaceuticals and Licensing
businesses, we are able to implement the planned
investments to deliver our growth targets, while
seeking to further expand our portfolio
through acquisition.

Summary of financial performance

Revenue
2013/14

Profit before tax
2013/14

£290.5m

2012/13 £233.7m
Change: +24%

£33.3m

2012/13 £24.1m
Change: +38%

Contribution1
2013/14

£111.5m

2012/13 £108.5m
Change: +3%

Cash and cash equivalents
2013/14

£38.2m

2012/13 £158.7m
Change: -76%

1 Contribution is gross profit less selling, general and administrative (SG&A) costs.

See page 26

Strategic report
The Strategic report explains in detail
how we have performed this year.
It provides a review of the business
and a comprehensive analysis of our
performance. It describes the key
performance indicators we use to
monitor the progress we have made,
a description of the principal risks
and uncertainties facing the Company,
and potential future developments.
This report is intended to provide
shareholders with a better understanding
of the Company, of its position in the
markets within which it operates,
and of its prospects.

Strategic report

Our performance

Group overview

Chairman’s statement

Chief Executive’s review

Our objectives

Focus on Interventional Medicine: Vascular

Focus on Interventional Medicine: Oncology

Our business model

Corporate citizenship

Market overview
Financial review
Risk management and principal risks

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BTG plc Annual Report and Accounts 2014

Group overview
Our business
We operate in three business segments:
Interventional Medicine (oncology
and vascular products), Specialty
Pharmaceuticals (antidote products) and
Licensing (royalties from licensed assets).

Interventional Medicine
Interventional medicine aims to deliver
treatments precisely to where they are
needed in the body in order to seek to
improve efficacy and reduce side effects.
This is a fast-growing area of medicine,
driven by demand for better treatments
and outcomes, by advances in imaging
techniques and product innovation.
BTG focuses on growing market
segments and patient populations that
are poorly served by current approaches.
Our existing portfolio comprises
products to treat people with liver
tumours, blood clots and varicose veins.

Interventional oncology
LC Bead®, DC Bead®, Bead Block®
Embolisation and drug-eluting
beads that are used in the treatment
of a number of solid tumours including
hepatocellular carcinoma (HCC,
a primary liver cancer), liver
metastases from colorectal cancer,
and other cancers.

Revenue split

£33.4m
Beads
£24.7m
TheraSphere®
£20.3m
EkoSonic®
£0.7m
Brachytherapy

Interventional vascular
EkoSonic®
Ultrasonic catheter devices that accelerate the
penetration of thrombolytic agents into blood
clots, to aid lysis (clot dissolution) performance.

TheraSphere®
A targeted liver cancer therapy that
consists of millions of tiny radioactive
glass microspheres that are delivered
directly to liver tumours and used
to treat patients with unresectable
HCC and, outside the US, all types
of liver tumours.

Varithena™ (polidocanol injectable foam) 1%
An engineered injectable foam product approved
in the US in November 2013 for the treatment
of patients with symptoms and appearance
of incompetent veins and visible varicosities
of the great saphenous vein (GSV) system.

Group revenue £290.5m

Contribution £111.5m

£79.1m
Interventional
Medicine
£102.3m
Specialty
Pharmaceuticals
£109.1m
Licensing

Revenue split

Specialty Pharmaceuticals
Our Specialty Pharmaceuticals business
focuses on antidote products that are
used in hospital emergency rooms and
intensive care units. The products
typically address conditions with small
patient populations for which there are
limited or no existing treatment options.

£13.8m
Interventional
Medicine
£58.7m
Specialty
Pharmaceuticals
£39.0m
Licensing

£62.7m
CroFab®
£27.3m
DigiFab®
£12.0m
Voraxaze®
£0.3m1
Uridine triacetate

CroFab® Crotalidae Polyvalent
Immune Fab (Ovine)
A polyclonal antibody treatment for
the management of patients with
North American pit viper envenomation.
Clinically proven to effectively address
envenomation progression.

Voraxaze® (glucarpidase)
A recombinant enzyme used for
treatment of toxic plasma methotrexate2
concentrations (>1 micromole per litre)
in patients with delayed methotrexate
clearance due to impaired renal function.

Licensing
The Licensing business generates
royalties from technologies that have
been licensed to others. This is no longer
a core strategy but this business is
expected to continue to deliver revenues
beyond 2020.
The major contributor to royalty revenues
is Johnson & Johnson’s Zytiga®
(abiraterone acetate). This treatment for
men with advanced prostate cancer is
available in more than 80 countries.

Product not yet approved in any territory; revenue is from named patient sales
where permitted.

DigiFab® Digoxin Immune Fab (Ovine)
A polyclonal antibody treatment for patients with
life-threatening or potentially life-threatening
digoxin2 toxicity or overdose. Clinically proven to
effectively clear digoxin from the body.

Uridine triacetate
A pharmaceutical product under development
with partner Wellstat Therapeutics Corporation
as a potential treatment for overexposure to
5-fluorouracil (5-FU)2.
2

Methotrexate and 5-FU are chemotherapies used to treat different types
of cancer. Digoxin is a commonly used heart medication.

Revenue split

£83.8m
Zytiga®
£13.0m
Two-Part Hip Cup
£12.3m
Others

BTG plc Annual Report and Accounts 2014Strategic report

Chairman’s statement
We have delivered a strong financial
performance, expanded our portfolio
of marketed products and development
opportunities and enhanced our
organisational capacity and capabilities
to enable the business to continue to
deliver sustainable growth.

“ We have had an
exceptional year,
transforming our
business and becoming
a leading player in
interventional medicine.”

Garry Watts
Chairman

Performance against corporate
objectives
Our corporate objectives focus on our
financial performance, delivering products
for our customers, growth activities and
operating efficiency.

Our strong financial performance reflects
good organic growth and a positive
contribution from acquisitions.

In July 2013, we acquired TheraSphere®
and EKOS Corporation, adding two highly
complementary products to our business,
and then in November 2013 we received
US approval for Varithena™, our novel
treatment for varicose veins. This enlarged
portfolio means that we now have a
leading Interventional Medicine business
and that we are a significant partner for
interventional clinicians.

To position the business for sustained
growth, we have enhanced our capacity
and capabilities in key functions including
Commercial, Regulatory, Medical,
Manufacturing and Quality. We have
also reorganised our innovation and
development functions and enhanced
Quality, Compliance and Environmental
Health and Safety (EHS) systems and
processes, to improve our controls,
operating efficiency and effectiveness.

Further details of progress with our
corporate objectives are given on
pages 10 to13.

We now have a diversified product
portfolio providing significant organic
growth opportunities, particularly in our
Interventional Medicine business. We
have also broadened the number and
scope of our development and innovation
projects, which provide additional growth
potential. We have the financial and
organisational capability to expand our
portfolio further through acquisitions
and we intend to explore opportunities
in both interventional medicine and
specialty pharmaceuticals.

As our current focus is to invest to exploit
these multiple growth drivers, we do not
recommend payment of a dividend for the
year. The Board will continue to review its
dividend policy as the business develops.

Governance
Our business operates in highly regulated
markets, requiring that the Board has a
continuous focus on good governance and
oversight. An area of particular focus for
the Board during the year was Compliance
in relation to our expanding commercial
activities and Quality, given the increase in
manufacturing sites and complexity
resulting from the acquisitions.

In the year ahead we will continue to focus
on risk management to ensure that our
processes remain appropriate as the
business grows. The risk report on pages
30 to 34 and governance report on pages
38 to 45 provide further information.

People
Our Company has experienced enormous
change over the past several years, as
have the industry sectors in which we
operate. We have been able to build our
business and navigate through healthcare
reforms thanks to the dedication,
enthusiasm and hard work of our
employees, many of whom have joined
the Company recently. I am grateful to
them all.

I am also grateful to our shareholders,
who have continued to support the
implementation of our growth strategy.

Prospects
Over the past several years our business
has expanded significantly, evidenced by
increased revenue, profitability and
investment, an expanded portfolio of
marketed products, development
programmes, more employees and share
price appreciation.

We have built a great platform. We now
anticipate a period of sustainable,
profitable growth combined with
ongoing investment to expand the
indicated uses and geographic availability
of our products.

Garry Watts
Chairman

BTG plc Annual Report and Accounts 2014

Strategic reportChief Executive’s review
The acquisitions of TheraSphere®
and EKOS Corporation and the US
approval of Varithena™ give us
a leading position in the growing
interventional medicine space.
Together with the financial
underpin from our Specialty
Pharmaceuticals and Licensing
businesses and strong internal
capabilities, we have the
platform and resources to
deliver sustained growth.

A leader in Interventional Medicine
Through the growth of our Bead products,
the acquisitions of TheraSphere® and
EKOS Corporation and the US approval
of Varithena™, BTG has become a leader
in Interventional Medicine.

We have built our portfolio with innovative
products that target under-served patient
populations and that are valued by
clinicians and payers based on their
clinical profiles. We believe that this
focus on unmet medical need, innovation
and investment to demonstrate clinical
benefit is the right strategy in a changing
healthcare environment and will
enable us to build a sustainable
competitive advantage.

Our goal is to increase our Interventional
Medicine revenues from approximately
$150m on an annualised basis at present
to $1bn+ by our 2020/21 financial year.
This is based on increasing sales of our
oncology products from approximately
$110m annualised last year to $300m to
$400m; growing revenues from the EKOS
family of blood clot treatment products
from approximately $40m annualised to
$100m to $200m; and building Varithena™
into a $500m+ franchise.

These growth targets are underpinned
by activities that are already underway
relating to product innovation, which has
created a pipeline of new products in
development, commercial activities to
expand their geographical availability
and development activities intended
to expand the approved uses of
the products.

“ We are building a strong
reputation among leading
specialist physicians for
both the quality of our
products and our
commitment to innovation
and clinical development.”

Louise Makin
Chief Executive Officer

Organic growth and acquisitions
The US approval of Varithena™ in late
November 2013 was a significant
achievement for the Company and
represents an opportunity for significant
value creation.

It is a patient-centred treatment and
the first product to be approved based
on randomised data showing clinically
meaningful improvements in both
the symptoms and appearance of
varicose veins.

To realise its full potential we are following
a controlled launch strategy in the US.
This is designed to ensure optimum
clinician and patient experience from the
start. As a comprehensive treatment that
may be used in place of two or more
existing procedures, Varithena™
represents a versatile and minimally
invasive experience for physicians and
patients. We aim to equip vein clinicians
with the clinical training and market
access support to fully integrate
Varithena™ into their practices.

Our first market is the US reimbursed
sector for great saphenous vein (GSV)
incompetence. Here, approximately
750,000 procedures are conducted
annually by approximately 1,000 vein
specialists. We completed recruitment of a
US sales force of 24 representatives in
February 2014 and commenced physician
outreach in March, focusing initially on
well-established vein clinicians. Clinicians
are required to complete online training and
will be supported by a BTG medic during the
first patient procedures. We expect that
commercial patient treatments will
commence in the US in Q3 2014.

Our second market in the US is a self-pay
market for patients whose varicose veins
are moderate to severe but who are
ineligible for reimbursed treatment.
We believe that these patients may be
more motivated to pay for treatment
themselves with the introduction of a
more patient-centred option.

We are also finalising plans to seek
approval to extend use of Varithena™
into treatment of aesthetic leg veins.
Treatment of these smaller veins may
not be reimbursed in the US therefore
this is likely to be predominantly a
self-pay market.

In addition, we intend to seek approval for
Varithena™ in other geographic markets.

Multiple growth opportunities exist for
our other interventional products.

Use of the EkoSonic® blood clot treatment
products is continuing to grow in the
US driven by greater awareness of
the potential benefits of interventional
treatment over standard anticoagulation
therapy. Our US sales force now calls on
600 US hospitals, and we are expanding
our sales efforts in selected other
geographies including the EU.

Based on positive clinical data from
studies exploring the use of EkoSonic®
in treating patients with pulmonary
embolism, we have now received 510k
clearance to expand use into this patient
population in the US. We are also studying
the use of our product for treating patients
with chronic deep vein thrombosis (the
ACCESS clinical study).

Within interventional oncology, we have
combined and expanded the US sales forces
for TheraSphere® and the Bead products,
significantly increasing the number of
hospitals detailed with TheraSphere® and
expanding coverage for the Bead products
from 480 to 600 hospitals. We are also
expanding our commercial presence in other
geographies. In Europe we are building small
direct sales forces in the five major markets,
initially to focus on TheraSphere® and to a
more limited extent EkoSonic®. In Asia, we
are creating a regional hub in Hong Kong to
serve as a local centre of excellence for
regulatory and medical affairs, supporting
direct sales operations (we are finalising our
plan of direct sales in Taiwan) or distributors.

DC Bead® is already approved in a number
of Asian markets including Japan, South
Korea and Taiwan and is under review in
China, although it is likely that we will need
to supplement the data package to gain
marketing approval. We are developing a
regulatory strategy for TheraSphere® in
Asian markets including China. Although
already approved under a Humanitarian
Device Exemption (HDE), we are also
accelerating the three Phase 3 trials of
TheraSphere®, two of which are intended to
gain full pre-market approvals (PMAs) in the
US for treating patients with unresectable
hepatocellular carcinoma (HCC) and as a
second-line treatment for patients with
metastatic tumours in the liver resulting
from colorectal cancer (mCRC).

Our Innovation team is working on a
number of pipeline projects including an
imageable Bead product for identifying
potential areas of under-treatment and
a bioresorbable Bead product for use
in non-malignant tumours such as
uterine fibroids.

Responding to challenges
Our Brachytherapy plant in the US received
an FDA warning letter relating to certain
deficiencies in production. As a precaution,
we voluntarily suspended manufacture
and shipment of the Brachytherapy seed
products while planning and conducting
remedial measures. As a non-core
business, we had already been reviewing
strategic options and, prior to seeking
to resume manufacture and shipments,
we sold the business.

We have had several other regulatory
manufacturing inspections during the
year, some of which resulted in
observations that required remedial
actions. There were no other interruptions
to product supply. Post-audit remedial
actions are a common requirement in
our industry, and we continually strive
to improve our operations through ongoing
investment in improving our facilities,
processes and quality systems.

Our values and our people
Our Company values, which are described
on page 22 are designed to foster a culture
that embraces innovation, teamwork
and always doing the right thing for the
business and its stakeholders. They are
at the core of how we operate and are
embedded into our recruitment and
performance management processes.
This approach has served us well during
the Company’s transition from a business
of around 50 people to one with over
860 employees and has also helped us to
integrate the businesses we have acquired.

By living our values, we are able to recruit
and retain the right people and ensure
that we operate to consistently high
standards internally and in all interactions
with our stakeholders.

Outlook
After another year of significant progress
we are in a strong position to continue
to implement our growth plans. These
include continuing the commercial
roll-out of Varithena™ and accelerating
the Phase 3 trials intended to expand
the uses and geographic availability of
the Bead products, TheraSphere® and
EkoSonic® products. In parallel we will
continue to seek opportunities to expand
our portfolio. We are confident that this
strategy will enable us to continue to build
a significant business and long-term value
for our customers, patients, shareholders
and employees.

Louise Makin
Chief Executive Officer

Key events and achievements 2013/14

Acquisition of TheraSphere®, July 2013

Acquisition of EKOS Corporation, July 2013

US approval of Varithena™, November 2013

BTG plc Annual Report and Accounts 2014

Strategic report

Our objectives
We use a number of financial measures
to monitor business performance, and
we also monitor progress against three
other corporate objectives from which we
derive our annual corporate objectives.
These are described on pages 10 to 13.

Financial
metrics
See page 11

Delivering products for
our key stakeholders
See pages 12 and 13

Operating efficiency
See pages 12 and 13

Investing for growth
See pages 12 and 13

1. Maintaining financial discipline and delivering
our annual financial targets as we invest for
growth is critical to our long-term success.

2. We must deliver differentiated products that address

unmet medical needs to compete effectively.

3. Our processes and organisational capabilities must

be effective and efficient to deliver our corporate goals.

4. Meeting our growth objectives requires targeted

investment in innovation, development, our commercial
footprint and our capabilities.

Objective 1:
Financial management
The key financial indicators we monitor are revenue,
contribution, profit before tax and cash management.
These have been selected to demonstrate progress
in implementing our growth strategy, reflecting our
history of acquisitions and our investment plans.
Similar indicators are used in the Group’s annual
bonus scheme, as explained in the directors’
remuneration report on pages 51 to 68.

Revenue
Revenue increased by 24% to £290.5m, driven by
good growth in the existing business and the addition
of revenues from TheraSphere® and the EkoSonic®
blood clot treatment products, which were acquired
in July 2013.

Profit before tax
Profit before tax increased to £33.3m (12/13: £24.1m).
This reflects the higher revenue and reduced
amortisation, offset by increased investment in
commercial and development activities.

2014

2013

2012

2011

2010

£290.5m

£233.7m

£197.0m

£111.4m

£98.5m

+24%

2014

2013

2012

2011

2010

£33.3m

£24.1m

£23.0m

(£10.8)m

£9.1m

+38%

Contribution
Contribution (gross profit less SG&A costs) grew 3%
to £111.5m, primarily reflecting increased SG&A
costs in Interventional Medicine. The contribution
margin fell to 38% (12/13: 46%) due to the lower
gross margin in the licensing segment and the
impact of acquisitions and investments in
Interventional Medicine.

Cash and cash equivalents
In the year, the Group used £270.1m in cash
to fund the acquisitions of TheraSphere®
and EKOS Corporation including associated
acquisition costs. In addition the Group raised
£103.1m of cash through an equity issue.
The Group generated £46.5m in cash during
the year from its underlying operations.

2014

2013

2012

2011

2010

£111.5m

£108.5m

£91.8m

£43.6m

£40.4m

+3%

2014

2013

2012

2011

2010

£38.2m

£158.7m

£111.9m

£73.9m

£82.6m

-76%

BTG plc Annual Report and Accounts 2014Strategic reportOur objectives
continued

02
Objective 2:
Delivering products for our key stakeholders
This goal encompasses identifying unmet
medical needs and exploring innovative product
solutions through clinical studies, manufacturing
and product development, navigating regulatory
approval processes, and designing and
implementing effective product launch
strategies in selected geographical markets.

03
Objective 3:
Operating efficiency
Here we seek to ensure that, as the Company
grows, our systems and processes are fit for
purpose and scalable.

04
Objective 4:
Investing for growth
This objective encompasses having the
organisational capabilities and capacity
in place to deliver our growth objectives.

Progress in 2013/14

Interventional Medicine
• Varithena™ approved in US in November 2013;
controlled US launch plan being implemented;
plans to expand into other geographies and
indications being finalised.
• Positive data generated for EkoSonic®
product in pulmonary embolism may
support label expansion.
• DC Bead® launched in Japan and
reimbursement awaited in South Korea;
regulatory strategy for TheraSphere® in Asia
under development.
• Acceleration of TheraSphere® Phase 3 trials
underway in the US.

Specialty Pharmaceuticals
• CroFab® Copperhead study progressed; new
educational website for CroFab®; International
Trade Commission action initiated against a
potential CroFab® competitor.
• Continued geographic expansion of DigiFab®.
• BTG has fully supported Wellstat Therapeutics
as it prepares to submit its NDA for uridine
triacetate, anticipated by the end of 2014;
named patient sales commenced ex-US.

• Innovation and Development functions
reorganised to enhance connections between
Innovation, Development, commercial teams
and end-users.
• Quality systems audited and processes/
capabilities enhanced through training
and hiring.
• EHS and Compliance standards enhanced and
embedded; companywide training completed.
• Global procurement system implemented.
• Global manufacturing strategy reviewed.
• EKOS and TheraSphere® acquired.
• Varithena™ sales force in place and trained.
• Capabilities review completed.
• Interventional Medicine development and
geographic expansion plans in place.

Priorities in 2014/15

Interventional Medicine
• Complete Varithena™ US commercial launch;
progress US self-pay segment, RoW expansion
and indication expansion plans.
• Deliver EKOS product and pipeline
opportunities.
• Accelerate TheraSphere® Phase 3 trials.
• Deliver Beads innovation products.
• Execute Beads, TheraSphere® and EKOS
geographic expansion plans in EU and Asia.

Key execution risks
• Poor acceptability of Varithena™ in the US
reimbursed sector and/or failure to secure
Varithena™ additional geographic approvals
or other revenue indications would negatively
impact revenue growth.
• Inability to gain approval of EKOS products in
new indications.
• Failure to complete planned studies on time
or unsuccessful outcomes; poor market
acceptability of new products or inability to
gain appropriate regulatory approvals.

Specialty Pharmaceuticals
• Establish rescue therapy leadership: support
growth through clinical demonstration of
product value, customer education.
• Launch DigiFab® in Australia.
• Support Wellstat Therapeutics in finalising
US NDA for uridine triacetate and develop
commercial launch plans.

• US approval of a potential competitor could
impact CroFab® leadership; FDA decision not
to approve uridine triacetate.

• Implement electronic document management
system (eDMS).
• Ensure inspection readiness.
• Embed EHS metric reporting in the business.
• Ensure Sunshine Act and overall healthcare
law compliance.

• Inability to implement eDMS could slow down
R&D and regulatory processes.
• Failure of Quality systems could lead to
interruption of product supply and potentially
regulatory actions.
• Failures in compliance could lead to regulatory

actions and financial penalties.

• Identify/prioritise potential acquisition
opportunities in Interventional Medicine
and Specialty Pharmaceuticals.
• Implement EU go-direct strategy and Asia
expansion plans for Interventional Oncology.

• Failure to identify or execute transactions could
limit long-term growth.
• Poor market acceptability of products or failure
of, or poor execution of, commercial or regulatory
expansion plans would affect revenue growth
and return on investments.

BTG plc Annual Report and Accounts 2014Strategic report02

Focus on Interventional Medicine: Vascular
We have two interventional vascular
products: Varithena™, which was approved
in the US in November 2013 for the
treatment of patients with varicose veins,
incompetent veins and visible varicosities
of the great saphenous vein system, and the
EKOS family of ultrasonic catheter devices
that are used in the treatment of blood clots.
Both are innovative products that address
medical need and have demonstrated
clinical benefits.

Key facts

Varithena™ evaluated in 1,333
patients in 12 clinical trials

EkoSonic® cleared for use in
pulmonary embolism in the US

Varithena™

The potential opportunity for Varithena™ in the US is significant.

Prevalence:

~30m

Incidence:

~2.5m

Visited vein clinic:

~1.4m

Treated:

~0.5m

It is estimated there are approximately 30 million Americans with mild to moderate varicose veins and that each year some 2.5 million people develop symptomatic varicose veins. These are the people who may be eligible to receive treatment that would be reimbursed by their insurer.Of these 2.5 million people, we estimate that in 2012, 1.4 million visited a vein specialist, but only 500,000 people had treatment (representing approximately 750,000 great saphenous vein (GSV) procedures). We estimate that the number of reimbursed GSV procedures in the US will increase by approximately 8% per year, to reach some 1.25 million annual GSV procedures by 2021.

Varithena™ is a new treatment option
available to vein clinicians. It is the
first product in this market sector to
receive FDA approval based on
randomised Phase 3 clinical data showing
clinically meaningful improvements in
both the symptoms and appearance of
varicose veins, demonstrated using
patient and physician reported outcomes
(PRO) instruments.

We estimate that Varithena™ will generate
peak sales in the US reimbursed sector of
$250m, and we aim to build a $500m+
business by expanding its use in the US
and into other countries.

EKOS
The EkoSonic® Endovascular System
combines a locoregional approach to
thrombolysis with ultrasound
acceleration. Ultrasound thins and
loosens fibrin strands, propelling
thrombolytic drug into the clot, speeding
lysis of the clot and permitting the use of
less thrombolytic drug.

In the US approximately one million blood
clots occur annually, of which we estimate
just over two-thirds are amenable to
interventional treatment. However,
most people with clots are treated
conservatively with anticoagulant therapy

designed to prevent additional clots
forming while the existing clot is not
sought to be treated. As a result, over
one-third of patients are readmitted
to hospital with serious and costly
to manage complications such as
post-thrombotic syndrome.

In 2012, we estimate there were
approximately 70,000 interventional
treatments, amounting to total sales
of interventional treatments of $95m
that year. EKOS generated revenue of
approximately $28m, which represented
39% growth over prior year sales. EKOS
revenues were £20.3m (approximately
$33m) for the period from acquisition
in July 2013 to March 2014 representing
approximately annualised revenues
of $40m.

Two main factors are leading to increased
use of interventional treatments in the
US: emerging data showing potential
clinical benefits and healthcare
reforms that affect the reimbursement
hospitals may receive for patients that
are readmitted.

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Competitive landscape and market
opportunity
In the US reimbursed market sector
treatment of the GSV and associated
visible varicosities typically involves
multiple procedures. These include heat
ablation of the GSV, a procedure that
requires tumescent anaesthesia and
sometimes patient sedation. A catheter
is placed inside the GSV, within which
a probe generates heat to ablate the
GSV as it is slowly pulled out along the
vein. The visible varicosities are then
treated in separate procedures using
either phlebectomy (which involves
making incisions along the length of the
veins to remove segments) and/or liquid
or physician-compounded sclerosants.

Varithena™ is versatile, non-surgical,
minimally invasive treatment that can
be used to treat a wide range of GSV
diameters and their associated visible
varicosities. It is an engineered foam
comprising 1% polidocanol and a
proprietary physiological gas mix
(65% : 35%, oxygen : carbon dioxide with
ultra-low nitrogen content). It is injected
directly into the vein, where its chemical
action on the inner lining of the vein wall
causes the vein to spasm and collapse.
The cohesive nature of the foam fills the
vein lumen, displacing blood, for optimal
circumferential contact. The patient
requires no sedation or tumescent
anaesthesia. A compression bandage is
worn for two weeks following treatment,
during which time the surfaces of the
collapsed vein wall bond, closing the
damaged veins.

“ Varithena™ offers
a completely new
treatment experience
for patients.”

Paul McCubbin
General Manager, Varithena™

Focus on Interventional Medicine: Oncology
Our products are used in the treatment
of people with liver tumours. The Bead
products block arteries, depriving the
tumour of blood and nutrients; drug-eluting
beads also deliver a chemotherapeutic drug
directly to the tumour. TheraSphere® consists
of millions of small glass microspheres that
deliver radiation (yttrium-90) directly to
liver tumours.

“ Our goal is to improve
the treatment of people
with liver cancer.”

Guenter R. Janhofer
Chief Medical Officer and Head of Development

Competitive landscape and
product opportunity
As new data emerges, more physicians
who are managing patients with HCC and
mCRC are using locoregional therapies to
improve disease control and patient
outcomes. These include drug delivery
embolisation systems such as DC Bead®
and localised internal radiation therapy
such as TheraSphere® to control primary
liver cancer (HCC) and metastatic
colorectal cancer (mCRC).

There are many different reported
regimens and practices for the use of
transarterial chemoembolisation (TACE)
throughout the world. Traditionally they
involve the administration of a
compounded oil and drug solution
emulsion followed by an embolising
material, in a procedure called conventional
TACE (cTACE). DC Bead® has been shown to
offer improved consistency and tolerability
compared to cTACE and provides an
effective, standardised liver-directed
therapy for primary and metastatic liver
cancer. DC Bead® is a leading brand among
several proprietary products.

TheraSphere® is one of two commercially
available selective internal radiation
products used for treating liver tumours.
It is used in approximately 37% of internal
radiation procedures to treat liver tumours.

We estimate that the global combined
annual incidence of HCC and mCRC is
approximately 1.2 million people. Of these,
based on the current indications, we

believe approximately 350,000 patients
would be amenable to treatment using
localised embolisation, chemoembolisation
and radiation treatments. Taking into
account access and affordability in
different countries, we estimate the current
available global population is 147,000
patients which, based on current pricing,
represents a $1.3 billion global opportunity.
This supports the planned investment in
the development of these products to
obtain approval in these indications
where appropriate.

In 2013/14 our total sales in interventional
oncology were approximately $95m. Our
target is to achieve sales of between
$300m to $400m by 2021, and we have a
number of strategies to drive growth.
These include product innovation, funding
clinical trials to expand the indicated uses
of our products, and geographic expansion
to increase our European footprint and to
address the significant unmet medical
need in Asia.

Focus on Interventional Oncology

$1.3bn

$300m to
$400m

~$110m

annualised

Hepatocellular carcinoma (HCC)

Metastatic colorectal cancer (mCRC)

About HCC
HCC is the most common form of primary
liver cancer. The majority of people with
HCC have cirrhosis, usually from chronic
hepatitis B or hepatitis C infection, or
chronic alcoholism.

Patient populations and management
The global incidence of HCC is
approximately 415,000, with men being
4 to 8 times more likely to develop HCC
than women.

Liver transplantation is a very limited
treatment option with only one in 20
patients eligible. Surgical resection is
suitable for patients with good liver
function and limited cirrhosis, and leads
to five-year survival rates of between 40%
and 50%. Radiofrequency or microwave
ablation can be used as a minimally
invasive alternative to resection in
suitable patients with similar outcomes.
Chemoembolisation (as with DC Bead®)
is standard of care in the intermediate
stage, and systemic chemotherapy and
radiation therapy are used in the
advanced stage.

About mCRC
mCRC is the most common form of
secondary liver tumour. Around half
of people with colorectal cancer, which
is the third most common cancer in
Western Europe and North America,
develop metastatic tumours in the liver.

Patient populations and management
The global incidence of mCRC is estimated
at 660,000, with around 145,000 cases
in Asia and 60,000 globally with around
400,000 cases in North America and
Europe combined.

Surgical resection is suitable for patients
with good liver function. Beyond resection,
systemic chemotherapy is the mainstay
of treatment, with limited current use of
locoregional therapy.

Five-year survival rates after resection
in patients with liver-isolated mCRC
average 40%. There is little survival data
for the other techniques. BTG is
conducting a Phase 3 trial of
TheraSphere® in mCRC patients.

Key facts

Liver cancer is the
second most
prevalent cancer1
worldwide

Advances in imaging
technology have
enabled the
development of
new locoregional
treatments

1 World Health Organisation

BTG plc Annual Report and Accounts 2014

Strategic report147,000 available patients$1.3bn global opportunity in 2021BTG target 2021/22$300 to $400m BTG 2013/14 sales~$110m annualised

Our business model
Our core purpose is to advance the treatment
of people with cancer, vascular disorders and
critical care needs. We create value by
acquiring, developing and commercialising
innovative, differentiated products that meet
the needs of our specialist physician customers
and their patients.

D e v e l o pment products

s i g

Acquire &

Core
purpose

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M a nufacture

Intern

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Financial mana g e m e n t

Our activities

Our priorities

We monitor our performance
against a number of strategic
objectives.

We create value by identifying
unmet medical needs,
acquiring and developing new
products, manufacturing
them to high standards and
commercialising them
through direct sales or
through distributors.

“ We have multiple organic
growth drivers and continue
to seek M & A opportunities
in both Interventional
Medicine and Specialty
Pharmaceuticals.”

Louise Makin
CEO

Customer insight

Acquire and develop

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 and we provide training in the use of
our products. To protect patient safety we offer
dedicated medical support to physicians regarding
the use of our products and we invite proposals for
funding or other support to explore the potential
use of our products in different patient
populations to inform our R&D strategy. We also
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 within approved
indications, 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 where we may focus our
development efforts.

We supplement these insights from customers
and others with formal market research, using the
information to identify potential new opportunities.
These may be addressable with our current
products and technology platforms, or they may
require us to acquire and/or develop
new technologies.

When sourcing technologies, we look for
opportunities where we can add value. These
include products (or late-stage programmes) that
we can sell through our existing sales channels, or
through a new sales team that can be supported
by our existing infrastructure. We also seek to
exploit our strong capabilities in areas of
technology convergence, such as drug-device-
procedure combination products. We look for
opportunities where we can drive further growth
by investing in development and commercial
activities.

For every technology, whether developed in-house
or acquired, we create a lifecycle plan to maximise
value. This may include product innovation, clinical
trials to expand the indicated uses, and commercial
activities to expand the geographical availability.

Most of our development programmes are
intended to expand the approved uses of products
that are already approved in a primary indication.
We believe this is a lower-risk approach as safety
and efficacy profiles have already been
established in the initial indication.

Having identified additional patient populations
that may benefit we liaise with clinicians,
regulators and others to determine the
appropriate trial designs. Our development
personnel manage these activities and oversee
the contract research organisations and others
involved in conducting many of our studies in order
to obtain the requisite regulatory approvals to
access new commercial opportunities.

Case study

Clinicians who use our embolisation and
drug-eluting beads identified situations where a
smaller average bead size than was available could
be beneficial in the treatment of certain liver
tumours. In response, our Innovation team
developed LC BeadM1™ and DC BeadM1™, which
have a unique size range and distribution and may
allow the doctor to be more selective and penetrate
deeper into the tumour, so protecting the healthy
liver and reducing stress to cirrhotic livers.

As Varithena™, a treatment for varicose veins, was
progressing towards approval in the US, we sought
opportunities to acquire complementary
interventional vascular products. This resulted in
the acquisition of EKOS Corporation, which makes
and sells a leading blood clot treatment. BTG has an
acute care sales force that visit emergency rooms,
where 50% of blood clots present. In addition,
EKOS customers include clinicians who also treat
varicose veins. These overlaps provide significant
team-selling opportunities across our portfolio.

BTG plc Annual Report and Accounts 2014Strategic reportOur business model
continued

“ We are investing in
commercial activities to
support the launch of
Varithena™ in the US and
to establish direct sales
operations in Europe.”

Rolf Soderstrom
CFO

Manufacture

Commercialise

We manufacture our Bead products and
Varithena™ at our site in Farnham, UK, with Bead
product development activities also taking place
at our site in Alzenau, Germany. TheraSphere® is
manufactured for us by Nordion Inc. in Canada.

We sell our products directly in the US, where we
have dedicated sales teams for our acute care
products, our interventional oncology products, for
the EKOS blood clot treatment products and for
Varithena™.

We manufacture the ovine polyclonal antibodies
CroFab® and DigiFab®. The supply chain involves
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 USA.

We manufacture the EKOS blood clot treatment
products at a dedicated facility near Seattle,
Washington, USA.

We contract out certain aspects of our
manufacturing supply chain, though we seek
to ensure that the regulatory and quality
requirements are met, and we remain responsible
for the overall safety of our products. We are
continuing to invest in upgrading our
manufacturing operations and capabilities to
ensure we can continue to meet all relevant
standards as they evolve and to provide further
capacity as the business grows.

See risk section on pages 30 to 34

We have identified significant cross-selling
opportunities across our four sales forces. For
example, our EKOS sales team calls on specialist
hospital physicians, some of whom are conducting
varicose vein procedures in addition to using the
EKOS products in treating blood clots.

In addition, our Specialty Pharmaceuticals field
force calls on emergency room doctors;
approximately 50% of blood clots present in
emergency rooms.

Elsewhere we sell mainly through partners or
distributors, though we have a small direct sales
presence in Europe for TheraSphere®. 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.

We sell certain products outside the US (where
alternative treatment options are not available) on
a named patient basis where those products are
not yet approved and meet the required criteria to
be made available under special 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. These may be assets we acquire in
transactions we undertake that are deemed
non-core or legacy assets forming part of our
Licensing business.

Case study manufacturing

Case study commercialisation

BTG manufactures its products at a number
of different sites in Europe, North America
and Australia:

In Europe we manufacture our Interventional
Oncology Beads and Varithena™ and drug
substance for our polyclonal antibody antidotes.

In North America we house the snakes that supply
venom for the manufacture of our antidote CroFab®;
Seattle is where we manufacture EkoSonic®.

In Australia we have an FDA-approved sheep farm
used in the manufacture of our polyclonal
antibody antidotes.

We have international reach into established and
emerging healthcare markets selling our products
direct to customers in the US and elsewhere
principally through distribution partners. During the
coming financial year we plan to expand our
commercial presence in other geographies. In
Europe we are building small direct sales forces in
the five major markets, initially to focus on
TheraSphere® and to a limited extent EkoSonic®.
In Asia we are creating a regional hub in Hong Kong
to serve as a local centre of excellence for
regulatory and medical affairs, supporting direct
sales operations or distributors.

“ Our team is working on
a number of innovative
pipeline projects.”

Peter Stratford
Chief Technical Officer, Interventional Medicine

Creating value

The core activities we undertake to create value are
based on our ability to identify market and product
opportunities and our skill in executing across a
range of disciplines. We:
• Identify unmet medical needs in specialist areas
of medicine where patients are currently under-
served
• Acquire and develop innovative products that
advance the treatment of those patients
• Manufacture those products to high standards of
quality and reliability
• Commercialise the products by selling directly or
through partners.

We add value at each stage of the process.
Customer relationships give us valuable insights to
help identify new product opportunities and ways in
which our existing products could be improved.

For a new product opportunity, we are able to deploy
multi-disciplinary teams to quickly assess the
opportunity and competitive landscape.

At the development stage we seek to minimise
risk by focusing on opportunities where proof of
concept has been established. We apply strict go/
no-go criteria to projects, which allow us to fail
projects early and concentrate our resources on
the best prospects.

Our commitment to support initial investigator-
initiated and larger-scale sponsored studies
differentiates us from certain other companies in
our sector. While pharmaceutical companies
allocate significant resources to clinical studies,
medical device companies, which form the majority
of our competitors in interventional medicine,
typically do not.

Manufacturing feasibility is assessed as early
as possible.

We focus on specialist physicians that can be
served by small, relatively low-cost sales forces. By
bringing to market innovative medical products that
are backed by clinical data, we provide physicians
with new treatment options and we offer patients
the prospect of better outcomes.

Throughout the product development life-cycle,
we seek to protect our products through patents,
know-how, trade secrets and trademarks.

Products and availability

Product
LC Bead®

LC BeadM1™
DC Bead®

Available in regions

2, 3, 4, 5, 6, 7, 8

1, 2, 3, 4, 5, 7, 8

2, 3, 4, 5, 6, 7

DC BeadM1™
Bead Block®
TheraSphere® 1, 2, 4, 5, 6, 8
EkoSonic®
CroFab®
DigiFab®

1, 2, 3, 4, 5, 7

1, 2, 4, 6, 8

Varithena™
Voraxaze®

1, 2, 4, 5, 7, 8

BTG plc Annual Report and Accounts 2014Strategic reportCorporate citizenship
“ Being a good corporate citizen is one of our
key Company objectives as we recognise that
forging strong relationships in the communities
where we operate will build trust and recognition
in what we do.”

Louise Makin
Chief Executive Officer

Approach to Corporate citizenship
Our reporting areas, listed below, have been carefully chosen as
they are most relevant to our business and address our most
significant business impacts. This year we have streamlined the
way we report and reduced the number of categories we report
under which are now:
• People
• Communities
• Environment
• Governance
These pages summarise our activities and key data for the
financial year. More detailed information including case studies
can be found online at www.btgplc.com/responsibility.

People
Employees
We provide a number of Employee Assistance Programmes
to enhance employee satisfaction and later in 2014 will be
conducting our third biennial employee engagement survey
to monitor progress. We provide regular opportunities for all
employees to interact with members of the Leadership Team
so that they can keep abreast of developments and ask
questions. As the business grows we have looked to implement
scalable solutions to reduce administration and paperwork.
Over the last year we have launched a new online HR system,
MyHR, which provides a central repository of information
on our people, together with dedicated training plans tailored
to individual needs. BTG is committed to ensuring equality
of opportunity and diversity in the workplace and this year
we have started to report the percentage of women in the
businesses who are Senior Managers.

Data on gender

Number of females who are:

2013/14

2012/13

Employees

Senior Managers

Leadership Team members

Board Directors

424 (50%)

39 (30%)

2 (18%)

2 (25%)

284 (51%)

No data

2 (18%)

2 (25%)

Communities
Charitable Giving
Our Charitable Giving Policy sets out our approach to the donation
of Company money for charitable causes. We donated £23,363
(2012/13: £15,201) to charitable causes during the year. In May
2013 we completed the BTG Cycle Challenge in the UK. 13 riders
from each of our three UK sites completed a 270 mile journey which
took them from our manufacturing facility in West Wales via our
manufacturing facility in Farnham to the finish at BTG’s
headquarters in the centre of London. The riders raised over
£10,000 for Leukaemia & Lymphoma Research. A complete list of
the charities which we supported during the financial year can be
found on our website.

As well as supporting corporate charity events we also
encourage employees to participate in events of their own
and match individual donations up to a maximum of £250.

Our values
Our values enable us to operate to high standards in all our
activities, so we do the right thing every time for BTG and our
stakeholders. They are:

Openness

We will be open in giving, accepting and sharing
ideas, knowledge, help, advice and
constructive challenge.

Accountability

We will accept that we have an obligation to
take responsibility and account for our actions.

Teamwork

Integrity

Delivery

Continuous
Learning

We will collaborate to achieve common goals
through mutual respect, openness
and flexibility.

We will build trust in all interactions by
displaying consistently high standards of
ethical and professional business practice.

We will always strive to deliver what we have
committed to do, on time and to the
highest standard.

We will encourage individuals and teams to
generate new ideas, share knowledge, and
adapt business practices to be the best
in our industry.

Environment
The following metrics encompass the key assessments under our
Environmental Health and Safety (EHS) Management Standards
introduced in 2012: carbon emissions; waste production; water and
electricity usage and lost time accidents. These apply worldwide,
and all of our sites are audited periodically against these
standards. In addition, we employ a monthly EHS reporting system
which includes both leading and lagging performance indicators.

During the year we opened a new office and research site in
Camberley in the UK and sold our Brachytherapy business in
Oxford in the USA to Eckert & Ziegler. We also acquired the
EkoSonic® manufacturing facility in Seattle in the USA. The
business is a relatively low carbon emitter and energy spend is
less than 3% of our operational spend, we continue to monitor
our carbon emissions. We are committed to installing high
energy efficiency equipment on new projects or at our existing
facilities where practicable. This is evidenced by our new
Camberley laboratories which have been built with recirculating
fume cupboards. These enable 70% energy recovery while
maintaining employee safety, provided in the past by total
extraction cupboards. In addition we are planning to invest
£120,000 in solar power at our Australian facilities.

Our electricity usage has increased overall this year due to the
acquisition of the EKOS manufacturing facility and the extension
of our Farnham manufacturing site to produce Varithena™.
Electricity usage was offset by the divestment of the Oxford
manufacturing site and the implementation of more energy
efficient cold store technology in Wales.

The business’s carbon dioxide emissions have decreased
significantly over the year, driven primarily by a decrease in
scope 1 emissions following the divestment of our Oxford
manufacturing site which used considerable amounts of
liquefied petroleum gas (LPG) for heating purposes.

Water consumption increased in line with increased headcount
and the addition of Varithena™ manufacturing facilities
in Farnham.

Our total waste and recycled waste has decreased during the
year following the divestment of the Oxford site which produced
and recycled large quantities of solid lead waste.

Hazardous waste has also decreased as 2013 figures included
an atypical amount which resulted from an incident reported
in 2013.

Lost time accidents reduced from 11 to 8 across the Group, with
a 37% decrease at the Australian site.

Data on Environment

Data

Total CO2 equivalent emissions generated (tonnes)1–5

CO2 equivalent emissions scope 1 (tonnes)

CO2 equivalent emissions scope 2 (tonnes)

Total production units

Total Kg CO2 generated per production unit

Total employees

Total Kg CO2 generated per employee

Total electricity consumed (MwH)

Total electricity consumed (MwH) per production unit

Total waste from our production sites (metric tonnes)6

Waste recycled (metric tonnes)

Hazardous waste – incinerated or other treatment (metric
tonnes)

Waste to landfill (metric tonnes)

Total water consumption at production sites (cubic metres)7

Total lost time accidents (days per 100,000 hours worked)8

1 GHG protocol used for data. Scope 3 emissions have not been calculated.

2013/14

5,229
1,576

3,653

2012/13

5,687
2,109

3,578

201,228

192,658

895

5,842

6,973

0.0347

471

128

112

136

28,900

0.5

558

10,191

6,451

0.0334

1,573

508

309

756

20,406

1.17

% Change

-8
-25

-13

+60

-42

-70

-75

-64

-82

+42

-57

2 Covers 100% of BTG controlled operations, third-party manufacturing has not been included in either the carbon dioxide generated or the intensity figures.

3 Data from operational sites with more than 20 employees based on energy bills.

4 Emissions from field based and smaller offices estimated based on average US consumption – as this is where majority are based, 3% of data is estimated.

5 Conversion factors used: Defra/DECC 2013.

6 Waste from our manufacturing and research sites in Australia, USA and UK.

7 Water consumption measured at our production sites in Australia, USA and UK.

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.

Governance
We are committed to high standards of governance which
underpin the management of our business affairs.

Code of Conduct
Our Code of Conduct describes the values, principles, policies
and procedures we have developed to promote understanding of,
and adherence to, the ethical behaviours that we expect of all
employees. It is regularly updated to reflect changes in
legislation and annual training is a mandatory requirement for
all of our employees.

Anti-bribery and Corruption
We take a zero tolerance approach to bribery and corruption and
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 of our business partners.

Human Rights and Anti-Slavery
During the last year we produced a Human Rights Statement,
accessible on our website, which discloses our efforts to
eradicate any slavery and human trafficking, should it exist,
from our direct supply chain and addresses the requirements
of the California Transparency in Supply Chain Act.

The Sunshine Act and Open Payments Program*
Our relationship with our customers is highly regulated, in
particular in the US. Transparency is a key theme in the
governance of our relationship with customers. This year, to
ensure that we comply with the National Physicians Payment
Transparency Program we have produced a Sunshine Act and
Open Payments Program brochure for customers detailing their
obligations and to help us collect the necessary data for
reporting purposes.

* The US Physician Payment Sunshine Act 2009 requires pharmaceutical and medical device companies, with effect from 1 August 2013, to collect and report to
the US Center for Medicine and Medicinal Services (CMC) the nature of any financial relationships and payments made to licensed physicians and teaching
hospitals. The goal of the law is to increase the transparency of financial relationships between healthcare providers and pharmaceutical and medical device
companies. The reported data will be made available in a publicly searchable database.

BTG plc Annual Report and Accounts 2014Strategic reportMarket overview
Overview
The global pharmaceuticals and
medical devices industries are
among the world’s largest, with
total annual sales exceeding
$500 billion. BTG operates in
niche segments, principally
within Interventional Medicine
and Specialty Pharmaceuticals,
and in selected geographies.

Our markets
The macro-environment for the global
pharmaceuticals and medical devices
industries presents opportunities
and challenges.

On the opportunity side, patient
populations are expanding driven by
overall population growth and an ageing
population in particular by increasing
numbers of people in developing
economies who have better access to
healthcare. In addition, people worldwide
are more informed about their conditions
and potential treatments thanks to
increased access to information online,
and are more likely to seek treatment.
Advances in our understanding of disease
mechanisms that provide insights to
develop new, improved treatments also
provide opportunities for the industry.

On the challenge side, the costs of
providing healthcare are also growing and
payers are seeking to reduce costs by
limiting access to medicines and by
reducing the prices they pay for them.
Together with the increased use of generic
medicines and ongoing patent expiries,
these market and pricing restrictions
mean that the industry is under pressure
to replace declining revenue streams with
new ones from true product innovations
that offer benefits to patients and value
to payers. In addition, competition
remains strong.

Approaches to dealing with these
challenges include increasing operating
efficiency to reduce costs, focusing R&D
investment on truly innovative products
rather than on making modest
improvements to existing products, and
an increased focus on providing
medicines to developing countries in
recognition that growth in traditional
Western economies has slowed.

Our approach is to acquire and develop
technologically leading products that
are administered by specialist physicians
and that advance the treatment of
under-served patient populations.

We are usually able to command
appropriate prices for our products,
reflecting their clinical benefit and the
small addressable patient populations.
In addition, the physicians who use our

products are specialists and we can
service them through small, efficient
sales forces. Smaller global markets and
peak sales potentials that may range from
a few tens of millions of dollars to several
hundreds of millions of dollars mean
that competition is usually more limited
and that competitors are more often
smaller companies rather than major
global companies.

Within Interventional Medicine, we
estimate that our oncology products, used
in the treatment of patients with liver
cancer, address a global opportunity that
could reach $1.3bn by 2021. Aggregate
sales by BTG and competitors were
approximately $200m in 2012, of which
BTG’s products amounted to
approximately $90m. Our target is to build
our sales to $300m to $400m by 2021.

Our two vascular products are used to
treat varicose veins and blood clots. In the
US, there were approximately 500,000
patients treated for varicose veins in 2012,
amounting to approximately 750,000 GSV
procedures. We expect the number of GSV
procedures to increase to approximately
1.25m per annum in the US by 2021/22,
and that the peak sales potential of
Varithena™ in the US reimbursed sector
is $250m. We estimate the total peak
sales potential of Varithena™ including
the US self-pay segment and other
geographies to be $500m+.

In the US we estimate that approximately
one million severe blood clots occur
annually, of which some two-thirds are
candidates for interventional treatment.
In 2012, we estimate interventional
treatments were used in approximately
70,000 patients, and that the total value
of sales of interventional treatments was
approximately $95m. Sales of EkoSonic®
products were approximately $28m, which
represented 39% growth over the prior
year; in 2013, EkoSonic® sales grew 35% to
approximately $40m annualised. The use
of interventional techniques for delivering
thrombolytic drugs to treat blood clots is
growing based on emerging clinical
data showing potential benefits over
conservative anticoagulant treatment.
Our goal is to build EkoSonic® sales to
$100m to $200m by 2021.

Our antidote products are used in
emergency settings to treat rare and
serious conditions: snakebites, digoxin
overdose and toxicity associated with
high-dose methotrexate administration
in patients with renal impairment. None
of the products have competitors,
although there is a potential competitor
in development to CroFab®, the snakebite
treatment. Around 5,000 envenomations
occur each year in the US, with weather
patterns affecting the number. Many
millions of digoxin prescriptions are
issued annually globally, with around
1% to 4% of people having a toxic
reaction: DigiFab®, which combats digoxin
toxicity, is approved in the US, UK, Canada,
Switzerland and Australia, and is sold
on a named patient basis in other
territories. Voraxaze®, a treatment for
high-dose methotrexate overexposure,
is approved in the US and sold in other
territories on a named patient basis.
We estimate there are around 200 to
300 patients annually in the US
requiring treatment for high-dose
methotrexate toxicity.

Highly regulated industries
The pharmaceutical and medical devices
industries are highly regulated. All
research, clinical development, regulatory,
manufacturing and commercial activities
are 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.
We have continued over the past year to
build our capabilities in these areas.

We monitor and assess the potential
impact of regulatory and healthcare
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.

Competition
Our industries are competitive. By
focusing on specialist healthcare
segments, we usually face less
competition from large companies.
Our strategy to remain competitive
is to develop and acquire technically
differentiated products, to support

our products with clinical data showing
their utility and to continue to innovate in
response to customer need. We also aim
to differentiate our service levels, so that
BTG builds an excellent reputation with its
customers, and to understand the payer
environment so that we are providing
payers with value.

Our interventional oncology products are
used to treat patients with liver tumours,
a significant unmet need with limited
treatment options. By demonstrating their
benefits for patients in clinical studies we
can both continue to benefit from
appropriate pricing and reimbursement
and we can differentiate our products
from the limited competition that exists.

Varithena™, a novel treatment for varicose
veins, is entering an established sector
but is a highly differentiated, versatile
treatment that offers a patient-centric
experience. Our EkoSonic® family of blood
clot treatments is also technically
differentiated from the competition.

Reputation
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, patent
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
corporate priorities.

Our reputation with regulators, customers,
employees and others is extremely
important for the long-term success of
the business. By operating ethically,
delivering on our promises and ensuring
the quality of our products and service
levels, we are confident we can maintain a
strong reputation with our stakeholders.

Associated risks
Product supply or safety issues; the
emergence of new technologies/
competitors; loss of intellectual
property protection, failure of product
development plans, lack of product
acceptance by physicians.

See pages 30 to 34 for more detail

BTG plc Annual Report and Accounts 2014Strategic reportFinancial review
The Group has delivered a strong
financial performance that reflects
good organic revenue growth, the impact
of acquisitions during the year and ongoing
clinical and commercial investments to
drive future performance.

“ With multiple
opportunities to drive
performance through
investments, the
business is capable of
delivering sustained
financial growth.”
Rolf Soderstrom
Chief Financial Officer

Revenue

£290.5m

2012/13 £233.7m
Change: +24%

Contribution

£111.5m

2012/13 £108.5m
Change: +3%

The results include the impact
of approximately 9 months
of contribution from the
acquisitions completed in
July 2013.

Revenue
Reported revenue grew by 24% to
£290.5m (12/13: £233.7m). This reflected
underlying revenue growth of 20% to
£244.8m (12/13: £203.8m). Acquisitions
added revenue of £45.0m (12/13: nil)
and non-recurring items were £0.7m
(12/13: £29.9m).

We saw revenue growth across each of
our operating segments. In Interventional
Medicine reported revenues of £79.1m
(12/13: £36.1m) included a 16% increase
in revenue from our embolic beads to
£33.4m (12/13: £28.8m) plus revenues of
£24.7m (12/13: nil) from TheraSphere®

Specialty
Pharmaceuticals

Interventional
Medicine

Licensing

CroFab®
DigiFab®
Voraxaze®/other

Uridine triacetate

Total

Embolic beads

Total
Zytiga®

Two-Part Hip Cup

Others

Total

and £20.3m (12/13: nil) from EKOS.
During the year we disposed of
our Brachytherapy business which
contributed revenue of £0.7m
(12/13: £7.3m).

In Specialty Pharmaceuticals we saw
growth of 5% to £102.3m (12/13: £97.2m)
which reflects the established nature of
the two major products, CroFab® and
DigiFab®. It is pleasing to see Voraxaze®
delivering double digit growth in its
second year since launch.

The Licensing segment revenues
increased to £109.1m (12/13: £100.4m).
We have seen strong Zytiga® revenues of
£83.8m (12/13: £49.9m) which has more
than offset the lack of non-recurring
revenues from BeneFix® following patent
expiry and from AZD9773 following
termination of that programme
(12/13: £22.6m).

2013/14
(£m)

2012/13
(£m)

Change
(%)

62.7

27.3

12.0

102.3

33.4

83.8

13.0

12.3

109.1

244.8

24.7

20.3

0.7

290.5

62.7

23.8

10.7

–

97.2

28.8

49.9

13.3

14.6

77.8

203.8

–

29.9

233.7

–

+15

+12

–

+16

+68

-2

-16

+40

+20

–

+24

Total

Total underlying revenues

Acquisitions

TheraSphere®

EKOS
Non-recurring (Brachytherapy, BeneFix®, CytoFab®)

Total

Gross Profit
Reported gross margin reduced to 67%
from 71%. This reflects the expected
reduction in the Licensing segment gross
margin to 53% (12/13: 60%) following the
loss of high margin contributions from
BeneFix® and AZD9773 in the prior year.
In Interventional Medicine gross margins
have been impacted by both acquisition
adjustments and lower gross margin
products from acquisitions. Excluding the
impact of acquisition adjustments of
£1.9m (12/13: nil), gross margins were
74% (12/13: 84%). In Specialty
Pharmaceuticals margins have increased
to 80% (12/13: 78%). We expect BTG gross
margins to return to around the 70% level
as we see higher margin revenue growth
drive further efficiencies.

Contribution
SG&A expenses have increased from
£58.0m to £84.0m. The majority of this
increase has occurred in the
Interventional Medicine segment and
comprises the incremental cost base
associated with 9 months ownership of
EKOS and TheraSphere®, the commercial

preparations for the US launch of
Varithena™ and investment in the
underlying embolic Bead business.

The Group monitors segmental
contribution (gross profit less SG&A).
In total this has increased to £111.5m
(12/13: £108.5m), however contribution
margin has dropped to 38% (12/13: 46%).
This is due to the lower gross margins from
the Licensing segment plus the impact of
acquisitions and investments in the
Interventional Medicine segment. As we
look forward we expect the contribution to
move back above the 40% level as we see
growth from the Interventional Medicine
segment in particular.

In Interventional Medicine, the
contribution grew 6% to £13.8m
(12/13: £13.0m) and the contribution
margin decreased to 17% from 36%
as a result of the lower gross margin
and increased SG&A investment.
The contribution in Specialty
Pharmaceuticals increased to £58.7m
(12/13: £55.4m) and the contribution
margin was 57% as in the prior year.

BTG plc Annual Report and Accounts 2014

Strategic reportFinancial review
continued

Profit before tax

£33.3m

2012/13 £24.1m
Change: +38%

Cash and cash equivalents

£38.2m

2012/13 £158.7m
Change: -76%

The Licensing segment profit contribution
decreased to £39.0m (12/13: £40.1m)
and the contribution margin fell from 40%
to 36%, predominantly as a result of the
lower gross margin.

Operating Profit
Operating profit is calculated as
contribution less: amortisation on
impairments of acquired intangible
assets; foreign exchange gains/losses;
research and development; amounts
written off or profit on disposal of
intangible assets and property plant
and equipment; and acquisition
and reorganisation costs.

Amortisation and impairment of acquired
intangible assets has reduced to £23.3m
(12/13: £43.4m). While amortisation has
increased during the year to £23.3m
(12/13: £14.4m) due to the acquisitions
of EKOS and TheraSphere®, there were
no impairments in the current year
(12/13: £29.0m).

The $/£ exchange rate moved by
approximately 10% from $1.50/£ at
the beginning of the year to $1.66/£
at the end of the year. BTG’s exposure
to US$ denominated revenue and
costs has resulted in the recognition
of foreign exchange losses of £5.0m
(12/13: £3.1m gain).

Investment in research and development
activities grew to £47.2m (12/13: £41.2m).
The main areas of expenditure were
activities to progress the US approval and
launch of Varithena™, studies and
innovation projects associated with the
Beads platform, activities to support
marketed products and new expenditure
associated with clinical development of
the acquired TheraSphere® and EKOS
products. A review of the Interventional
Oncology research and development
strategy has been completed and is
expected to result in increased R&D
expenditure in the near term as the Group
accelerates the ongoing Phase 3 trials
of TheraSphere® and continues to support
a number of innovation programmes
and other studies associated with
marketed products.

Acquisition and reorganisation costs of
£9.8m (12/13: £0.1m credit) related to the
acquisitions of EKOS and TheraSphere®
during the year.

Operating profit before acquisition
adjustments and reorganisation costs
was £62.3m (12/13: £69.0m). The net
decrease is principally due to the
inclusion in 2012/13 of non-recurring high
margin licensing revenues relating to
BeneFix® and AZD9773 which contributed
£21.2m to operating profit in that year.
After accounting for acquisition
adjustments and reorganisation costs,
reported operating profit was £27.3m
(12/13: £25.7m) the increase being
a result of lower acquisition and
reorganisation charges of £35.0m
(12/13: £43.3m).

Financial income and expense
Financial income of £8.2m (12/13: £1.1m)
included a gain on mark-to-market of
foreign exchange forward contracts of
£7.5m (12/13: loss of £2.6m) This offsets
the foreign exchange loss of £5m (2012/13
gain of £3.1m) included within operating
profit. Financial expense of £2.2m (12/13:
£2.7m) relates principally to an
adjustment of £1.4m (12/13: nil) related to
the contingent milestones for the
acquisition of EKOS.

Profit before tax and tax
The Group’s profit before tax was £33.3m
(12/13: £24.1m). The Group profits arise in
the UK, the United States and other
overseas territories. As a consequence the
effective tax rate is a combination of a
blend of the varying tax rates in the
differing countries. In the UK, BTG has
benefited from the Patent Box legislation
which allows for lower tax charges on
income from qualifying assets. The
effective tax rate for the Group this year
is 27% (12/13: 32%) which has resulted
in a tax charge of £9.0m for the year
(12/13: £7.7m) which comprises a current
tax charge of £13.7m offset by a deferred
tax credit of £4.7m.

Summary and financial outlook
We have delivered a strong performance
in the underlying business and added
new revenue streams from the
acquisitions, which have performed in
line with our expectations since
completion in July 2013. We anticipate
continued top-line growth based on
growth across the portfolio and as we see
the full year impact of the acquisitions.

We are investing in commercial activities
to support the launch of Varithena™ in
the US and to establish direct sales
operations in Europe, initially to support
expansion of TheraSphere®. We are also
establishing a regional hub for regulatory
and medical affairs together with satellite
commercial offices in Asia, primarily to
support our interventional oncology
products. We intend to increase
investment in development activities, in
particular to continue the acceleration of
the three Phase 3 trials of TheraSphere®,
to progress a number of innovation
programmes and clinical studies
associated with the Bead products and
with the EKOS products.

Based on a solid financial platform and
with multiple opportunities to drive
performance through commercial,
geographic and development activities,
we are confident that the business is
capable of delivering sustainable
long-term financial growth.

Earnings per share
Basic earnings per share was 6.8p (12/13:
5.0p) on profit after tax of £24.3m (12/13:
£16.4m). Underlying earnings per share,
excluding acquisition adjustments and
restructuring was 14.5p on underlying
profit after tax of £51.5m (12/13:14.5p on
underlying profit after tax of £47.4m).

Balance Sheet
Non-current assets
Non-current assets have increased
significantly at 31 March 2014 to
£565.5m (31 March 2013: £308.0m). The
main reasons for the growth in assets are
the acquisitions of EKOS Corporation and
TheraSphere® and investment in
manufacturing facilities, primarily
relating to Varithena™.

The acquisitions have resulted in gross
additions to goodwill of £71.1m and
intangible assets of £245.5m which have
been offset by amortisation, disposals
and foreign exchange to result in net
increases of £64.4m in goodwill and
£188.7m in intangible assets.

The net increase of £5.9m in property,
plant and equipment comprises gross
additions of £11.7m relating mainly to
Varithena™ manufacturing expansion
offset by disposals relating to the
Brachytherapy business, depreciation
and foreign exchange.

The Group’s defined benefit pension
scheme, as measured under IAS19
Revised – Employee Benefits has
changed from an asset of £10.3m at
31 March 2013 to an asset of £8.0m
at 31 March 2014. The movements in
the period reflect Company contributions
during the year of £3.6m and an income
statement credit of £0.1m offset by an
actuarial loss of £6.0m. A formal actuarial
valuation was prepared as at 31 March
2013 and is expected to be agreed with
the Trustees shortly.

Current assets
Cash and cash equivalents have reduced
from £158.7m to £38.2m due to the
acquisitions of EKOS and TheraSphere®.
The Group did not draw on its £60m
multi-currency revolving credit facility
during the year.

Both inventory and trade and other
receivables have increased as a result of
acquisitions and underlying business
growth in the year. Inventory has
increased to £27.0m (31 March 2013:
£23.3m) and receivables to £75.1m
(31 March 2013: £54.5m). The fair value of
forward contracts as at 31 March 2014
was an asset of £4.4m compared to a
liability of £2.2m as at 31 March 2013.

Total Liabilities
Non-current liabilities have increased to
£93.5m (31 March 2013: £44.7m) mostly
as a result of an increase in the net
deferred tax position of £46.6m,
predominantly arising as a result of the
acquisitions.

Trade and other payables have
increased to £79.9m (31 March 2013:
£61.6m) reflecting the underlying
growth of the business, the impact of
the acquisitions, including contingent
consideration payable on the acquisition
of EKOS, and increased Zytiga® revenue
sharing accruals.

Cash flow
It has been a year of both organic
investment and acquisitions which has
been funded through cash generation
from the business and fund raising. The
business generated £48.5m from
operating activities which compares to
£55.5m at 31 March 2013. The lower
levels of cash generation reflect higher
levels of working capital in the business
and investment in SG&A and research
and development. During the year we
raised £103.1m which together with our
existing cash balances was used to fund
the purchase of EKOS and TheraSphere®
for total consideration of £260.3m and
investments in our manufacturing
capabilities of £11.6m.

We end the year with cash and cash
equivalents of £38.2m.

BTG plc Annual Report and Accounts 2014Strategic reportRisk management
and principal risks
The system of internal controls
utilised to identify, assess,
manage and mitigate the key
risks facing the business

Risk management framework
Maintenance of the Group’s risk
management and internal control
systems is the responsibility of and a key
focus for the Board of Directors. The
Board’s role is to ensure that the risks
taken by the Group are understood and
appropriate in light of its strategy and
corporate goals, and that adequate
internal processes are in place to identify,
assess, monitor, manage and mitigate key
risks effectively. The Company has
adopted a risk management strategy
intended to achieve that objective,
regarding both risks arising from the
internal operations of the Group and also
those arising from the continually
changing business environment and
markets in which it operates. While the
Company aims to manage such risks, no
risk management strategy can provide
absolute assurance against loss.

Risk management is embedded
throughout the Group’s operations and
functions including Finance, Research
and Development, Manufacturing and
Quality, Regulatory, Environmental Health
and Safety, Sales and Marketing
Compliance, IT, Human Resources, Legal
and Intellectual Property Management.
Risks are identified and assessed in terms
of likelihood and potential impact by
operational staff and managers in the
different business areas and are collated
Group-wide into a composite Risk
Register by a Risk Committee, which
comprises senior members of staff
representing relevant parts of the
business and key functions. The Risk
Committee is chaired by the CFO, Rolf
Soderstrom. Individuals in the business
managing discrete risks on a day-to-day
basis update their sections of the Risk
Register regularly and the overall Risk
Register is reviewed twice yearly by the
Risk Committee and formally reported to
the Audit Committee, following which it is
considered by the Board. The focus is on
identifying and understanding newly
emergent risks, progress of agreed
mitigation strategies and any changes to
the likelihood or potential impact of key
risks. Each key risk is allocated a business
owner, overseen by the relevant member
of the Leadership Team.

The Audit Committee review focuses on
risks that are rated ten or more on a
25-point scale, which results from
multiplying the likelihood and impact
scores, each of which is rated on a
five-point scale. There are currently 16
such key risks compared with 17 in the
prior year. Included within the reports to
the Audit Committee is an explanation of
any changes in the risks, controls,
mitigation, impact or likelihood since the
last report, so the Audit Committee can
clearly understand what has changed in
the business, how the risks are being
addressed and the adequacy and impact
of the mitigation efforts.

The Audit Committee then summarises
the risk report and its findings to the
whole Board, its understanding of the
risks inherent to the industry and specific
to the Group, its level of comfort that the
risks being taken are appropriate in light
of the Group’s strategy and that mitigating
actions are appropriate and effective.

From time-to-time the Audit Committee
will undertake a “deep dive” assessment
of a critical risk to better understand its
nature and to consider available
mitigation options that could be deployed
to better manage that risk, together with
the costs, timelines and likelihood of
success of those options. This process
assists the Board to shape the definition
of the Group’s risk appetite, having
ensured it is appropriate with regard to
the Group’s strategy. The Board also
considers new material risks in a timely
fashion as they arise.

The risk group works in coordination with
the Internal Audit group and Compliance,
Development, Quality and other
assurance groups to integrate governance
activities to ensure an overall robust risk
management process.

Principal risks
Here we describe what we believe are the
most significant risks that could
materially affect the Group’s ability to
achieve its financial and operating
objectives. The list is not exhaustive
although other risks are deemed less
material at this time. Some risks are
generic to the industry in which the Group
operates; others are specific to the
Group and inherent in the Company’s
strategy. The Company considers all these
risks relevant to any decision to invest in
the Company.

As a general risk the existing and future
products launched by the Company may
not be a commercial success: depending
on the receipt and scope of the applicable
required marketing approvals (and the
time and investments required to obtain
approvals); product acceptance by
physicians and patients; commercially
viable levels of product reimbursement
being established; safety and efficacy
continuing to be demonstrated, and
the impact of competition. The
pharmaceutical and device industries
are generally competitive and require
substantial ongoing product innovation,
investment and product development to
sustain a competitive advantage. Existing
products could be rendered obsolete,
uncompetitive or uneconomic having
regard to product development by other
companies and changing regulatory
requirements. The Company’s success will
continue to depend on its ability to
develop, in-license or acquire new
products and businesses and to realise
the expected benefits from such activities
by the application of greater resources
and effectively integrating the

opportunities into the Group. Failure
to in-license, acquire or develop
and effectively progress or integrate
new product opportunities on
a commercially viable basis, could
have a material adverse effect on the
Company’s revenues.

Specifically assessed risks:
1. External supply chain
Impact: We rely on third-party contractors
for the supply of many key materials and
services, such as supply of components
and the filling and freeze-drying of end
products in the Specialty
Pharmaceuticals business. These
processes inherently carry risks of failure
and loss of product and are risks over
which the Company has a lower degree of
control. Problems at contractors’ facilities
such as technical issues, contamination
and regulatory actions may lead to delays
and disruptions or loss of supply or
available capacity. Some materials and
services may only be available from one
source and regulatory requirements may
make substitution costly, time-consuming
or commercially unviable.

Mitigation: Rigorous monitoring of
suppliers; maintenance of adequate
product and component inventories;
dual sourcing implemented or being
investigated where practicable. In
accordance with the risk rating the
Company will continue to focus on
this area to ensure market demand for
products can continue to be met (as
has historically been the case).

Change in 2013/14: The acquisition of
TheraSphere® has increased our reliance
on third-party manufacturing (given our
dependency on Nordion as the sole
manufacturer of that product). We are
assessing options to secure additional
product capacity through the external
supply chain.

2. Internal supply chain
Impact: BTG relies on its single site in
Wales for supply of manufactured
antibody products, and a single site in
Farnham, UK, for the manufacture of the
Bead and Varithena™ products with the
consequent possibilities for disruption to
or loss of supplies resulting from, for
example, technical issues, contamination
or regulatory actions. 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 manufactures its EKOS products
at a single site in Seattle, WA, USA, with
the consequent possibilities for disruption
to or loss of supply.

Mitigation: Dual sourcing is being
investigated where practicable;
inventories are being increased or
maintained and monitored through a
sales and operational planning process;
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.
In accordance with the risk rating the
Company will continue to focus on
this area to ensure market demand
for products can continue to be met
(as has historically been the case).

Changes in 2013/14: The acquisition
of EKOS Corporation resulted in an
additional significant BTG product line
being dependent on an internal single
manufacturing site (Seattle). The disposal
of the Brachytherapy business addressed
an internal manufacturing risk that
materialised during the year (receipt
of an FDA warning letter relating to the
Brachytherapy Oxford, US site).

3. Intellectual property, know-how, trade
secrets
Impact: BTG may be subject to challenges
relating to the validity of its patents or
alleging infringement by BTG of
intellectual property rights of others,
which might result in cessation of product
sales, litigation and/or settlement costs
and/or loss of earnings. BTG might elect to
sue third-parties for their infringement of
its patents in order to protect product
revenue streams. Litigation, especially in
the US, involves significant costs and
uncertainties. 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
or maintain the necessary intellectual
property rights in relation to products
acquired or in development, limiting
the potential to generate value from
these products and investments.
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 obtain or
enforce patents, or which reduce the
available term of granted patents or
periods of market exclusivity protection,
could adversely impact the Group’s
financial performance.

Patent expiries can adversely impact the
Group’s revenues. Currently, BTG earns
significant royalties from sales of Johnson
& Johnson’s Zytiga® (abiraterone acetate),
which may be subject to generic
competition in the US from our 2016/17
financial year when the US composition of
matter patent expires, and in the EU from
our 2020/21 financial year when the
ten-year data post-approval exclusivity
period ends.

BTG’s patent portfolio is currently subject
to several challenges.

Enforcement of third-party patents
against BTG may prevent BTG selling
products or require BTG to pay royalties or
other compensation to the patent holder.

BTG plc Annual Report and Accounts 2014Strategic reportRisk management
and principal risks
continued

BTG may rely upon know-how and trade
secrets to protect its products and
maintain a competitive advantage, which
may be important where patent protection
is limited or absent. BTG may have to sue
third parties to protect its know-how and
trade secrets; failure to maintain them
could result in the loss of earnings.

Mitigation: Dedicated internal resource,
supplemented by external expertise,
monitors third-party patent portfolios and
patent applications and intellectual
property rights; development and
implementation of BTG patent filing,
defence and enforcement strategies;
robust processes are in place to automate
patent renewals; internal controls
established to avoid disclosure of
patentable material prior to filing patent
applications and to protect know-how.

Change in 2013/14: Intellectual Property (IP)
management has been made more complex
by the acquisitions of TheraSphere® and
EKOS Corporation which are now overseen
by the central IP group. The IP landscape
is generally more complex in the
Interventional Medicine market place
rendering IP management more
challenging. BTG is enforcing its patent
rights and has initiated the commencement
by the US International Trade Commission
(ITC) of an investigation in relation to the
importation of the Anavip® product into
the US (as a potential competitor to
CroFab®). The ITC will consider whether
to exclude the importation of Anavip®.

4. Competition
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 or 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.

There are currently no competitors to the
Specialty Pharmaceuticals products
CroFab®, DigiFab® or Voraxaze®. However,
future competition is likely in some cases
and competing products could materially
adversely impact BTG’s financial results.
We believe Instituto Bioclon has
submitted a Biological Licence
Application to seek US approval for a
potential competitor product (Anavip®) to
CroFab®. That product may be launched in
the US. Within Interventional Medicine,
the Beads products compete with
products from US companies Merit
Medical and CeloNova; TheraSphere®

competes globally with a product from
Australian company SirTex; Varithena™
competes with other treatment modalities
including heat ablation, vein stripping and
physician-compounded sclerosing foam;
EKOS competes with other interventional
clot treatment products from US
companies Covidien, Bayer MedRad and
others. In Licensing, Zytiga® (abiraterone
acetate) competes with a number of
recently approved treatments for
advanced prostate cancer including
Xtandi® (enzalutamide).

Mitigation: BTG focuses on niche
opportunities, addressing specialist
segments where there are high barriers
to entry, for example, relating to the
development and manufacturing
processes, or to the need to generate
significant supportive clinical data
to gain approval and commercial
acceptance. We seek to differentiate
our products by demonstrating in
clinical trials safety and efficacy
benefits, or greater patient acceptance.

Change in 2013/14: Following the
acquisition of EKOS and TheraSphere®
and the approval of Varithena™, we now
assess the competitive landscape
separately for Specialty Pharmaceuticals,
and within Interventional Medicine, the
Interventional Oncology (TheraSphere®
and Beads) and Interventional Vascular
(Varithena™ and EkoSonic®) businesses.
The sectors in which the Group operates
remain competitive.

5. Research and development execution
Impact: Failure to implement our research
and development strategy could result in
an inability to deliver new products and
new approved indications for existing
products, which would have a material
detrimental effect on the sustainability of
the business and on its medium- to long-
term growth prospects. Failure of the
programmes could result from lack of
organisational resource or capability
deficiencies, from not aligning R&D
programmes with commercial objectives or
from changes in the regulatory landscape
making it more difficult to conduct the
planned R&D programmes or to achieve the
desired clinical results and approvals.

Mitigation: Capabilities and
organisational capacity enhanced through
recruitment; monthly monitoring of
performance against goals; monitoring of
regulatory landscape; use of external
resources such as contract clinical
research organisations (CROs) are being
more effectively leveraged; active
development of R&D and regulatory
strategies and delivery plans. However,
notwithstanding our mitigation activities,
the inherent risks in pharmaceutical and
medical device R&D remain material
and difficult to mitigate.

Change in 2013/14: We have reorganised
our research and development function
and processes to ensure full alignment
with manufacturing and commercial
functions. The acquisitions of
TheraSphere® and EKOS Corporation have
significantly increased the portfolio of
R&D projects and clinical trials to be
executed to deliver on the Company’s
strategy. Specific plans are being
implemented to accelerate delivery of
those studies, including revising how the
Company works with CROs to support
these efforts and increasing the number
of sites participating in the relevant
clinical studies.

Given the increase in number and
complexity of studies and the additional
focus of the Group’s strategy on R&D
investment this risk is assessed to have
increased in comparison to last year.

6. Quality & regulatory, process
documentation
Impact: Our quality systems and
regulatory processes and documentation
(including those relating to Good
Manufacturing Practice and Good Clinical
Practice) are regularly audited by
regulators such as the US FDA. Any
inadequacies identified can result in
observations, major findings and/or
warnings, which would need to be
addressed through remedial actions but if
not addressed adequately, could lead to
regulatory action such as cessation of
product development, public censure,
product recalls, an inability to release
manufactured product, loss of
manufacturing or product licences or
forced temporary or permanent shutdown
of facilities and the consequential
disruption to product supply.

Mitigation: We have invested in upgrading
our processes, capabilities and people
capacity to ensure appropriate resources
are available to support all required
control measures. A Global Quality System
has been established and implementation
across the Group is nearing completion.

Change in 2013/14: EKOS and
TheraSphere® were acquired during the
year and continuing improvements are
being made to the applicable quality
systems to bring them into full
conformation with the Company’s Global
Quality System as it continues to develop.
As establishment of that system is
nearing completion, overall, the risk is
assessed as having decreased in
comparison with the prior year and will
continue to be assessed in light of the
results of future external audits.

7. Commercial Compliance
Impact: The pharmaceutical and device
industries are highly regulated and, in
addition to the broad range of regulations
relating to the development, approval and
manufacturing of its products, the Group
must comply with many regulations
relating to the marketing of its products.
This is true in the US, from which the
Group derives most of its revenues and
where the Group has established its own
direct sales and marketing operations.
Ensuring compliance with such
regulations necessitates allocation of
significant financial and operating
resources. Failure by BTG (or its
commercial partners where BTG has a
liability) to comply with certain rules, laws
and regulations, including the US False
Claims Act, Anti-Kickback Statute and
the US Foreign and Corrupt Practices Act
among others, for alleged improper
conduct, including corrupt payments
to medical professionals, off-label
marketing of products, or the submission
of false claims for reimbursement to the
Federal government may result in criminal
and civil proceedings against the Group.
Significant breaches could result in
large financial penalties and injunctive
or administrative actions against the
Group which could materially adversely
impact the Group’s financial performance
and prospects or result in the loss of
product licences or exclusion from sale
of certain products.

Mitigation: A Code of Conduct has been
established, supported by a mandatory
training programme. Robust and extensive
compliance systems are in place to
ensure sales and marketing and other
activities comply with applicable
regulations in the US and other territories
in which the Group operates. Internal
expertise, procedures, monitoring and
training is maintained and provided to
seek to manage these risks.
Notwithstanding the significant efforts
made in this area, given the significant
potential fines and other penalties related
to any compliance failures, the risk rating
remains high, reflecting the Company’s
continuing vigilance in this area.

Change in 2013/14: Enhanced
compliance processes and monitoring
and auditing programmes have been
established. EKOS and TheraSphere®
marketing and other activities have
been incorporated into BTG’s global
compliance programme.

Given the anticipated continued
geographic expansion of the Group (with
direct sales in the EU for TheraSphere®
and Taiwan for DC Bead®) the remit for
the compliance system has increased
accordingly, including with respect to the
Group’s anti-bribery and anti-corruption
controls and management processes.

8. Organisational capabilities and
capacity
Impact: Inability to implement growth and
delivery plans through inadequate
capabilities, capacity and processes
would adversely affect the long-term
sustainability and growth prospects of the
business. BTG is subject to intense
competition for key staff with the
necessary skills and expertise. Given the
industry in which the Group operates a
significant proportion of the Group’s staff
are technical in nature.

BTG’s business and the scope of its
activities have been transformed in recent
years through organic growth and
acquisitions. BTG’s growth is being driven
by numerous factors including new
product launches and entering new
markets. In parallel, the external
environment has become more
challenging as a result of increased
regulation, pricing pressures and
competition. To continue with its growth
plans and be able to meet the external
challenges, BTG must continue to
enhance its capabilities through
recruitment of key experienced personnel
and training and development while
delivering its financial targets.

Mitigation: Processes are in place to
identify capability and resource gaps, and
to identify and recruit key personnel to
address those requirements. Training
development and incentive plans are used
to attract, motivate and retain staff.

Change in 2013/14: Initiatives introduced
to promote BTG as an employer of choice.
HR initiatives extended to include new
employees associated with TheraSphere®
and EkoSonic®. Continuing enhancement
of BTG learning and development
and leadership programmes.

BTG plc Annual Report and Accounts 2014Strategic reportRisk management
and principal risks
continued

9. Product Liability
Impact: The manufacturing, clinical
testing, marketing and sale of BTG’s
products involve significant potential
product liability if our mitigation efforts
fail. 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. BTG may be exposed to
substantial product liability claims that
could result in fines, damage awards to
injured parties and legal or other material
costs and sanctions. Adverse events may
also result in product recalls or
suspension or loss of product licences
adversely impacting BTG’s revenues.

Mitigation: BTG conducts robust and
well-designed and monitored clinical
trial development plans to seek to ensure
the safety of its products. BTG operates
comprehensive quality systems relating
to the manufacture of its products and
a pharmacovigilance system to monitor
and rapidly respond to safety events
arising with respect to products sold
or used. BTG maintains product
liability insurance but it may not be
commercially viable to adequately
insure against the occurrence of this
key risk. Notwithstanding the efforts
made, quality and other systems may fail.
Even in the absence of failure, significant
product liability events may occur.

Change in 2013/14: The expanding
operations in the US (from organic growth
and acquisitions of EKOS Corporation and
TheraSphere®) potentially increase
liability risks.

10. Non-IP-related litigation
Impact: As BTG grows and sells more
products, particularly in the US, the
likelihood of litigation increases.
Defending against litigation brought
by others, or pursuing litigation against
others, requires substantial financial
and human resources. Successful
litigation against BTG could result in loss
of rights, and the ability to commercialise
products, substantial fines and damages,
injunctive or administrative remedies
that could materially impact the Group’s
performance and prospects. The range
of types of actions and outcomes is
broad: including employment claims,
contract disputes, regulatory litigation
and tax disputes.

Mitigation: Control procedures are in
place to minimise litigation relating to the
development, manufacturing and sale of
the Group’s products including the legal
team oversight of contractual
arrangements with third parties.
Appropriate use of external advisers and
dispute avoidance or resolution strategies.

Change in 2013/14: The operations of
the Group have expanded through the
acquisitions and Varithena™ approval,
though all internal controls have been
applied across the businesses
and portfolios.

The strategic report was approved by the
Board on 19 May 2014.

By order of the Board

Dr Paul Mussenden
Company Secretary

Governance
The Board of Directors and our
approach to corporate governance
and remuneration.

Governance

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BTG plc Annual Report and Accounts 2014

Board of Directors
Our Board of Directors are responsible
for governing the Company’s affairs;
defining its strategy and overseeing
performance.

Garry Watts
Chairman

Garry Watts, FCA, MBE, joined the Board
of BTG as non-executive Chairman in
January 2012. He is Chairman of the
Nomination Committee.

Garry is Chairman of Spire Healthcare and
of Foxtons Group plc, deputy chairman of
Stagecoach Group plc. and non-executive
director of Coca-Cola Enterprises, Inc. Until
December 2010, he was for seven years CEO
of SSL International plc and before that its
CFO. Garry is 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.

Melanie Lee
Non-Executive Director

Melanie Lee, PhD, CBE, FMedSci, DSc
(Hons), joined BTG as a non-executive
director in November 2010. She is a member
of the Remuneration Committee.

Melanie is the Chief Executive Officer of
NightstaRx Ltd, a Founder and director of
the pharmaceutical consultancy Think10,
and a non-executive director of H Lundbeck
A/S. Melanie was previously CEO of
Syntaxin Ltd until it was sold to Ipsen, she
was the Chair of Cancer Research
Technology and a Trustee and Deputy-Chair
of Cancer Research UK. During her career
Melanie 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.

What are the responsibilities
of the Board?

Our Board of Directors are responsible for
governing the Company and are ultimately
accountable to our shareholders for our
activities, strategy and performance. Each
year we hold an Annual General Meeting at
which the Board 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.

Louise Makin
Chief Executive Officer

Rolf Soderstrom
Chief Financial Officer

Giles Kerr
Non-Executive Director

Louise Makin, MA, PhD (Cantab), MBA,
joined BTG as Chief Executive Officer in
October 2004 and is a non-executive
director of Intertek Group plc and a Trustee
of the Outward Bound Trust.

From 2001, she 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.

Rolf Soderstrom, BA, ACA, joined BTG as
Chief Financial Officer in December 2008
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.

Giles Kerr, FCA, joined BTG as a non-
executive director in October 2007 and is
the Company’s Senior Independent director.
He is Chairman of the Audit Committee and
a member of the Nomination and
Remuneration Committees.

Giles is currently the Director of Finance
with the University of Oxford, UK. He is also
a Director of Victrex plc, Isis Innovation Ltd
and Senior plc. 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.

Ian Much
Non-Executive Director

Jim O’Shea
Non-Executive Director

Richard Wohanka
Non-Executive Director

Ian Much joined BTG as a non-executive
director in August 2010. He is Chairman of
the Remuneration Committee and a member
of the Audit and Nomination Committees.

Ian is currently a non-executive director and
the senior independent director of Chemring
Group PLC. 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.

Jim O’Shea joined BTG as a non-executive
director in April 2009 and he is a member of
the Nomination Committee.

Richard Wohanka joined BTG as a non-
executive director in January 2013 and
is a member of the Audit Committee.

He is a director of Zalicus Inc., Prostrakan
Group Plc, and Trevi Therapeutics, Inc. and a
former Chairman of the US National
Pharmaceuticals Council. From 2007 to
2008, he was Vice Chairman of Sepracor,
Inc., where he was also President and Chief
Operating Officer from 1999 to 2007.
Previously Jim was Senior Vice President of
Sales & Marketing and Medical Affairs for
Zeneca Pharmaceuticals (US), a business
unit of Zeneca Inc. While at Zeneca, he held
several management positions of increasing
responsibility in international sales and
marketing in the US and the UK.

Richard has more than twenty 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. Richard is a board member
of the Nuclear Liabilities Fund and of
Scottish Widows.

BTG plc Annual Report and Accounts 2014GovernanceCorporate governance report

Governance framework

Chairman

Board

Nomination
Committee

Remuneration
Committee

Audit
Committee

Leadership
Team1

Disclosure
Committee

Risk
Committee

Internal
Audit

Compliance
Steering
Committee

1 A number of Management Committees that report to the Leadership Team

are described in detail on page 43.

Dear Shareholder,

As a Company, we believe that achieving high standards of
corporate governance is fundamental to the management
of our business. We have a strong governance framework
embedded within the culture of our organisation through
our Company values, our Code of Conduct, and its
underlying supporting policies, procedures and
management processes. Ultimate responsibility for this lies
with the Board, and we are continually looking to improve
standards while building a successful Company. The
September 2012 edition of the UK Corporate Governance
Code (the Code), introduced additional compliance
requirements, such as the consideration of board diversity
and external board evaluations to be carried out every three
years, as well as how certain activities, such as those
carried out by the Audit Committee are reported on in this
Annual Report and Accounts. The Company believes that it
has complied with all of the Code provisions. This Corporate
Governance Report explains how the Company applies the
principles of the Code. This year’s Annual Report is subject
to the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013
(the Regulations). Details of which can be found in the
Directors’ remuneration report on pages 51 to 68.

The Board is 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. The
Chairman of the Remuneration Committee and I met with a
number of shareholders ahead of last year’s AGM, in
consultation over the proposed changes to the performance
conditions and structure of the Executive Directors’
Performance Share Plan. In addition, Louise Makin, our CEO,
held over 80 meetings with investors and Rolf Soderstrom,
our CFO, met with over 30 institutional investors. Louise also
attended and presented 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 Vice
President of Corporate and Investor Relations, who reports
directly to the CFO.

At the Company’s AGM on 16 July 2014, the Board
will be available to meet investors as usual for face-to
face discussions.

Garry Watts
Chairman

Compliance with UK Corporate Governance Code (the Code)
The Board supports the principles set out in the Code as
published by the Financial Reporting Council (FRC) in September
2012, which applies to reporting periods beginning on or after
1 October 2012 and can be found on the FRC website,
www.frc.org.uk. The Financial Conduct Authority has yet to
change the Listing Rules, and therefore requires that certain
compliance statements are made in relation to the edition of the
Code issued in June 2010. This report therefore addresses the
requirements of both editions of the Code.

Compliance with the provisions of 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 2014. Details of directors’ remuneration, as required by
the Code and Part 4 to Schedule 8 to the Large and Medium-
sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013, are set out in the directors’
remuneration report on pages 51 to 68.

The Company’s auditor, KPMG LLP, is required to review whether
this corporate governance statement reflects the Company’s
compliance with the provisions of the Code specified for its
review by the Listing Rules of the UK Listing Authority. 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.

Leadership
The Board of Directors
The Board is responsible for the long-term success of the Group
and the overall management of the business. It has a schedule of
matters specifically reserved for its decision or approval. These
include the approval of the interim and annual financial and
management statements, and major public announcements,
setting strategic direction, budgets and long-term plans. Other
areas include the approval of major investments, acquisitions
and disposals, key risk decisions, major capital expenditure,
decisions relating to major litigation, significant financing,
dividend policy and executive remuneration and appointments.

The Board as a whole reviews the overall strategic development
of the Group, 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,
staff and patients and meeting its legal, regulatory and other
obligations and ensuring the integrity of its financial information
and business conduct.

While, as a unitary board, the executive and non-executive
directors are collectively responsible for the success of the
Company and have fiduciary duties to shareholders, their roles
are strictly delineated. The executive directors have direct
responsibility for the business operations of the Company, while
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:
• Set the Company’s strategic objectives and policies.
• Ensure the necessary financial and human resources are in
place to support strategy.
• Determine the significant risks that the Company is willing to
take to achieve its strategic aims and ensure effective risk
management controls are in place.
• Review management and Company performance.
• Ensure the proper discharge of the Company’s statutory and
other legal, regulatory and ethical responsibilities.
• Agree and oversee the application of an appropriate corporate
governance framework.

Board activity during the year:
Activity over the year encompassed a number of typical cyclical
items, such as approval of the 2014/2015 budget, preliminary
announcement, Annual Report & Accounts and the 2013 interim
financial statements and announcement. Other matters
included a bi-annual review of the risk management report from
the Audit Committee, a Strategy Review day and an R&D and
Innovation day intended to allow the Board to oversee the
progress with the development of the Group’s product portfolio
and to consider future R&D investment options in more detail.
Both the Strategy and R&D reviews were refocused to take into
account the impact and opportunity presented by the
acquisitions of TheraSphere® and EKOS Corporation during the
year. Specific matters reviewed included the progression and
ultimate approval of those acquisitions and the definition of the
Varithena™ commercial launch plan.

Governance matters included review of the Board and
committee evaluations and recommendations from the Board
committees, such as proposed amendments to the terms of
reference for each of the Nomination, Audit and Remuneration
Committees. Further work included the simplification of the
Group corporate structure.

In terms of external focus, feedback from investors was regularly
reviewed by the Board and specific input was sought from
material shareholders in relation to the changes to the executive
director Remuneration Policy approved at the 2013 AGM.

Board Committees
The Board has three committees, Audit, Remuneration and
Nomination, to which it delegates specific responsibilities.
The reports for these committees can be found on pages
46 to 68. Each committee has full terms of reference that can
be found on the website at btgplc.com/about-us/corporate-
governance and are available on request from the
Company Secretary.

BTG plc Annual Report and Accounts 2014GovernanceCorporate governance report
continued

The terms of reference for each committee are reviewed at least
annually, to take into account evolving best practice and each
revision is approved by the relevant committee and then by the
Board. The Board provides the committees with sufficient
resources to undertake its duties, including access to the
Company Secretary and external advisers, where appropriate.

The Chairman
Garry Watts has been Chairman since he joined the Board on
1 January 2012. The Chairman is responsible for leading the
Board, creating conditions for overall Board and individual
Director effectiveness, promoting constructive debate and for
ensuring the following:
• That the Board devotes adequate time to the right agenda
issues, such as its role in shaping strategy.
• A robust decision making process is in place by ensuring
appropriate high-quality information is made available to the
Board in a timely manner and that clear decisions are made,
communicated and effected.
• That the Board environment is productive and the
composition and diversity, experience and expertise of
the Board and its Committees is appropriate having regard
to the Company’s needs.
• The Board discharges its responsibilities with respect to
risk management.
• Board committees are properly structured with appropriate
terms of reference, membership and collective experience.
• Necessary relationships of mutual respect and open
communication are fostered between directors, with non-
executive directors providing support and advice while
respecting the executive responsibility.
• Effective communication with shareholders and other
stakeholders.

The Senior Independent Director
Giles Kerr has been the Company’s Senior Independent director
(SID) since July 2008. The principal role of the 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. He is
also responsible for:
• Supporting the Chairman’s delivery of objectives, and leading
his evaluation.
• Leading the non-Executive Directors in the oversight of the
Chairman and ensuring there is a clear division of
responsibility between the Chairman and CEO.
• Being available to shareholders to express concerns which
the normal channels have failed to resolve or which would
be inappropriate.

Executive Directors
The CEO, Louise Makin, is primarily responsible for the running
of the Group and for executing the Group strategy in line with the
risk appetite defined by the Board and the Company values.
Rolf Soderstrom, Chief Financial Officer (CFO), 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. The CFO has operational
responsibility for business development activities.

The executive directors are also responsible for:
• Communicating 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.
• Providing 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.
• Delivering 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.

Board by gender

6
Male
2
Female

Attendance at meetings
The table below details the directors’ attendance at scheduled
Board and Committee meetings since the last annual report, the

composition of the Board and the Company’s assessment of the
independence of the directors.

Board & Committee
composition & attendance

Total number of meetings

Executive directors
Louise Makin (CEO)
Rolf Soderstrom (CFO)

Non-executive directors
Garry Watts

Giles Kerr

Melanie Lee

Ian Much

James O’Shea

Richard Wohanka

Committee
memberships

Independent

Board
meetings

Nomination
Committee

Audit
Committee

Remuneration
Committee

None
None

Nom2
Aud2, Rem, Nom
Rem
Aud, Rem2, Nom

Nom

Aud

8/8
8/8

8/8

7/8

n/a
n/a

3/3

2/3

n/a

3/3

n/a

n/a
n/a

n/a

3/3

n/a

3/3

n/a

3/3

n/a
n/a

n/a

4/5

5/5

n/a

No
No

No1
Yes

Yes

1 Garry Watts is excluded from the determination of independence by virtue of

4 The external auditor always attends the Audit Committee meetings and the

his role as Chairman of the Company.

remuneration advisers usually attend the Remuneration Committee meetings.

2 Committee Chairman.
3 Richard Wohanka was unable to attend the July Board meeting (and AGM) due
to an engagement in place prior to his appointment to the Board. Giles Kerr
did not attend one Nomination Committee meeting where his re-appointment
was discussed and one Remuneration Committee meeting where a change of
location meant he was unable to attend.

5 The table shows, for each director, number of meetings attended/number of

meetings eligible to attend.

6 Additional specific Board sub-Committee telephone meetings were held as

appropriate to approve specific business activities such as the acquisitions of
TheraSphere® and EKOS Corporation.

Board composition, membership and election of directors
The Board comprises six non-executive directors, including the
Chairman, and two executive directors.

The names and brief biographical details of all the directors
are set out on pages 36 and 37. The Company recognises the
importance of diversity, including gender diversity, with 25%
of the members of the Board being women. Details of gender
diversity in the Group below Board level can be found in
the corporate citizenship area of the strategic report on
pages 22 and 23.

There have been no changes to the Board during the year.
As reported in the Nomination Committee report on page 50,

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.

All non-executive Board appointments are for three year terms,
subject to re-election at each year’s AGM, apart from Giles Kerr,
whose re-appointment is for a one year term, having served on
the Board for more than six years. 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.

Balance of directors

Tenure of non-executive directors and Chairman

1
Chairman
2
executive
directors
5
non-executive
directors

1
More than 6 years
1
4-6 years
3
2-4 years
1
1-2 years

BTG plc Annual Report and Accounts 2014Governance
Corporate governance report
continued

Independence
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. In line 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.

Directors’ conflicts of interest
To address the effect of Section 175 of the Companies Act 2006
(directors’ conflicts of interests), 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 2014 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 regularly reminded 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 and support and performance evaluation
Information, training and support
Using a secure Board portal, accessible by the Board on an
electronic device, in advance of each meeting the directors
receive an agenda and a full set of papers for each item to be
discussed. Directors receive sufficiently detailed strategic and
operational reports and senior executives regularly attend
meetings to enhance the non-executive directors’ understanding
of the business and current issues and to make presentations
on the results and strategies in their areas of responsibility. This
year an R&D and Innovation day was introduced into the Board
programme to further enhance understanding of how the
activities of this important part of the business are undertaken
and to better inform the Board’s consideration of the Company’s
strategy and investment programme and options. Board
meetings are occasionally held at different office locations in the
UK and US enabling non-executive directors an additional
opportunity to visit other Company sites.

When they join the Company, each director receives a
comprehensive induction package, which includes 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.

They also have direct access to the advice and 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 Board recognises that a review of its own performance
is beneficial in ensuring its continued effectiveness
and development.

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.

This year, as last year, under the direction of the Chairman,
the Company Secretary developed a series of comprehensive
questionnaires to evaluate the performance of the Board as
a whole, the Committees and the Chairman, using web based
software. Next year, in line with the requirement of the Code
for an external evaluation at least every three years, external
consultants will be appointed to carry out the review.

The results of the process confirmed that the Board provided
effective leadership of the Group. Progress was reported against
the objectives set for the Board last year:
• There was greater transparency around the risk management
process, with the Board looking more closely at risks involved
with the Company’s strategy and the Audit Committee
concentrating on ensuring effective operational identification
management and mitigation of risks.
• The experience and expertise of the non-executive directors
was drawn on more fully with relevant non-executive directors
contributing to discussions on the Group’s financial affairs
and risk management processes outside the formal board
meeting schedule.

The Board noted the pace of development and change in the
business over the year had an impact on the Board, making
increased communication more important than ever.

In response to this year’s evaluation the Board objectives are to:
• Increase communication, by way of additional Board calls
on the Board calendar, to respond to the pace of activity
and growing complexity of the business, especially in months
where there are no formal Board meetings already scheduled.
• Continue to improve the monitoring of progress on delivering
the strategy and its component parts and understanding the
long-term sustainability of the business model.
• Continue to develop the risk management processes,
especially from a top-down perspective to ensure the early
identification of emerging risks and that the process
continues to be further integrated into the evolution of
strategy and assessed when looking at acquisitions and other
developments in the business. The goal is to continue to evolve
the definition of the Group’s risk appetite.

• Continue to look at benchmarking performance and
development opportunities against the external environment
and competitors.
• Continue the focus on people and leadership development
and succession planning, ensuring the Group has adequate
capability and capacity in terms of people and resources to
meet its diversifying objectives.

Financing reporting and internal control
The statement of directors’ responsibilities in relation to the
preparation of the financial statements is set out on page 71
and the auditor’s statement on the respective responsibilities
of Directors and the auditor is included within its report set out
on pages 72 to 74.

Communications with shareholders, such as results
announcements, interim reports, annual reports or AGM and
trading updates, are reviewed carefully and approved by the
Board, or a sub-committee of the Board, 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.

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 while
ensuring that risks are properly identified and managed and the
Group’s legal, regulatory and other obligations are met. 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 established an Internal Audit group supported externally by
PwC. Further information can be found in the Audit Committee
report on pages 46 to 49.

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 the internal controls in place to manage and assess
risk 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 R&D
commercialisation strategies as well as oversight of governance
activities. A number of committees that monitor various parts of
the business report to the Leadership Team on a regular basis:
• Research & Development Oversight Board: Ensures BTG
is investing in its assets efficiently and in relation to
opportunities with well-targeted business cases where the
value to the customer and to BTG is clearly understood and
articulated. Oversees the definition of activities and priorities
of the Innovation Leadership Team and Development
Leadership Team.
• Innovation Leadership Team: Investigates the opportunity
to develop new products, product line extensions and new
indications to address identified unmet medical needs,
providing strategic and operational leadership of innovation
activities up to proof of principle in man.
• Operational 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.
• Development Leadership Team: Evaluates 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.
• Global Quality Leadership Team: Reviews progress with overall
Quality Strategy and objectives, this includes ensuring
inspection readiness, QMS effectiveness and enhancements,
product delivery on time and to required quality, safety and
efficiency. Ensures continued regulatory compliance.
• Performance Management Review: Monthly meeting of the
Leadership Team and senior staff to review progress against
business plans and targets, both financial and operational.
• Risk 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.
• Compliance Steering Committee: Responsible for maintaining
and overseeing a 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.
It sets policy and oversees any investigations required with
respect to any alleged failures. It also assists in the definition
and assessment and response to compliance monitoring
and auditing and reports to the Audit Committee at least
twice yearly.
• Corporate Responsibility Committee: Ensures the Group
maintains high standards in this area.

BTG plc Annual Report and Accounts 2014GovernanceCorporate governance report
continued

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 Board.
For further details see the Audit Committee report on pages
46 to 49. 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 on the products in which BTG
has an interest. 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.

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 risk 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 anti-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 and is in accordance with the
Code. Further information is given in the Audit Committee report
on pages 46 to 49.

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, as they arise and
also 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 Group is
not compromised.

Within the 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 the separation
of duties and safeguards.

On 23 May 2013 the Company completed a placing of 32,208,030
new ordinary shares at a price of £3.30 per share, raising a total
of approximately £103.1m (after expenses). The purpose of the
placing was to fund, in part, the completion of the acquisitions
of EKOS Corporation and TheraSphere® which were announced
on 23 May 2013 and completed on 5 July 2013 and 13 July 2013
respectively. As part of that placing, Invesco Asset Management
(who immediately prior to the undertaking of the placing held
29.9% of the issued share capital of the Company) subscribed
for 9,574,530 ordinary shares at the placing price representing
a total consideration at the placing price of £32.4m, representing
2.8% of the market capitalisation of the Company as at the close
of business on 23 May 2013. The completion of
the placing resulted in Invesco holding a total of 29.9% of
the issued share capital of the Company as at 24 May 2013.
Invesco participated in the placing on the same terms as other
subscribers and no commission was payable to them in respect
of that participation.

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 Board
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 Board is available after the meeting for an informal
discussion with shareholders.

The AGM will be held at 10.30am on 16 July 2014, 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/
investors/reports-and-accounts. The letter accompanying the
AGM Notice includes details of the resolutions and explanatory
notes thereon.

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 Asset Services’ (BTG’s
registrars) 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.

As Invesco held greater than 10% of the issued share capital of
the Company immediately prior to the placing they were deemed
a related party for the purposes of the Listing Rules.

See note 30 on page 113 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 Vice
President of Corporate and 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 parties 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.

Relations with shareholders and constructive use of the AGM
Relations with shareholders
The Group maintains 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 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. The Chairman of the
Remuneration Committee wrote to major shareholders last May
setting out the executive director Remuneration Policy proposals
and he and the Chairman met with many of them to gain their
feedback ahead of the proposals being put to shareholders at the
2013 Annual General Meeting. No other requests were received
from major shareholders to meet with the Chairman, Senior
Independent director or other non-executive directors 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
material 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.

BTG plc Annual Report and Accounts 2014GovernanceAudit Committee report

Dear Shareholder

The role of the Audit Committee is central to the governance
of the Group’s financial activities. It monitors, reviews and
enhances the integrity of the Group’s internal controls, its
financial reporting and the way the Group assesses, manages
and reports risk and compliance. 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
highly regulated environment in which the Company operates
only enhances the need to ensure our processes remain fit
for purpose.

Following the introduction of the September 2012 edition
of the Corporate Governance Code (the Code), that applies
to accounting periods beginning on or after 1 October 2012
and after taking advice from the Audit Committee, the Board
confirmed that the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
performance, business model and strategy.

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 Secretary on request.

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. As required by the Code, he is considered 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 68. 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
36 and 37.

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 always
attends Commitee meetings. The Company Secretary or his
deputy serves as secretary to the Committee.

Activities
A summary of matters considered by the Committee since the
last Annual Report is shown on the following page. Each area of
review is explained in further detail within this report:

Members

Giles Kerr (Committee Chairman)
Ian Much
Richard Wohanka

Committee member since

6 November 2007

1 November 2010

1 January 2013

Details of attendance at meetings are shown in the table on page 41.

There were three Committee meetings during the year

Area of review

Financial reporting

Activities undertaken

Review of the Group’s half year and full year results

Consideration of whether the Annual Report is fair, balanced and understandable

Review of external auditor reports on the half year and full year results

Consideration of significant accounting issues as detailed below

Review of prospective changes in accounting standards and their potential impact

Review of trading updates issued by the Group and amendments thereto

Assessment of the going concern basis of preparation for the financial statements

External auditor

Review of external auditor independence

Risk management and internal control

Internal audit

Review of the scope, nature and resource planning for half year and full year audits

Approval of external auditor fees

Review (and approval where required) of use of auditors for non-audit work

Review of risk management systems, internal controls and fraud, anti-bribery and
anti-corruption procedures

Detailed risk review surrounding the Group’s Intellectual Property management

IT and cyber-risk review

Review of enhanced compliance systems and policies

Review of the results of internal compliance monitoring and auditing

Review of the Group’s whistle-blowing policy

Review of the Group’s tax affairs

Review of internal investigations and Internal Investigations Policy

Review of the integration of the acquisitions made in 2013 so far as they relate to
key controls

Review of the Internal Auditor’s work plan

Review of Internal Audit reports produced throughout the year

Review of structure and resources of the Internal Audit group

Committee governance

Review and amendment of Committee terms of reference

Completion of an effectiveness review

Financial Reporting
A key role of the Committee is to undertake detailed monitoring
of the integrity of the annual and half year results, including a
review of the significant financial reporting judgements
contained in them with the aim of ensuring that they present a
fair and balanced view of the Company and comply fully with the
relevant statutes and accounting standards. Where requested
by the Board, the Committee will advise on whether, taken as a
whole, the Annual Report and Accounts is fair, balanced and

understandable. 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 as set out below. 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 least twice a year,
when the half and full year results are discussed.

BTG plc Annual Report and Accounts 2014GovernanceAudit committee report
continued

Significant accounting matters
The Committee considered the following key accounting issues,
judgements and disclosures during the course of the year:
• Acquisition accounting: The Group completed two acquisitions
during the year; EKOS Corporation and the Targeted Therapies
division of Nordion Inc. comprising the TheraSphere® product.
The Committee discussed the key assumptions and
judgements applied by management in satisfying the
requirements of IFRS 3 and reviewed valuation reports
prepared by an independent third party. Note 33 contains
further details of acquisition accounting.
• Carrying value of Goodwill and Intangible Assets: The Committee
received and critically reviewed a report from management
setting out the approach to and results of impairment testing
in accordance with IAS 36. The report covered all asset
classes, with a particular focus on goodwill and intangible
assets as further disclosed in note 12 and the valuation
methodology including discount rates, assumed growth rates
across and sensitivity analysis for these asset classes.
• Recognition of Deferred Tax Assets and Liabilities: The
Committee reviewed the appropriateness of deferred tax asset
recognition and the movements on deferred tax assets and
liabilities during the year. This included the movements arising
from the Group’s two acquisitions and the assumptions made
in setting up the deferred tax liability on acquired intangibles.
• Presentation format of Consolidated Income Statement: The
Group’s Consolidated Income Statement on page 76 has, for a
number of years, been prepared using a three column format
for each financial year. The Committee reviews the
appropriateness of this disclosure on an annual basis and did
so once again this year, paying particular regard to recent
guidance from the Financial Reporting Council, in relation to
the reporting of exceptional items issued in December 2013.
• Other matters: During the course of the year, the Committee
received updates from management on Group corporate
structure, tax strategy and the adoption of new accounting
standards. In particular, the Committee discussed the impacts
of IAS 19 ‘Employee Benefits’ (2011) (see note 22).

Review of external auditor effectiveness, independence
and appointment
The Committee reviews the overall performance of the auditor
annually and approves its terms of engagement and
remuneration. The Committee discussed and agreed the
auditor’s proposed work plan prior to the commencement of the
audit of the results for the year to 31 March 2014 and also
reviews the non-audit work carried out by the auditor to ensure
that such services do not impair its independence or objectivity.
The external auditor provided a report demonstrating how their
independence and objectivity is maintained when providing
non-audit services.

The Committee has a formal policy for approving the use of the
auditor for non-audit work detailing areas where the auditor may
not be used, 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 from management
summarising the fees paid to the auditors for non-audit work
and whether such services were pre-approved or specifically
approved by the Committee. Details of the amounts paid to the
external auditor for non-audit services are set out below.

Audit Committee approval

Task

Pre-approval required:

US tax compliance services

Others

Fees
£’000

101

Total fees paid to the Company’s auditor, KPMG, are shown in
note 6 on page 91. 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.

Each year, the Committee considers the reappointment of the
external auditor and makes a recommendation to the Board.
As part of this process, the Committee also looks at the need
for the rotation of the audit partner and assesses the auditor’s
independence. Richard Broadbelt replaced David Bills as audit
engagement partner this year, following David’s completion of
his five-year term. An agreed succession plan had been put in
place ahead of handover, which went smoothly. Last year, while
considering partner rotation, the Committee considered whether
it was an appropriate time to engage in an external audit tender
process, taking into account the speed of change and complexity
of the business, and the services offered by the current auditors,
and their independence, together with the guidance issued by
the Financial Reporting Council (FRC). 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. At the time, the Committee concluded that it
would not be in the Company’s interests to commence a tender
process, but would review this decision annually. Following an
equivalent review of the auditor this year, including auditor
performance and independence, the Board recommends the
reappointment of KPMG as external auditor, and to authorise
the directors to determine the auditor’s remuneration.

Having regard to the FRC’s guidance on transitional
arrangements and ongoing developments in audit regulation, the
Company intends to consider external audit tender, at the latest,
nearer the time of the next audit partner rotation, currently
scheduled for 2018, however the Company may put the audit out
for tender at any time before this date. The Committee further
acknowledges, and will continue to monitor, the proposed
changes by the UK Competition Commission and the European
Union in respect of the auditor services and retendering.

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 and were found to be operating effectively.

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.

Internal audit
The Committee monitored and reviewed the work of Internal
Audit throughout the year. The annual internal audit plan was
approved by the Committee at the start of the year and any
subsequent changes to that plan have also been approved by
the Committee. The internal audit plan focuses on financial
controls and compliance with healthcare law. The work carried
out by Internal Audit did not identify any material weaknesses
in internal controls but included proposals to enhance control
procedures. The Committee monitors management’s responses
to ensure that control improvements are instigated on a timely
basis. Following internal staff redeployment, the internal
audit function is supported by PwC under the direction of
the Audit Committee.

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, the following actions
were agreed for the year ahead:
• Need to continue to evolve the approach to risk management
having regard to the speed of change of the Company,
the impact of acquisitions and the growing complexity
of the Group.
• Increase in focus on defining the Group’s risk appetite, its
relationship with and contribution to shaping the Group’s
strategy and the effective correlation of the work of the
Risk Committee, Compliance and Internal Audit Groups.

Risk management and internal control
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 risk management process and internal control effectiveness
and reports to the Board on its findings twice-yearly. In particular,
the Committee’s review focuses on financial, operational,
healthcare law compliance and risk management 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
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 Committee discharges its risk management duties using a
combination of reports from management, Internal Audit and
the external auditor. A risk management 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 risk
throughout the business. The Risk Committee maintains a risk
management plan that is designed to identify risks, 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 Group has a Compliance Steering Committee, which is
responsible for maintaining a 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 of ongoing
monitoring work are reported to the Audit Committee alongside
the twice-yearly risk management report.

Additional details of risk management and principal risks
that may affect the business are given on pages 30 to 34 in
the strategic report.

Whistle-blowing
In line with best practice, the Group supports an independent
and confidential whistle-blowing procedure and the Committee
is responsible for ensuring that arrangements under which
employees may 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 Employee Code of Conduct are details of the
Group’s whistle-blowing policy and displays at each site give
details of what employees should do if they have concerns
regarding any aspect of the business. Employees are encouraged

BTG plc Annual Report and Accounts 2014GovernanceNomination Committee report

• Considering the expertise and capabilities as well as the
capacity required of the Group’s management team and wider
employee group having regard to the Group’s strategy and
changing needs. This was an area of focus in light of the rapid
growth of the Group including as a result of the acquisitions
undertaken in 2013.

Board succession
There have not been any changes in the composition of the
Board or its Committees during the year. As part of the Board’s
succession plans, the skills required by the Board members are
regularly reviewed and appropriate candidates for replacement
are identified to ensure the overall balance and skills set of the
Board. 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.

Following the appointment of new non-executive directors, the
Committee ensures that they receive a comprehensive induction
programme. As part of the induction process each new director
is given a full briefing on the financial and operating history of
the Company and details of its strategy, operating plans, budgets
and forecasts for future years. Arrangements are also made for
each 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 review is undertaken of the content of
recent Board and Committee discussions including risk
management reports, minutes and historical actions. A briefing
on corporate governance and directors’ responsibilities may
also be given and the opportunity to attend external courses
is also available.

The Committee also reviews succession plans and plans for
emergency cover of key managers on a regular basis.

Committee evaluation
The Committee carried out a review of its effectiveness and
reported the results to the Board. The Committee was found to
be functioning effectively.

Garry Watts
Chairman of the Nomination Committee

The Committee, established by the Board, is responsible
for appointments and reviewing the structure of the Board
and its Committees. The key objective of the Committee is
to ensure the Board has the balance of individuals who have
the appropriate mix of skills, experience, knowledge and
expertise to lead the Company.

The Committee and its membership
The Committee’s full terms of reference, reviewed and updated
during the year, are available on the Company’s website, or from
the Company Secretary on request. The key responsibilities of
the Committee are:
• 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.
• To identify, via a rigorous and transparent procedure, 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.
• To plan for the orderly succession of directors to the Board.
• To recommend to the Board the membership and
chairmanship of the Audit and Remuneration committees.

Members

Committee member since

Garry Watts
(Committee Chairman)

Giles Kerr

Ian Much

James O’Shea

1 January 2012

16 July 2008

1 January 2012

13 May 2009

Details of attendance at meetings are shown in the table
on page 41.

Other attendees at Nomination Committee meetings
• The Chief Executive Officer may attend meetings by invitation.
• The Company Secretary or his deputy serves as secretary to
the Committee.

Activities
The principal activities during the year related to:
• the reappointment of three non-executive directors, Ian Much,
Giles Kerr and Melanie Lee. Ian and Melanie were reappointed
for a further three-year term, subject to being re-elected at
each Annual General Meeting. Due to Giles having served on
the Board for six years, the Committee agreed that in line with
best practice, his reappointment would be for a period of
twelve months. It is the expectation that any non-executive
director reappointment beyond six years would be made on
an annual basis.
• Discussing succession planning for the Group’s Leadership
Team, including the CEO and CFO and the Group’s
senior managers.

Directors’ remuneration report

Dear Shareholder

I am pleased to present our directors’ remuneration report for
the year ended 31 March 2014.

Structure of the report
In light of our goal to ensure transparency, last year’s report
anticipated many of the new remuneration disclosure
requirements but this is the first year that the report is formally
subject to the new regime contained in Part 4 to Schedule 8 to
the Large and Medium-sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013 (the Regulations).
As such, it has been separated into the following parts:
• the ‘Annual Statement’ summarising the key messages and
explaining the business context in which the Committee’s
major decisions during the period were taken;
• the ‘Directors’ Remuneration Policy Report’ describing the
future executive remuneration policy to be put to a binding
shareholder vote at the AGM to be held on 16 July 2014 and
which will operate with effect from the AGM; and
• the ‘Annual Report on Remuneration’ which provides
shareholders with details of the remuneration actually
delivered to the Company’s directors during the 2013/2014
financial year and which is subject to the advisory vote at the
forthcoming AGM. This report also summarises the details and
context for major decisions on directors’ remuneration made
during the year.

2014 Annual Statement: alignment with shareholders
We believe in rewarding the executive directors based on
performance and delivery of shareholder value and by reference
to transparent and demanding performance targets. We
maintain our goal of attracting, retaining and motivating
leadership of the calibre required to drive the long-term success
of the Company.

Last year, shareholders approved a number of changes to the
future direction and structure of the policy for the remuneration
of the executive directors, following the detailed work carried out
by the Remuneration Committee and its consultation with our
major shareholders. This included changes to the Performance
Share Plan (PSP) award levels and performance conditions to
better reflect the stage of evolution of the Company, as well as
the introduction of the PSP multiplier awards. In addition,
shareholder support was received for the realignment of the
Chief Executive’s salary.

The objective of these structural changes was to ensure that the
policy maintained the correct balance between rewards for
short-term performance with respect to the Company’s current
portfolio of marketed products, the successful US launch of
VarithenaTM and longer-term strategic initiatives, such as the
development of new products and new product acquisitions. The
introduction of the multiplier awards, spanning five years, also
more appropriately matches the reward structure with the time
horizons of a business of our nature. That, together with the
introduction last year of increased shareholding guidelines,
means that the executive directors have significant value
invested in the long-term performance of the Company, aligning
their interests with those of shareholders if they continue to
deliver performance, not just over the short and medium-term
but also the long-term.

The Remuneration Committee will review the use of the PSP
Multiplier structure in 2016 and the overall remuneration policy
will be subject to a further binding shareholder vote every three
years (or sooner if changes are made to the policy in the interim).
The Annual Report on Remuneration will continue to be subject
to the advisory shareholder vote.

Progress during the year
We have seen the US approval of VarithenaTM by the FDA in
November 2013 and the preparations for commercial launch this
year. We made two acquisitions in 2013 relating to the EkoSonic®
and TheraSphere® products, which together have significantly
enhanced our Interventional Medicine commercial offerings and
broadened the product development portfolio. In addition,
progress has been made in expanding the geographical coverage
of our product offerings.

At the same time, the executives have sought to strengthen the
overall organisation and the underlying performance of the
established business has, once again, been strong.

This work has created significant shareholder value (with an
increase in the share price from 360.1p on 1 April 2013 to 547.7p
on 31 March 2014). As a result, there will be 100% vesting under
the 2011 Option and PSP awards, subject to the decision of each
of the executive directors whether to roll over PSP amounts that
would otherwise vest, in order to receive a Multiplier award that
can increase or decrease the actual level of awards vesting
based on relative Total Shareholder Return (TSR) performance
up to the end of year five after grant. With respect to the 2011
PSPs, the actual amount vesting will depend on whether the
executive directors elect to roll over an award from a Core award
to a Multiplier award. If no such election is made vesting will
occur in July 2014. Vesting will occur in July 2016 if such an
election is made.

Following the acquisitions of the EkoSonic® and TheraSphere®
products during the year, the Committee increased the financial
targets that were applied to the Company annual bonus scheme.
Performance against those targets was measured at 82%.

Since the 2013 AGM, the Committee has addressed a further
issue raised by investors during the consultation period
preceding the AGM. We have introduced shareholding guidelines
for the remainder of the Leadership Team (at 50% of salary) and,
to avoid any doubt and in line with good corporate governance
practice, we have incorporated into the shareholding guidelines
wording to make it clear that the pledging and hedging of shares
held by the executives and Leadership Team is not permitted.

The 2014 salary increases for both the executive directors were
equal to the average of those to be awarded to the wider
workforce at 3.5% (with the full range of increases across the
Company being 2 to 15%). This change resulted in salaries for
the year starting 1 April 2014 of £569,250 for Louise Makin and
£373,117 for Rolf Soderstrom.

We welcome shareholder feedback and hope that you are able to
support our policy and the way in which it has been applied in
the year at the AGM on 16 July 2014.

Ian Much
Remuneration Committee Chairman

19 May 2014

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

The Committee believes that the salary and bonus structure and
forfeiture provisions, together with the shareholding guidelines
and participation in long-term incentive plans with performance
measured over three to five years from grant, provides a
balanced market-competitive package for the executive team
which is aligned with shareholder interests. However the
Committee will keep the approach under review in order to
ensure it remains appropriate.

The Committee’s specific policy for each element of
remuneration is as follows1,3.

Directors’ Remuneration Policy Report
This part of the directors’ remuneration report sets out the
remuneration policy for the Company and has been prepared in
accordance with Part 4 of the Regulations. The policy has been
developed taking into account the principles of the UK Corporate
Governance Code and the views of our major shareholders. The
Policy Report describes the policy to be applied for 2014
onwards and will be put to a binding shareholder vote at the
2014 AGM on 16 July 2014. If approved, the policy will take
formal effect from that date.

The policy for remuneration for executive directors is to enable
the Company to offer a package of rewards that:
• is sufficiently competitive to enable the Company to attract
and retain the management talent it needs to ensure the
Group is successful;
• 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;
• aligns executives with shareholders and helps to retain them
by delivering a significant element of remuneration in shares;
and
• is flexible enough to cope with the Company’s changing needs
as it grows and the strategy evolves.

Element

Purpose and link to strategy

Operation

Maximum

Performance targets

Base salary

Provides market
competitive fixed
remuneration that takes
account of individual
responsibilities, and
recruits and retains
executives that are capable
of delivering the Group’s
strategic objectives.

Benefits

Provide a competitive
package of benefits that
assists with attracting and
retaining employees.

Set at a broadly mid-market
level and normally reviewed
annually taking account of
individual responsibilities,
experience 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, device and
biotechnology companies.

The main benefits currently
provided comprise medical
benefits and permanent
health insurance, but the
components will have
regard to the market
practice in the location of
any future appointment.
This could include
relocation allowances or
other appropriate benefits.

None, although overall individual
and corporate performance is a
factor considered when reviewing
salaries.

Details of the salary review in the
period are set out on page 67.

Other than to reflect a
change in the size and
complexity of the role or
Company or to reflect
experience in the role,
salary increases will
normally be no higher than
the average increases
taking place across the
Company, taking into
account, where appropriate,
the relevant pay groups.

N/A

The quantum of benefits
will be in line with local
markets. The value of each
benefit is based on the cost
to the Company which may
vary from year to year.

Element

Purpose and link to strategy

Operation

Maximum

Performance targets

Annual bonus Links reward to the

Company's short-term aims
and value creation
objectives.

Deferral of part of the bonus
under the Deferred Share
Bonus Plan (DSBP) provides
an element of lock-in and
alignment with shareholders.

Maximum of 100% of salary
for executive directors.

Performance targets for the
executive directors are set annually
by the Committee and focus on
Company financial performance
measures such as revenue, trading
profit, operating cash (although the
Committee has discretion to select
other measures) and performance
against a number of corporate and
individual objectives intended to
stimulate future growth.

Financial objectives account for the
majority of the bonus.

Targets are set annually on a sliding
scale with 50% of maximum bonus
potential payable for on-target
performance and up to 25%
of maximum bonus potential
payable for performance at
threshold.

The Committee has discretion to
adjust the bonus pay-out if in its
opinion, the pay-out would not
otherwise appropriately reflect the
performance achieved. In addition,
the Committee must be satisfied
that a minimum level of financial
performance has been achieved
before any bonus is paid.

If, in exceptional circumstances, it
was decided to apply upward
discretion, it would first be
discussed with major shareholders
and the reasons fully disclosed in
the annual report on remuneration
for the relevant year.

All employees (except EKOS
employees who will be
integrated into current
arrangements for the next
fiscal year) including the
executive directors
participate.

May be paid as a mix of
cash and deferred shares
under the DSBP.

DSBP awards are structured
as conditional awards over
shares to be held for three
years and are subject to
clawback.6

The level of deferral is
linked to the achievement of
the individual’s applicable
shareholding guidelines as
follows:
• 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).
• When the shareholding
guideline is reached no
bonus would be required
to be deferred.

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

Element

Purpose and link to strategy

Operation

Maximum

Performance targets

Long-term
incentives

Support the strategy to
transition the business from
an R&D-focused specialty
pharma company to an
earnings-driven
international specialist
healthcare company.

Ensures remuneration
includes a strong emphasis
on the delivery of growth,
sustained financial
performance and superior
shareholder returns.

Maximum Core 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 the Core
award at year three in
exchange for a Multiplier
award. They may elect to
roll over 50 or 100% of a
Core award vesting right to
secure the opportunity to
receive a Multiplier award.

Annual awards of
performance shares (Core
awards) are made under the
Performance Share Plan
(PSP), vesting of which is
subject to the achievement
of targets measured over a
minimum of three years.2,5

Awards of performance
shares are subject to
clawback.6

Executives are offered the
opportunity to roll over 50%
or 100% of PSP awards
(representing up to 150% of
salary) vesting in year three
in return for a Multiplier
award, vesting of which is
subject to TSR performance
measured over five years
from the date of grant of the
original Core award.

Executives are entitled to
receive the value of dividend
payments that would
otherwise have been paid
on vested awards.

Awards prior to 2013 are subject to
conditions which are described in the
Annual Report on Remuneration on
pages 64 and 65.

Core awards granted from 2013 are
subject to relative TSR and EPS growth
performance conditions. TSR is
measured relative to companies in the
FTSE 250 index and EPS is measured
as growth in adjusted EPS in the final
year of the three year performance
period.

25% of each element vests at median/
threshold performance, rising to full
vesting at upper quartile/stretch
performance. Details of the targets for
these awards are provided in the
Annual Report on Remuneration.

For the 2013 and 2014 awards EPS and
TSR conditions have equal weightings.
In future years the weighting between
EPS and TSR conditions would be
decided by the Remuneration
Committee prior to each grant.

Multiplier awards are measured by
reference to TSR performance only over
a five year period.

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. rolled over awards
could be increased or decreased by
±100% (so that the number of shares
the subject of the award could be
doubled or be reduced to zero).

Multiplier awards – 2011 and 2012 PSP
awards only: 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. rolled over awards could be
increased by +150% or reduced by
-100% (down to zero).

Pension

Provides competitive
retirement benefits that
reward sustained
contribution.

All-employee
share plans

Encourages employees to
acquire shares in BTG,
increasing alignment with
shareholders.

Defined benefit provision:
1/60ths accrual up to cap
(reviewed annually), normal
retirement age of 60.

N/A

Defined contribution or
cash allowance: 25% of
salary.

Participation limits are
those set by the relevant tax
authorities from time
to time.

N/A4

For longer serving
employees: participation in
contributory defined benefit
pension arrangements up to
a scheme specific cap or
HMRC defined limits.

For more recent hires and
provision above the cap:
defined contribution
pension provision and/or
cash allowances.

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.

Element

Purpose and link to strategy

Operation

Maximum

Performance targets

Share holding
guidelines

Provide alignment between
executives and shareholders.

CEO: 250% of salary.

N/A

CFO: 150% of salary.

Executive directors are
required to build significant
shareholdings in the
Company7.

Executive directors may sell
vesting shares to meet tax
liabilities. In addition, 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.

In line 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.
2 Prior to 2013, awards consisted of a mix of market value share options granted

under the ESOP and performance shares granted under the PSP.

3 A description of how the Company intends to implement the policy set out in

this table for 2014 can be found in the Annual Remuneration Report.
4 All employee share plans do not have performance conditions. Executive

Committee discretions
The Committee operates the Group’s variable incentive plans
according to their respective rules and in accordance with HMRC
rules where relevant. To ensure the efficient administration of
these plans, the Committee will apply certain operational
discretions. These include the following:
• selecting the participants in the plans on an annual basis;
• determining the timing of grants of awards and/or payment;
• determining the quantum of awards and/or payments (within
the limits set out in the policy table above);
• determining the extent of vesting based on the assessment of
performance;
• making the appropriate adjustments required in certain
circumstances (e.g. change of control, rights issues, corporate
restructuring events, and special dividends);
• determining ‘good leaver’ status for incentive plan purposes
and applying the appropriate treatment; and
• undertaking the annual review of weighting of performance
measures, and setting targets for the annual bonus plan and
PSP from year to year.

If an event occurs which results in the annual bonus plan or PSP
performance conditions and/or targets being deemed no longer
appropriate (e.g. a material acquisition or divestment) the
Committee will have the ability to adjust appropriately the
measures and/or targets and alter weightings, provided that
the revised conditions or targets are not materially less difficult
to satisfy.

Outstanding share incentive awards that remain unvested
or unexercised at the date of this report, as detailed on pages
63 to 65 of the annual report on remuneration, remain eligible
for vesting or exercise based on their original award terms.

Directors are eligible to participate in the UK Sharesave Plan on the same terms
as other employees.

5 Copies of the PSP and DSBP plan rules are available on request from the

Company Secretary.

6 For all awards granted post 1 July 2011 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 being
discovered, an error in the calculation of performance for an award or individual
misconduct resulting in dismissal.

7 Under the shareholding guidelines the executive directors are not permitted to
hold their shares in hedging arrangements or as collateral for loans without the
express permission of the Board.

Remuneration at a glance
The Company’s policy results in a significant portion of
remuneration received by executive directors being dependent
on Company performance. The chart below illustrates how the
total pay opportunities for the executive directors vary under
three different performance scenarios: minimum, target and
maximum. These charts are indicative only, as share price
movement and dividend accrual have been excluded. All
assumptions made are noted below the chart.

Value of remuneration packages at different levels
of performance

Louise Makin, Chief Executive Officer

Minimum

On-target

Maximum

100%

684,000

58%

24%

18%

1,182,000

23%

19%

58%

2,960,000

£’000

500

1,000

1,500

2,000

2,500

3,000

3,500

Rolf Soderstrom, Chief Financial Officer

Minimum

100%

449,000

On-target

58%

24%

18%

775,000

Maximum

23%

19%

58%

1,941,000

£’000

500

1,000

1,500

2,000

2,500

3,000

3,500

Basic salary, benefits and pension

Bonus

LTIP award

Assumptions
Minimum = fixed pay only (salary + benefits + pension).

On-Target = 50% vesting of the annual bonus and 25% vesting of
the core LTIP award (37.5% of salary).

Maximum = 100% vesting of the annual bonus and 100%
vesting of the core LTIP award plus 100% application of the
multiplier (300% of salary).

BTG plc Annual Report and Accounts 2014Governance
Directors’ remuneration report
continued

How employees’ pay is taken into account in setting the
remuneration of the executive directors
The Committee considers the base salaries for the Leadership
Team and, although it does not directly consult with employees
regarding remuneration policy, it receives information on general
pay levels to ensure that the Committee 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 to
support staff retention, development in expanded roles and
motivation is important to BTG’s ongoing success and this is
reflected in the level and range 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 were 3.5%.
General workforce increases, effective June 2014, 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. A lower incentive opportunity is available below
executive level, with specific 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 around
a mid-market level for the role taking account of performance
and individual responsibility.

Employees are provided with a competitive local package
of benefits that includes participation in the Group’s
pension arrangements.

All employees (except EKOS employees who will be integrated
into current arrangements for the next fiscal year) 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 alignment tool helping to focus
employees on delivering value for shareholders. Other senior
staff who are considered to have the greatest potential to
influence Company performance are also able to receive awards
of long-term incentives at a lower maximum percentage of
salary than the executive directors. In addition, share ownership
guidelines apply to members of BTG’s Leadership Team with
lower levels of holding required (50% of salary) than for
executive directors. 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 below.

• Salary levels (on which other elements of the package are
calculated) are based on those as at 1 April 2014.
• The value of taxable benefits is based on the cost of supplying
those benefits (as disclosed) for the year ended on the
31 March 2014.
• Pension levels have been estimated at 20% of base
salary levels.
• The maximum vesting for the LTIP award includes both Core
and Multiplier awards. The normal level of maximum LTIP
vesting is 150% of salary for a Core award and 300% if an
executive director elects for a Multiplier award. It is assumed
that the full Core award is rolled over into a Multiplier award.
• The executive directors can participate in all employee share
schemes on the same basis as other employees. The value
that may be received under these schemes is subject to tax
approved limits. For simplicity, the value that may be received
from participating in these schemes has been excluded from
the above charts.
• Amounts have been rounded to the nearest £1,000.
Choice of performance measures and approach to
target setting
Annual bonus arrangements for the executive directors are split
between financial and individual and corporate non-financial
objectives with the financial targets currently accounting for the
majority of the bonus. Financial performance targets are based
on the budget and corporate measures and are linked to the
achievement of annual objectives that are consistent with BTG’s
longer-term goals. The Remuneration Committee reviews these
KPIs each year and varies them as appropriate (including with
respect to the weighting of financial and non-financial targets)
to reflect the priorities for the business in the year ahead. A
sliding scale of targets is set for each KPI to encourage
continuous improvement and challenge the delivery of stretch
performance. For each metric, the threshold target requires the
Company to maintain or improve on the prior year performance
with the stretch target requiring significant out performance
above plan.

For current and future awards under the PSP, the metrics are
split between adjusted EPS and relative TSR out performance of
a general market index (FTSE 250), which ensures focus on
sustainable growth and superior returns to shareholders (with
the weighting between TSR and EPS determined by the
Committee annually). The comparator index for TSR and
weighting between each measure for Core awards will remain
under review. In order to incentivise the achievement of
sustained outstanding returns to shareholders over the longer
term and assist with retention, at the end of the normal three
year performance period executives are able to elect to roll over
some or all of the performance shares that would otherwise vest
in return for the opportunity to receive an enhanced (or reduced)
award at the end of five years, subject to outperformance of the
FTSE 250 Index over that five year period. This multiplier is
intended to further align the interests of the executive directors
with shareholders whilst rewarding performance which
demonstrably delivers value to shareholders over the longer
term. Performance over a five-year period both recognises and
takes into account the Company’s strategic goals and its ongoing
evolution and increasing maturity as an organisation. TSR is
measured independently for the Committee by New Bridge
Street (NBS).

How shareholders’ views are taken into account
When shaping remuneration policy the Remuneration
Committee considers shareholder feedback received in relation
to the Annual General Meeting each year and guidance from
shareholder representative bodies more generally.

The Remuneration Committee engages proactively with
shareholders, and takes seriously their views. When any material
changes are made to the remuneration policy, the Remuneration
Committee Chairman will inform major shareholders of these in
advance, and will offer a meeting to discuss these.

Details of votes cast for and against the resolution to approve
last year’s directors’ remuneration report and matters discussed
with shareholders during the year are provided in the Annual
Report on Remuneration.

During the year, the Committee engaged with its largest
shareholders regarding changes to the executive directors’
remuneration arrangements, in particular the changes which
were made to the PSP. These were approved at BTG’s AGM in July
2013. As a result of this engagement, the Committee decided to
extend the operation of share ownership guidelines to members
of BTG’s Leadership Team who are not members of the Board
and to clarify that the policy formally prohibits the hedging and
pledging of shares by directors or the Leadership Team.

All employee share plans
The Company operates other share plans as follows:
• an 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;
• a 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; and
• the 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.

Approach to recruitment and promotions
The remuneration package for a new director will be set in
accordance with the terms of the Company’s approved
remuneration policy in force at the time of appointment
but focusing on the objective of appointing the most appropriate
incumbent in the right geography.

The salary for a new executive will be set to reflect their skills
and experience, the Company’s target pay positioning and the
overall market rate for the role in the relevant location, subject to
the overall goal of attracting the right candidate. Where it is
appropriate to do so, salaries may be set below the normal
market rate, with phased increases over the first few years as
the executive gains experience in their new role.

Benefits and pensions will be in-line with those offered to other
executive directors, taking account of local market practice with
relocation expenses provided if necessary. Tax equalisation may
also be considered if an executive is adversely affected by
taxation due to their employment with the Company. Legal fees
and other costs incurred by the individual may also be met by
the Company.

It is not anticipated that the aggregate ongoing incentive
opportunity offered to new recruits will be higher than that
offered to existing directors. Different measures and targets
under the bonus plan may be set initially taking account of
the responsibilities of the individual and the point in the
financial year at which they join. Any increases in quantum
offered above the policy limit would be contingent on the
Company receiving shareholder approval to its approved
policy at its next general meeting.

The Committee may offer additional cash and/or share-based
elements to assist with recruitment (for example to buyout
existing entitlements) when it considers these to be in the best
interests of the Company and its shareholders. Existing
arrangements will be used to the extent possible (subject to the
higher limits in exceptional circumstances set out in the policy)
however, the Committee retains discretion to use the flexibility
provided by the Listing Rules to make such awards. Such
payments would take account of remuneration relinquished
when leaving the former employer and would reflect (as far as
possible) the nature and time horizons attached to that
remuneration and the impact of any performance conditions.
Shareholders will be informed of any such payments at the time
of appointment.

For an internal executive appointment, any variable pay element
awarded in respect of the prior role will be allowed to pay out
according to its terms, adjusted as relevant to take into account
the appointment. In addition, any other ongoing remuneration
obligations existing prior to appointment may continue,
provided that they are put to shareholders for approval at the
earliest opportunity.

For the appointment of a new Chairman or non-executive
director, the fee arrangement would be set in accordance with
the approved remuneration policy in force at that time.

Legacy arrangements
For the avoidance of doubt, in approving this Policy Report,
authority is given to the Company to honour any commitments
entered into with current or former directors (such as the
payment of a pension or the unwind of legacy share schemes)
that have been disclosed to shareholders in this or any previous
remuneration reports. Details of any payments to former
directors will be set out in the Annual Remuneration Report
as they arise.

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 of £65,550 for being on the Board of Intertek
Group during the year to 31 March 2014 (July 2012 to March
2013: £37,500). Rolf Soderstrom does not currently hold any
outside directorships.

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

Service contracts and payments for loss of office
Executive directors have rolling service contracts, details
of which are summarised in the table below:

Provision

Detailed terms

Contract dates

Louise Makin – 19 October 2004
Rolf Soderstrom – 4 December 2008

Notice period

Termination
payment

Remuneration
entitlements

Twelve 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.

With respect to Rolf Soderstrom, any payments
made would be determined by reference to
normal contractual principles with mitigation
being applied wherever relevant or appropriate.
As Louise Makin’s contract was established
approximately 10 years ago, it does not provide
for mitigation.

Other than as specifically provided for in the
policy with respect to ‘good leavers’ (where for
example existing multiplier awards elected for
are retained) 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

The Company’s policy on new directors’ service contracts is that,
in line 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 should not provide for predetermined
compensation in the event of termination or provision for
enhanced payments in the event of a takeover of the Company.
Provisions permitting the Company to make any termination
payments by instalments, and requiring directors to mitigate
their loss in such circumstances, will be included in new

Details of contracts and letters of appointment, for directors
serving at the date of this report, are as set out below.

contracts. The Remuneration Committee will exercise discretion
in determining whether termination payments should be paid by
instalments, taking account of the reason for the departure of
the director and their prior performance. Other than in gross
misconduct situations, the Company would expect to honour the
contractual entitlements of terminated directors.

Other than in certain ‘good leaver’ circumstances (including, but
not limited to, redundancy, ill-health or retirement) no bonus
would be payable unless the individual remains employed and
is not under notice at the payment date. Any bonuses paid to a
‘good leaver’ would be based on an assessment of their
individual and the Company’s performance over the period,
and pro-rated for the proportion of the bonus year worked.

With regards to long-term incentive awards, the PSP rules
provide that other than in certain ‘good leaver’ circumstances,
awards lapse on cessation of employment. Where an individual
is a ‘good leaver’, the Remuneration Committee’s policy for future
core PSP awards will be to permit awards to remain outstanding
until the end of the original performance period, when a pro-rata
reduction will be made to take account of the proportion of the
vesting period that lapsed prior to termination of employment,
although the Committee has discretion to partly or completely
disapply pro-rating and the performance conditions in certain
circumstances. Multiplier awards would not be subject to
pro-rating. The Remuneration Committee has discretion to deem
an individual to be a ‘good leaver’. In doing so, it will take account
of the reason for their departure and the performance of the
individual.

Deferred bonus share awards will also normally lapse on
cessation of employment, unless the executive director is
deemed to be a ‘good leaver’ by the Remuneration Committee, as
referred to above.

The Committee will have authority to settle legal claims against
the Company (e.g. for unfair dismissal, discrimination or
whistle-blowing) that arise on termination. The Committee may
also authorise the provision of outplacement services and pay
reasonable legal expenses associated with the termination.

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.

Date of appointment

Notice period (months)

Date of expiry of current contract

1 January 2012

1 October 2007

1 August 2010

29 November 2010

2 April 2009

1 January 2013

31 December 2014

30 September 2014

31 July 2016

28 November 2016

1 April 2015

31 December 2015

Non-executive

Garry Watts

Giles Kerr

Ian Much

Melanie Lee

James O’Shea

Richard Wohanka

Non-executive directors’ and Chairman’s fees
The table below summarises the Company’s policy in relation to the fees of non-executive directors.

Purpose and link
to strategy

Operation

Takes account of recognised
practice and set at a level that
is sufficient to attract and retain
high-calibre non-executives.

Non-executive directors receive fees paid monthly in cash and
consist of an annual basic fee plus additional fees for additional
responsibilities such as a Committee Chairmanship and the role
of Senior Independent Director.

Maximum

N/A

Performance
targets

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.

In exceptional circumstances additional fees may be paid where
there is a substantial increase in the time commitment required
of non-executive directors.

Fee increases, if applicable, are normally effective from 1 April
each year.

Non-executives do not participate in any pension, bonus or share
incentive plans and do not receive any benefits.

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 market 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.

Limited benefits relating to travel, accommodation and
hospitality are provided in relation to the performance of
any directors’ duties.

Annual Report on Remuneration
This part of the report has been prepared in accordance with
Part 3 of the Regulations as amended, and 9.8.6R of the Listing
Rules. The Annual Remuneration Report will be put to an
advisory shareholder vote at the 2014 AGM. The information
on pages 51 to 66 has been audited.
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.

Members

Member

Ian Much (Chairman)
Giles Kerr
Melanie Lee

Member since

28 September 2010
3 November 2009
23 March 2011

Details of attendance at meetings are shown in the table on page 41.

Other attendees at
Remuneration Committee
meetings

The Chairman (Garry Watts), Chief Executive Officer (Louise Makin), Chief Financial Officer (Rolf Soderstrom)
and HR Director (Yvonne Rogers) may attend meetings by invitation, other than when their own remuneration
is being considered.

Committee evaluation

Committee advisers

The Company Secretary (Paul Mussenden) or his deputy serves as secretary to the Committee.

During the year, the Committee carried out a review of its effectiveness and the results, along with
recommendations for improvement, were reported to the Board. The Committee was found to be operating
effectively and it was agreed that there would be continued emphasis on ensuring a strong link was
maintained between remuneration and performance and strategy and aligned with shareholder interests.
Remuneration risks, whilst not significant, would continue to be carefully managed.

The Committee appoints its own advisers as it sees fit and has appointed New Bridge Street (NBS) (a trading
name of Aon Hewitt Limited, part of Aon plc) to act as advisers to the Committee and a representative
usually attends the meetings. NBS is a signatory to the Remuneration Consultant’s Group Code of Conduct
which sets out guidelines to ensure that its advice is independent and free from undue influence. NBS
advises the Committee on all remuneration issues including the vesting of long-term incentive
arrangements. The Committee reviews the performance and independence of NBS on an annual basis, and
is satisfied that it remains independent.

The Group continues to use NBS to advise on other matters including remuneration matters in general. NBS
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 2013/14 were: New Bridge Street £165,343 (2012/13: £132,000).

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

Single figure for total remuneration

Salary/fees
£’000

Benefits4
£’000

Bonus paid
in cash
£’000

Bonus paid
in shares1
£’000

Long-term
incentives2
£’000

Pension3
£’000

Other6
£’000

Total
remuneration

Executive directors

Louise Makin

Rolf Soderstrom

Non-executive directors

Garry Watts

Giles Kerr

Melanie Lee

Ian Much

James O’Shea

Richard Wohanka7

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

550

472

361

350

175

–

451

472

296

350

–

428

1,027

243

668

125

107

–

1,561

2,073

973

1,476

175

1 Element of bonus deferred into the DSBP.
2 Awards are included in the financial year in which the performance conditions

end. The share price used is the closing share price on the date on which
performance criteria are met, i.e. the final business day of the financial year.
For 2014 this figure does not include the Core PSP award as the Core and
Multiplier award are treated as a single award and the Core award will be
shown in 2015 if no election is made and both in 2016 if an election is made.
If 50% of a Core award is rolled over into a Multiplier award 50% of the Core
award will be shown in 2015 and the remainder is part of the Multiplier award
in 2016.

3 Pension consists of a cash supplement in lieu of employer pension

contributions following the changes to pension legislation. In addition, for

Annual bonus for the year to 31 March 2014
For the year ended 31 March 2014 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 25% at
threshold, 50% at on-target and 100% at maximum.

Following the acquisitions of EKOS Corporation and TheraSphere®
in July 2013 the Remuneration Committee adjusted the original
targets to reflect the impact of the Board-approved acquisition
plans. The effect was to add £42.5m to revenue, £4.7m to trading
profit and £1.4m to cashflow for each of the threshold, target
and stretch targets. The revised targets are reflected in the
tables opposite.

The trading profit measure, used for both bonuses and the 2011
and 2012 long-term incentive awards, is a normalised measure
relating to earnings before amortisation of intangibles,

Louise Makin, it includes £43,694 (2013: £28,995) representing the value of
the increase in the year of her pension entitlement in the defined benefit
BTG Pension fund.

4 All directors’ fees, salaries and bonuses are subject to UK income tax.
5 Benefits shown above for Louise Makin and Rolf Soderstrom relate principally

to the provision of life assurance and medical benefits.

6 Other shows the value of vested Sharesave options.
7 Fees paid to Richard Wohanka in 2013 were for the period from his

appointment to the Board on 1 January 2013.

restructuring and acquisition costs, group foreign exchange
movements and movements in derivatives. The cashflow
measure adjusts for restructuring and acquisition costs only.

For the financial year to 31 March 2014 they are calculated
as follows:

Profit before tax/operating
cash flow

Adjustments:

Derivatives and group foreign
exchange movements

Amortisation and impairment of
business combination intangibles

Proceeds from fundraising

Payments in relation to acquisitions

Restructuring and acquisition costs

Trading profit/operating cash flow
for bonus purposes

Trading profit
£m

Cashflow
£m

33.3

(120.5)

(4.7)

23.3

–

13.1

65.0

–

(103.1)

260.3

9.8

46.5

The performance achieved against the bonus targets are summarised as follows:

Measure

Corporate Financial Targets

Revenue

Trading profit

Operating cashflow

Individual Corporate
Objectives2

Total

As a percentage
of maximum
bonus
opportunity

231⁄3%

30%

100%

Performance required

Louise Makin

Rolf
Soderstrom

Pay out – Cash

Threshold
(£m)

Target
(£m)

Stretch
(£m)

Actual
(£m)

% of salary

275.5

59.7

23.9

286.6

66.7

30.6

298.5

71.7

35.9

290.5

65.0

46.5

19%

15%

23%

25%

82%

19%

15%

23%

25%

82%

Note:
1 The above table shows the financial targets set for the threshold, target and

stretch levels.

2 Covering ensuring the organisational capability and capacity to deliver the

strategy; delivering supply chain improvements and progressing the

The Remuneration Committee has the discretion to adjust the
final outcome upwards or downwards in the event that an
exceptional event outside of the directors’ control occurs which,
in the Committee’s opinion, materially affected the bonus
out-turn. There were no such events during 2013/14, although
as noted above, the Remuneration Committee did increase each
of the targets following the acquisitions of EKOS Corporation
and TheraSphere® in July 2013.

Deferred share bonus plan awards are structured as conditional
awards over shares, to be held for three years.

2011 LTIP

Metric

Condition

Interventional Medicine business plan. The performance thresholds for
individual corporate objectives have not been disclosed as they are deemed
to be commercially sensitive.

The level of deferral is linked to the achievement of the
Company’s shareholding guidelines and is described in the
Policy Report. Provided that the guidelines have been fully
achieved bonuses are paid entirely in cash. As Louise Makin and
Rolf Soderstrom have already met their shareholding guidelines,
the entirety of the 2014 bonus earned is to be paid in cash.

Vesting of LTIP Awards
Awards granted on 6 July 2011 under both the Executive Share
Option Scheme and the Performance Share Plan are based on
performance to the year ending 31 March 2014. The
performance conditions for these awards are as follows:

Threshold
Target

Stretch
Target

Actual

% Vesting

Cumulative Trading
Profit (50%)

TSR (50%)

Three year normalised trading profit period

£61.7m

£101.7m

£173.4m

50%

Three year comparison with index between
median and upper quartile

Median
(TSR: 47.4%)
(Rank 60)

Upper
Quartile
(TSR: 96.4%)
(Rank 31)

TSR: 164.2%
Rank: 10

50%

Total Vesting

100%

TSR has been calculated for the Committee by NBS.

BTG plc Annual Report and Accounts 2014Governance
Directors’ remuneration report
continued

2011 Option vesting details

Louise Makin

Rolf Soderstrom

Options

Number of
shares at grant

163,356

99,658

Number of
shares to vest
163,356**

99,658

Number of
shares to lapse

Total

Estimated
Value*

–

163,356

£397,935

99,658

£242,767

* Value estimated as not fully vested until 6 July 2014 and is based on the

** 163,356 shares comprising an HMRC approved option over 10,036 shares and

closing share price on 31 March 2014 of 542.5p per share less the exercise
price of 298.9p per share.

an unapproved option over 153,320 shares.

The 2011 performance share awards are subject to the optional
multiplier mechanism approved by shareholders at the 2013
AGM. As a result the number of shares that will actually vest
under the 2011 PSP this year as a Core award are subject to an
election by either executive director to forego vesting of 50% or
100% of that award and roll over the award in return for the
entitlement to receive a Multiplier award which may increase
or decrease the number of shares vesting at year five based on

relative TSR performance up to the end of that period. The Core
awards will not vest until the earlier of the expiry of the period
within which Directors are able to elect to roll over their awards
without a valid election having been made. Any Multiplier
award will not vest until the period of five years from grant of
the original Core award. Matching awards in respect of the
2011 or 2012 PSP will not be granted until a valid election has
been made.

LTIP awards made during the year
On 17 July 2013, the following PSP awards were granted to executive directors.

Type of award

Basis of award
granted

Share price at
date of grant

Number of
shares over
which award
was granted

% of shares
granted that
vest at
threshold
performance*

Face value of award (£’000)

... shares over
which award
originally
granted*

… shares if all
performance
conditions are
met**

Vesting
determined by
performance
over

Louise Makin

Nil cost
option

300% of
salary of
£550,000***

Rolf Soderstrom

Nil cost
option

300% of
salary of
£360,500***

395.1p

417,614

25%

£824,996

£1,649,993 Three

financial
years to
31 March
2016

395.1p

273,728

25%

£540,750

£1,081,499 Three

financial
years to
31 March
2016

* assumes Core award only (i.e. no roll over in exchange for Multiplier award).
** assumes Multiplier applies (i.e. all core awards are rolled over).
***

the 300% conditional award assumes performance that would result in full

vesting of the Core award and an election by the Executive Directors to roll
over 100% of the Core award in order to receive the Multiplier award and that
the full Multiplier award ultimately vests.

The number of awards under the 2013 Core award that will vest
will be determined according to the satisfaction of the following
performance conditions (each performance condition applies to
50% of a Core award).

Percentage of vesting of
that portion of an award*

Adjusted EPS in
the financial year to
31 March 2016**

Relative TSR ranking
against the FTSE 250
Index (as at 1 April 2013)
for the period from
1 April 2013 to
31 March 2016

25%

100%

50% of the Core
award

< 17.7p (below
threshold)

Below median

17.7p (threshold)

Median

24.1p (stretch)

Upper quartile

* Vesting on a straight line basis in between threshold and stretch (EPS) or

median and upper quartile (TSR).

** The EPS targets represent 40% growth (at Threshold) and 90% growth (at
Stretch) against the adjusted EPS baseline of 12.7p. The baseline of 12.7p
was determined by the Committee in 2013 and excluded the one-off effects
of the termination of the CytoFab® development programme from underlying
EPS in the 2012/13 financial year.

If a participant elects to roll over 50% or 100% of their vested
Core awards, participants will receive matching Multiplier
awards on a one-for-one basis which, together with the vested
deferred Core awards, will be subject to a further performance
condition. Under the Multiplier performance condition, for each
1% of TSR underperformance of the median TSR, the shares
that vest under the deferred Core award will decrease by 1%, for
each 1% of TSR outperformance of the median TSR, the shares
that vest under the Multiplier award will increase by 1%.

Underperformance / outperformance
of the constituents of the FTSE 250
Index (as at 1 April 2013) for the period
from 1 April 2013 to 31 March 2018

Number of Core and Multiplier
awards that will vest*

Underperformance
of 100% or more

Equal to the median

Outperformance
of 100% or more

50%

100%

* Vesting on a straight line basis from 0% to 100%, as set out opposite.

Outstanding share awards
The table below sets out details of executive directors’ outstanding share awards (which will vest in future years subject to
performance and/or continued service).

Exercise price
(p)/market
price on date
of award (p)

At 1 April
2013

Granted
in year

Exercised

Lapsed

At 31 March
2014

Exercise period/
vesting date

Share price
on exercise
(p)

Louise Makin

Date of grant/award

Share options
31 July 2009

179.25

187,179

13 July 20101

201.30

216,816

6 July 20112

298.90

163,356

1 June 2012

386.00

122,288

Sharesave
1 September 2010

146.67

2,454

4 July 2011

219.52

822

20 July 2012

320.16

1,124

–

19 July 2013

289.49

–

1,243

Total option awards

–

2,454

–

187,179

17,563

199,253

–

163,356

122,288

–

822

1,124

1,243

675,265

31 July 2012 to
30 July 2019
13 July 2013 to
12 July 2017
6 July 2014 to
5 July 2021
1 June 2015 to
31 May 2022

1 September
2013 to 1 March
2014
1 September
2014 to 1 March
2015
1 October 2015
to 1 April 2016
1 September
2016 to 1 March
2017

385.6

BTG plc Annual Report and Accounts 2014GovernanceExercise price
(p)/market
price on date
of award (p)

At 1 April
2013

Granted
in year

Exercised

Lapsed

At 31 March
2014

Exercise period/
vesting date

Directors’ remuneration report
continued

Outstanding share awards continued
Louise Makin

Date of grant/award

Performance share
awards
13 July 20101
6 July 20112
6 July 20113
1 June 20124
17 July 2013

201.30
286.60
286.60
380.54
395.10
395.10

218,751
149,831
10,036
124,042
–
–

–
–
–
–
208,807
208,807

Deferred share awards

28 May 2010

201.30

98,386

22 July 2011
1 June 2012
Total other awards
Total awards

286.60
380.54

53,288
54,192

–

–
–

1 Share options and performance shares awarded in 2010 were subject to a

cumulative trading profit and a relative TSR condition against the FTSE 250 (both
of equal weighting). The cumulative trading profit condition required a three year
normalised trading profit between a threshold and stretch target; range £24m –
£60m. The relative TSR target required a threshold performance of a median
position and a stretch performance of finishing at or above upper quartile (with
straight line vesting in between these points). Following the 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 lapsed. The shares vested on 13 July 2013. The total
gain on the vesting of PSP awards in the year was £789,252.

2 Share options and performance shares awarded in 2011 were subject to a
cumulative trading profit and a relative TSR condition against the FTSE 250
(both of equal weighting). The cumulative trading profit condition required a
three year normalised trading profit between a threshold and stretch target;
range £61.7m to £101.7m. The relative TSR target required a threshold
performance of a median position and a stretch performance of finishing at or
above upper quartile (with a straight line vesting in between these points).
Following the measurement of the TSR performance condition by NBS (which
was measured at 164.2% against the comparators) and the measurement of
the performance against the profit measure, the Committee approved the
vesting of 163,356 shares to Louise Makin under the 2011 ESOP award and
149,831 shares under the 2011 PSP award. The 163,356 shares awarded under
the 2011 ESOP award comprises an HMRC approved option over 10,036 shares
and an unapproved option over 153,320 shares. Louise has until the third
anniversary of the grant of the PSP award to elect to receive a Multiplier award
as an alternative to the vesting of the 2011 PSP shares as a Core award.

3 On 6 July 2011 Louise was granted an HMRC tax approved market value option
over 10,036 shares at an option exercise price of 298.9 pence per share (the
CSOP) and a separate conditional free share award under the PSP over shares
worth (on vesting) a maximum of approximately £30,000 (the PSP award). The
CSOP and PSP award were designed so that when taken together they deliver
the same aggregate gross gain as a free share award under the PSP over

Share price
on exercise
(p)

392.6

201,032
–
–
–
–
–

98,386

–
–

17,719
–
–
–
–
–

–

–
–

–
149,831
10,036
124,042
208,807
208,807

13 July 2013
6 July 2014
6 July 2014
1 June 2015
17 July 2016
17 July 2018

–

13 July 2013

392.6

22 July 2014
1 June 2015

53,288
54,192
809,003
1,484,268

10,036 shares, but in a more tax efficient manner. In relation to the PSP award,
the maximum gain that can be realised is approximately £30,000; accordingly,
if the market value of a share on the vesting of the PSP award is above 298.9
pence the number of shares deliverable under the PSP award will reduce so
that their value remains equal to approximately £30,000. The growth value of
the shares above 298.9 pence is instead delivered under the CSOP. Based
on a share price of 542.5 pence Louise would receive 5,530 shares worth
approximately £30,000 under the PSP award and she would realise a gross
gain (i.e. before tax and after payment of the total option exercise costs
of £29,997.60) of approximately £24,448 on the exercise of the CSOP, giving
rise to an aggregate gain under the PSP award and the CSOP of approximately
£54,448 (the gross gain on 10,036 free share awards at 542.50 pence being
approximately £54,445). If the share price on vesting is below 298.9 pence the
CEO shall acquire all of the 10,036 shares under the PSP award and the CSOP
will lapse.

4 Share options and performance shares awarded in 2012 were subject to a

cumulative trading profit and a relative TSR condition against the FTSE 250
(both of equal weighting). The cumulative trading profit condition required a
three year normalised trading profit between a threshold and stretch target;
range £133.4m to £177.4m. Both of these figures have been increased by
£12.4m compared to the original approved targets to reflect the expected
contribution to trading profit of the acquisitions made in July 2013. The
relative TSR target required a threshold performance of a median position and
a stretch performance of finishing at or above upper quartile (with straight
line vesting in between these points).

5 Unless otherwise stated the Company’s TSR will be compared with that of a
peer group comprising FTSE 250 companies. In relation to awards granted
before 2013 the relevant index comprises 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) with opening and closing TSR values averaged over
three months prior to the start and end of the performance period.

Rolf Soderstrom

Date of grant/award

Share option awards

Exercise price
(p)/market
price on date
of award (p)

At 1 April
2013

Granted in
year

Exercised

Lapsed

At 31 March
2014

Exercise period/
vesting date

Share price
on exercise
(p)

392.6

31 July 2009

179.25

116,037

13 July 2010

201.30

140,930

6 July 2011

298.90

99,658

1 June 2012

386.00

90,673

–

Sharesave

19 July 2013

289.49

–

3,108

13,388

–

102,649

11,416

129,514

31 July 2012 to
30 July 2019

13 July 2013 to
12 July 2020

6 July 2014 to
6 July 2021

1 June 2015 to
31 May 2022

99,658

90,673

–

3,108

1 September
2016 to 1 March
2017

425,602

Total option awards

Performance share
awards

13 July 20101

6 July 20112

1 June 20123

17 July 2013

Deferred share
awards

28 May 2010

22 July 2011

1 June 2012

Total other awards

Total awards

201.30

286.60

380.54

395.10

142,188

103,913

91,974

–

136,864

201.30

286.60

380.54

60,954

34,637

35,225

–

60,954

–

130,670

11,518

–

13 July 2013

392.6

–

103,913

6 July 2014

91,974

1 June 2015

136,864

17 July 2016

17 July 2018

–

13 July 2013

392.6

22 July 2014

1 June 2015

34,637

35,225

539,477

965,079

–

1 Share options and performance shares awarded in 2010 were subject to a

cumulative trading profit and a relative TSR condition against the FTSE 250
(both of equal weighting). The cumulative trading profit condition required a
three year normalised trading profit between a threshold and stretch target;
range £24m to £60m. The relative TSR target required a threshold
performance of a median position and a stretch performance of finishing at or
above upper quartile (with straight line vesting in between these points).
Following the 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
lapsed. The shares vested on 13 July 2013. The total gain on the vesting of PSP
awards in the year was £513,010.

2 Share options and performance shares awarded in 2011 were subject to a

cumulative trading profit and a relative TSR condition against the FTSE 250
(both of equal weighting). The cumulative trading profit condition required a
three year normalised trading profit between a threshold and stretch target;
range £61.7m to £101.7m. The relative TSR target required a threshold
performance of a median position and a stretch performance of finishing at or
above upper quartile (with a straight line vesting in between these points).
Following the measurement of the TSR performance condition by NBS (which
was measured at 164.2% against the comparators) and the measurement of
the performance against the profit measure, the Committee approved the

vesting of 99,658 shares to Rolf Soderstrom under the 2011 ESOP award and
103,913 shares under the 2011 PSP award. Rolf has until the third anniversary
of the grant of the PSP award to elect to receive a Multiplier award as an
alternative to the vesting of the 2011 PSP shares as a Core award.

3 Share options and performance shares awarded in 2012 were subject to a

cumulative trading profit and a relative TSR condition against the FTSE 250
(both of equal weighting). The cumulative trading profit condition required a
three year normalised trading profit between a threshold and stretch target;
range £133.4m to £177.4m. Both of these figures have been increased by
£12.4m compared to the original approved targets to reflect the expected
contribution to trading profit of the acquisitions made in July 2013. The
relative TSR target required a threshold performance of a median position and
a stretch performance of finishing at or above upper quartile (with straight
line vesting in between these points).

4 Unless otherwise stated the Company’s TSR will be compared with that of a
peer group comprising FTSE 250 companies. In relation to awards granted
before 2013 the relevant index comprises 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) with opening and closing TSR values averaged over
three months prior to the start and end of the performance period.

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

Outstanding share awards continued
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 the
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.

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 3% of the 10% in
ten years and 2.6% of the 5% in ten years in accordance with the
Association of British Insurers (ABI) guidance on dilution limits.

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
(for Louise Makin this is 2020). 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 (including any pension
exchanged for a retirement lump sum). 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 £9,870 (2013: £9,618)
to the Fund, representing 7% of her salary up to the earnings cap
and the Company contributed £31,725 (2013: £30,915).

Louise Makin receives a cash payment in lieu of pension to value
of 20% of base salary over the earnings cap. Rolf Soderstrom
receives a cash payment in lieu of pension contributions to
the aggregate value of 20% of base salary. These pension
allowances are not subject to bonus or other benefits and
are paid less such deductions as are required by law.

Directors’ shareholding and share interests
To align the interests of the executive directors with
shareholders, they are required to build and maintain a holding
of Company shares worth at least 250% of salary in the case of
the CEO and 150% of salary in the case of the CFO.

Beneficially
owned at
31 March 2014
and at the date
of this report

Executive
Directors

Louise Makin

473,373

Rolf
Soderstrom

Non-Executive
Directors

Garry Watts

Giles Kerr

Melanie Lee

Ian Much

James O’Shea

Richard
Wohanka

184,252

10,000

–

26,500

Vested unexercised nil
cost options

PSP

DSBP

Guideline
Met?

Vested
unexercised
market value
options

Subject to performance conditions

Options

PSP

Options

DSBP

–

N/A

–

N/A

Yes

386,432

701,523

285,644

107,480

Yes

232,163

469,615

190,331

69,862

N/A

Vested unexercised nil cost options count towards the guidelines
on the basis of their net of tax value. Market value options do not
count until such time as they have been exercised.

The directors are not permitted to hold their shares in hedging
arrangements or as collateral for loans without the express
permission of the Board. None of the directors currently holds or
has held their shares in such an arrangement.

Percentage increase in the remuneration of the
Chief Executive Officer

CEO

– Salary1

– Benefits

– Bonus

Average per UK employee2

– Salary

– Benefits

– Bonus

% change from
2013 to 2014

16.5%

-4.4%

3.3%

0.9%

-1.5%

1 Last year, following an exercise to recalibrate the salaries of the key

employees in order to ensure that we maintain an appropriate package of
remuneration, Louise Makin’s salary was increased by 16.5%. This increase
brought her salary, in the Committee’s assessment, to a broadly mid-market
position for her role and reflected her strong performance over a number of
years. BTG employs a high proportion of highly-qualified scientists,
technicians and professionals whose skills are highly sought after and whose
retention is important to BTG’s success. BTG keeps salaries under review.
General workforce salary increases in 2013 ranged between 2% and 15%.

2 We have an international workforce, however, as Louise Makin is a UK

employee, the Committee considers UK employees to be the most relevant
comparator group.

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 2014 is shown in the
graph right.

Total remuneration for the Chief Executive Officer over time

Total Remuneration (£’000)

Bonus outturn (%)

LTIP Vesting (%)

Total shareholder return

Value (£)

500
450
400
350
300
250
200
150
100
50
0

31 Mar 2009

31 Mar 2010

31 Mar 2011

31 Mar 2012

31 Mar 2013

31 Mar 2014

BTG plc

FTSE 250

This graph shows the value, by 31 March 2014, of £100 invested in BTG plc on
31 March 2009 compared with the value of £100 invested in the FTSE 250 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 2014
was 547.7p. During the year the share price ranged from a low of
323.1p to a high of 624.4p.

2010

1,351

79%

100%

2011

1,489

70%

89%

2012

1,944

95%

80%

2013

2,073

100%

92%

2014

1,561

82%

100%

The chart above shows the total remuneration for the Chief
Executive during each of the financial years. The total
remuneration figure includes the annual bonus and LTIP awards
which vested based on performance in those years. The annual
bonus and LTIP percentages show the payout for each year as a
percentage of the maximum.

Relative importance of spend on pay
The table below illustrates the change in expenditure by the
Company on remuneration paid to all the employees of the
Group and distributions to shareholders from the financial
year ending 31 March 2013 to the financial year ending
31 March 2014.

These matters were selected to be shown as they represent key
distributions by the Group to its stakeholders. The increase in
expenditure on pay is largely linked to the significant increase in
headcount of the Group in the year through both organic growth
and the two acquisitions.

How the 2014 policy will be applied in 2014 onwards
2014 salary review
The executive directors’ salaries were reviewed in March 2014
and a 3.5% increase took effect from 1 April 2014 (this is equal
to the average salary increase provided to UK employees).

The current salaries as at 1 April 2014 are as follows:

Overall expenditure
on pay

Dividend plus share
buyback

2014
£m

63.7

Nil

2013
£m

Percentage
Change

49.8

+28%

Nil

n/a

Salary as at
1 April 2014

Salary as at
1 April 2013

Increase %

Louise Makin

£569,250

£550,000

Rolf Soderstrom

£373,117

£360,500

3.5%

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ remuneration report
continued

Performance targets for the annual bonus and LTIP awards
to be granted
For the year 2014/2015, the annual bonus will continue to be
based on financial (70% of the total bonus) and individual and
corporate metrics (30% of the total bonus) as detailed in the
policy report on page 53.

items which the Committee considers commercially sensitive.
However, the financial metrics will continue to be based on three
financial metrics, being revenue (1⁄3 weighting), trading profit
(1⁄3 weighting) and operating cash (1⁄3 weighting). Full
retrospective disclosure of the targets and performance against
them will be seen in next year’s Annual Remuneration Report.

The Committee has chosen not to disclose, in advance, the
performance targets for the forthcoming year as these include

The measures for the Core awards made under the Performance
Share plan will be as disclosed in the policy table on page 54.

Targets for the Core awards made during 2014/15 will be measured
in the final year of the three year period (the 2016/17 financial year)
and are as follows:

Below threshold

Threshold

EPS in the year ending
31 March 2017

TSR relative to FTSE 250
over 3 financial years ending
31 March 2017

Less than 20.3p

Less than median

20.3p

Median

Percentage of each
element that vests

25%

Between threshold and stretch

20.3p to 28.3p

Between median and upper
quartile

25% to 100% on a straight
line basis

Stretch

28.3p or higher

Upper quartile or higher

100%

Targets for the Multiplier awards are as disclosed in the
Policy Report.

Non-executive director 2014 remuneration
Set out in the table below are the fees paid for the year
ended 31 March 2014 and proposed fees for the year ended
31 March 2015.

Payouts for performance between Threshold and Stretch calculated
on a straight line basis

Shareholder voting at the Annual General Meeting
At last year’s Annual General Meeting held on 16 July 2013, the
directors’ remuneration report received the following votes from
shareholders:

As from
1 April 2014
£m

As from
1 April 2013
£m

175,000

45,000

41,000

5,000

3,000

10,000

6,000

Votes cast in favour

281,311,364

Votes cast against

2,705,677

% increase
£m

Total votes cast

Abstentions

284,017,041

3,118,845

99.05%

0.95%

100%

10%

67%

Approval
This report was approved by the Board on 19 May 2014 and
signed on its behalf by

Ian Much
Chairman of the Remuneration Committee

Director

Chairman1

Non-executive
director

Senior Independent
director fee

Audit Committee
chairmanship fee

Remuneration
Committee
chairmanship fee

10,000

6,000

67%

1 The fee is fixed for the first three years of his appointment.
2 During the year, a benchmarking exercise was carried out by NBS in relation
to non-executive director fees. It found that current fees were below median
against similarly sized companies and also the sector comparator. As a result
of this, and given the scale of recent activity the material time commitment
required of the non-executive directors, the fees were adjusted to bring them
in line with fees of non-executives in similar sized companies.

Directors’ report

The directors present their report together with the financial
statements and the independent auditor’s report for the year
ended 31 March 2014.

Strategic report
The business review has been replaced by the strategic report,
which can be found on pages 2 to 34 and incorporates a review
of the Group’s performance during the year, business objectives,
business model, market overview, financial review, a description
of risk management and principal risks facing the business and
corporate citizenship. The principal activity of the Group is the
business of an international specialist healthcare company,
developing innovative products in areas where current treatment
options are limited. The results of the Group are set out in detail
on pages 76 to 80 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 it
faces. This information is contained within the strategic report
on pages 2 to 34 and incorporated into this report by reference:
• The Chairman’s Statement on page 6, the Chief Executive’s
review on pages 6 and 7 and the Group overview on pages 4
to 5 provide details of the Group’s principal activities and
strategy, its performance during the year and its prospects for
future development opportunities.
• Details of the principal risks facing the Group are set out on
pages 30 to 34.
• Information relating to the environment, employees and
stakeholders, health and safety, ethical considerations,
charitable donations and policies regarding its employees
is set out on pages 22 to 23.

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 on 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
2014 are shown in the consolidated income statement on page
76 and the consolidated statement of financial position on page
78. The directors do not recommend the payment of a dividend
for the year (12/13: nil). The results of the Group for the year are
explained further on pages 26 to 29.

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 36 and 37.

The Board confirms that each of the directors who served during
the year has been formally appraised during the period. All the
directors continue to demonstrate commitment to the Group,
the Board and to their role. In accordance with the UK Corporate
Governance Code, all directors of the Company will stand for
re-election annually.

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 policy 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 directors’
remuneration report on pages 51 to 68. 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 38
to 45.

Environmental matters
Our greenhouse gas emissions have been calculated as carbon
dioxide equivalents, these are disclosed in the corporate
citizenship section of the strategic report on pages 22 and 23.

Share capital and shareholders
As at 31 March 2014 the issued share capital of the Company
was £36,158,653, divided into 361,586,534 shares of 10p each.
During the year the share capital increased by 33,309,663
shares due to the exercise and vesting of share awards by
employees and former employees under the Company’s
employee share schemes and a share placing for a total of
32,208,030 new ordinary shares in May 2013. 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.

BTG plc Annual Report and Accounts 2014GovernanceDirectors’ report
continued

Details of the movements in the Company’s share capital
are shown in note 19 to the financial statements on page 100.
At 31 March 2014, the Company had 9,766 shareholders
(2013: 10,116). Further details of shareholdings and Company
reporting dates may be found on page 124.

Research and development
Research and development (R&D) is an important part of
the Group’s activities focusing in the areas of Specialty
Pharmaceuticals and Interventional Medicine. The Group
spent £47.2m (12/13: £41.2m) on R&D during the year.

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 109 to 112.

Going concern
The Group’s business activities and the factors affecting its
performance, position and future development are set out within
the strategic report on pages 2 to 34.

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 and available financial facilities. 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.

Political donations
The Company did not make any political donations during the
financial year: (2013: nil).

Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held
at 10.30am on 16 July 2014 at the offices of Stephenson
Harwood, 1 Finsbury Circus, London EC2M 7SH. Matters to be
considered at the meeting include resolutions to receive the
Annual Report and Accounts, to reappoint the auditor and
re-elect the directors.

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
Resolutions will be proposed at the forthcoming Annual General
Meeting, to re-appoint KPMG LLP as auditor and to authorise the
directors to determine its remuneration.

By order of the Board

Dr Paul Mussenden
Company Secretary

19 May 2014

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 108.

Details of outstanding share options and awards are set out in
note 23 to the financial statements on pages 105 to 108.

As at 16 May 2014, the Company had been notified of the
following interests held, directly or indirectly, in 3% or more
of the Company’s issued share capital.

Shareholding

% holding

Invesco Asset Management

88,273,080

M&G Investment Management Ltd

28,214,148

Aviva Investors Management Ltd

20,537,619

Schroder Investment
Management

Old Mutual Asset Managers

18,194,770

17,569,781

Standard Life Investments Ltd

15,821,101

AXA Investment Management

15,550,086

BlackRock Inc.

Legal & General Investment
Management Ltd

Woodford Investment
Management

13,077,650

12,341,858

11,745,626

24.41

7.80

5.67

5.03

4.85

4.37

4.30

3.61

3.41

3.24

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 in the corporate governance
report, the directors will stand for annual re-election at
the AGM, in accordance with the UK Corporate Governance
Code. The articles are available on the Company’s website
at www.btgplc.com/about-us/corporate-governance.

Change of control
There are a number of agreements with third parties with terms
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.

Statement of directors’ responsibilities
in respect of the annual report and accounts 2014 and the financial statements

Director’s Responsibility Statement pursuant to DTR 4
Each director confirms that to the best of our knowledge:
• the 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
• the 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 Director’s Report comprising pages 69 to 70, 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:

Dr Louise Makin
Chief Executive Officer

Rolf Soderstrom
Chief Financial Officer

19 May 2014

The directors are responsible for preparing the Annual Report
and Accounts, 2014 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 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:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
• 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 Parent
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Parent Company and
enable them to ensure that its 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.

Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, 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.

BTG plc Annual Report and Accounts 2014GovernanceIndependent auditor’s report
to the members of BTG plc only

Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of BTG plc for the year
ended 31 March 2014 set out on pages 76 to 121. In our opinion:
• the 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 2014 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as
adopted by the EU);
• the 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
• the 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.

2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements
the risks of material misstatement that had the greatest effect
on our audit were as follows:

Acquisition accounting
Refer to page 48 (Audit Committee statement), page 82
(accounting policy) and pages 114 to 116 (financial disclosures).
• The risk – During the year the Group completed the
acquisitions of EKOS Corporation (EKOS) and the Targeted
Therapies division of Nordion Inc. There is significant
judgement involved in determining the fair value of the
identifiable assets and liabilities acquired given the highly
specialised nature of the acquired businesses, the early stage
of the acquired products’ life cycles and in the case of Targeted
Therapies, in process research and development. For both of
the acquired businesses, the fair value of assets acquired
predominantly relates to existing developed technology, being
£227.8m out of a total £245.4m.

Contingent consideration of up to $40m is payable in respect
of the EKOS acquisition on the achievement of future
commercial milestones. Given the uncertainty regarding
achievement of these milestones, significant judgement is
required in measuring the fair value of the Group’s contingent
consideration obligation both at the acquisition date and at
the balance sheet date.

Given this we considered these issues to be significant
audit risks.

• Our response – In this area our audit procedures included,
among others, using our own valuation specialists to the
extent necessary:

– Inspection of the Group’s valuation analysis, which included

reviewing the independent external valuation report
prepared for each of the acquisitions, which were the basis
for the determination of the fair value of the intangible
assets. We critically challenged the key assumptions within
those reports, in particular we challenged and evaluated the
reasonableness of assumptions underlying the
identification of separately identifiable intangible assets in
respect of the developed and in-process intangible assets
acquired, the revenue growth rates included in the forecasts
and the useful economic life attributed to the acquired
assets, together with considering what is represented by the
residual goodwill. In performing this assessment we had
regard to available competitor products and market barriers
to entry, launch dates, the timing of patent expiry, forecast
peak sales, expectations on reimbursement and pricing, and
historical generic substitution rates subsequent to
expiration of the patent;

– Evaluation of the Group’s analysis of the fair value of the
contingent consideration with reference to the EKOS
contract terms and definitions. We challenged the revenue
growth assumptions underlying the forecast future cash
flows with reference to historical trends and performance
subsequent to the acquisition date; and

– Assessment of whether the Group’s disclosures with respect
to the acquired entities and the estimation required comply
with those required by the relevant accounting standard.

Carrying value of goodwill (£123.6m) and other intangible
assets (£397.9m)
Refer to page 48 (Audit Committee statement), page 83
(accounting policy) and pages 96 to 98 (financial disclosures).
• The risk – With regard to the Interventional Medicine cash
generating unit, the goodwill and other intangible assets,
primarily comprising developed technology, are considered for
impairment based on cash flows for established products and
products under development. These include the established
Beads products along with significant cash inflows forecast in
relation to the newly acquired EKOS and Targeted Therapies
clinical products which are at the early stage of their product
lifecycle, and Varithena™ which has regulatory approval in the
US and is due to launch in that market. The key business risk
affecting the carrying value of the Interventional Medicine
goodwill and other intangible assets is therefore the ability to
successfully commercialise the products concerned.

The Group’s primary analysis is based on value in use in line
with its intentions for recovering the carrying value of these
assets. The value in use is derived from discounted future cash
flow forecasts reflecting the projected trading volumes of the
existing and under development products. Due to the inherent
uncertainty involved in forecasting and discounting future
cash flows this is one of the significant audit risk areas that
our audit is concentrated on.
• Our response – In this area our audit procedures included,
among others, using our own valuation specialists to the
extent necessary:

– Inspection of Board minutes and the Group’s documented
assessment for identifying whether there are indicators of
potential developed technology and other intangible asset
impairment, taking into account performance during the
year, competitive developments and trial results where
relevant;

– Testing the Group’s budgeting procedures upon which the
forecasts are based with reference to historical accuracy
and minuted Board approval, and evaluating that the
principles of the Group’s discounted cash flow model are in
accordance with the relevant accounting standard;

– Critical analysis of the Group’s discounted cash flow models

prepared for individual intangible assets where an
impairment indicator has been identified, or prepared for the
purpose of assessing the recoverability of goodwill. We
assessed the reasonableness of revenue forecasts with
reference to historical trading performance and peak sales
assessments for established products, and with regard to
useful economic lives we considered the dates of patent
expiry. Externally derived data together with our own
assessments of key inputs, such as discount rates were also
considered in this assessment;

– For more recent acquisitions we also compared actual

results post acquisition for launched products to the results
in the business case supporting the transaction, and
considered the status of products under development with
reference to decisions documented in the Board minutes
and available trial results;

– We analysed the Group’s sensitivity analysis for key

assumptions, including revenue growth rates, operating
margins and discount rates to identify particular risk areas
to focus on; and

– Assessment of the adequacy of the Group’s disclosures,

including sensitivity analysis, in respect of the carrying value
of intangible assets.

3. Our application of materiality and an overview of the scope of
our audit
The materiality for the Group financial statements as a whole
was set at £6.0m. This has been determined with reference to a
benchmark of Group revenue (of which it represents 2.1%) which
we consider to be one of the principal considerations for
members of the Company in assessing the financial
performance of the Group.

We agreed with the audit committee to report to it all corrected
and uncorrected misstatements we identified through our audit
with a value in excess of £0.3m, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.

Audits for Group reporting purposes were performed by
component auditors at the key reporting components in the US,
Australia and by the Group audit team in the UK. In addition
specified audit procedures were performed by the Group team in
respect of the subsidiaries acquired in the US and Canada
during the year. These Group procedures covered 100% of total
Group revenue; 99% of Group profit before taxation; and 99% of
total Group assets.

The audits undertaken for Group reporting purposes at the key
reporting components of the Group were all performed to
materiality levels set by, or agreed with, the Group audit team.
These materiality levels were set individually for each
component and ranged from £0.1m to £1.5m.

Detailed audit instructions were sent to all the auditors in these
locations. These instructions covered the significant audit areas
that should be covered by these audits which included the
relevant risks of material misstatement detailed above and set
out the information required to be reported back to the Group
audit team. The Group audit team physically visited key reporting
components in the USA and UK. Telephone meetings were also
held with the auditors at that location and all of the other
locations that were not physically visited.

4. Our opinion on other matters prescribed by the Companies
Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.

BTG plc Annual Report and Accounts 2014GovernanceIndependent auditor’s report
to the members of BTG plc only continued

Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 71, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view. 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. This report is made solely to the Company’s
members as a body and is subject to important explanations
and disclaimers regarding our responsibilities, published on our
website at www.kpmg.com/uk/auditscopeukco2013a, which are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.

Richard Broadbelt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL

19 May 2014

5. We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the Annual Report that contains a
material inconsistency with either that knowledge or the
financial statements, a material misstatement of fact, or that is
otherwise misleading.

In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the directors’
statement that they consider that the Annual Report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business
model and strategy; or
• the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.

Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• adequate 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; or
• the 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; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.

Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 70, in relation to going
concern; and
• the part of the Corporate Governance Statement on pages 38
to 45 relating to the Company’s compliance with the nine
provisions of the 2010 UK Corporate Governance Code
specified for our review.

We have nothing to report in respect of the above responsibilities.

Financials
Financial statements, notes
and other key data.

Financials

Consolidated income statement
76
Consolidated statement of comprehensive income 77
Consolidated statement of financial position
78
Consolidated statement of cashflows
79
Consolidated statement of changes in equity
80
Notes to the consolidated financial statements
81
117
Company statement of financial position
Company statement of cashflows
118
118
Company statement of changes in equity
Notes to the company financial statements
119
Shareholder information
124
Cautionary statement and Trademarks
125

s
l
a
i
c
n
a
n
F

BTG plc Annual Report and Accounts 2014

Consolidated income statement

Year ended 31 March 2014

Year ended 31 March 2013

Revenue

Cost of sales

Gross profit

Operating expenses:

Amortisation and impairment of
acquired intangible assets

Foreign exchange (losses)/gains

Selling, general and administrative
expenses

Operating expenses: total

Research and development

Profit on disposal of property,
plant and equipment and
intangible assets

Amounts written off property, plant
and equipment

Acquisition and reorganisation
costs

Operating profit

Financial income

Financial expense

Profit before tax

Tax

Profit for the year

Basic earnings per share

Diluted earnings per share

Note

Results before
acquisition
adjustments
and
reorganisation
costs
£m

Acquisition
adjustments
and
reorganisation
costs
£m

290.5

(93.1)

197.4

–

(5.0)

(84.0)

(89.0)

(47.2)

1.1

–

62.3

8.2

(0.8)

69.7

–

(1.9)

(23.3)

–

(23.3)

–

(9.8)

(35.0)

–

(1.4)

(36.4)

Results before
acquisition
adjustments
and
reorganisation
costs1
£m

Acquisition
adjustments
and
reorganisation
costs
£m

233.7

(67.2)

166.5

–

3.1

(58.0)

(54.9)

(41.2)

0.4

(1.8)

–

69.0

1.1

(2.7)

67.4

–

(43.4)

–

(43.4)

–

0.1

(43.3)

–

(43.3)

Total
£m

290.5

(95.0)

195.5

(23.3)

(5.0)

(84.0)

(112.3)

(47.2)

1.1

–

(9.8)

27.3

8.2

(2.2)

33.3

(9.0)

24.3

6.8p

6.7p

Total1
£m

233.7

(67.2)

166.5

(43.4)

3.1

(58.0)

(98.3)

(41.2)

0.4

(1.8)

0.1

25.7

1.1

(2.7)

24.1

(7.7)

16.4

5.0p

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

All activity arose from continuing operations.

The notes on pages 81 to 116 form part of these financial statements.

Consolidated statement of comprehensive income

Profit for the year

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Foreign exchange translation differences

Items that will not be reclassified subsequently to profit or loss

Actuarial (loss)/gain 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

Note

Year ended
31 March
2014
£m

24.3

Year ended
31 March

20131
£m

16.4

(32.4)

4.2

(6.0)

0.8

(37.6)

(13.3)

0.5

(3.7)

1.0

17.4

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

The notes on pages 81 to 116 form part of these financial statements.

BTG plc Annual Report and Accounts 2014FinancialsConsolidated statement of financial position

ASSETS

Non-current assets

Goodwill

Intangible assets

Property, plant and equipment

Other investments

Deferred tax asset

Employee benefits

Derivative financial instruments

Current assets

Inventories

Trade and other receivables

Corporation tax receivable

Derivative financial instruments

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

Deferred tax liabilities

Provisions

Current liabilities

Trade and other payables

Derivative instruments

Corporation tax payable

Provisions

Total liabilities

Total equity and liabilities

Year ended
31 March
2014
£m

Year ended
31March
20131
£m

Note

123.6

397.9

31.3

3.0

0.8

8.0

0.9

59.2

209.2

25.4

3.0

0.9

10.3

–

565.5

308.0

27.0

75.1

1.5

4.4

38.2

146.2

711.7

36.1

288.7

317.8

(32.2)

(80.0)

530.4

2.6

90.4

0.5

93.5

79.9

–

7.4

0.5

87.8

181.3

711.7

23.3

54.5

0.4

–

158.7

236.9

544.9

32.8

188.6

317.8

0.2

(104.8)

434.6

0.5

43.8

0.4

44.7

61.6

2.2

1.2

0.6

65.6

110.3

544.9

The financial position as at 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

The notes on pages 81 to 116 form part of these financial statements.

The financial statements were approved by the Board on 19 May 2014 and were signed on its behalf by:

Dr Louise Makin
Chief Executive Officer

Rolf Soderstrom
Chief Financial Officer

Registered No: 2670500

Consolidated statement of cash flows

Profit after tax for the year

Tax

Financial income

Financial expense

Operating profit

Adjustments for:

Profit on disposal of property, plant and equipment and intangible assets

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

Fair value adjustments

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

Acquisition of businesses net of cash acquired

Net proceeds from disposal of property, plant and equipment, and intangible assets

Net inflow from held to maturity financial assets

Net cash outflow from investing activities

Cash flows from financing activities

Repayment of obligations under finance leases

Proceeds of share issues

Other financing activities

Net cash from financing activities

(Decrease)/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

Year ended
31 March
2014
£m

Year ended
31 March
20131
£m

24.3

9.0

(8.2)

2.2

27.3

(1.1)

24.3

–

3.4

5.3

(3.3)

1.9

–

57.8

(0.5)

(12.6)

10.9

(0.1)

55.5

(7.0)

48.5

0.2

(0.9)

(11.6)

(260.3)

3.2

–

(269.4)

–

103.4

(0.7)

102.7

(118.2)

158.7

(2.3)

38.2

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)

61.0

(5.5)

55.5

0.7

(2.6)

(7.6)

–

5.0

(4.5)

(0.2)

0.4

–

0.2

51.2

106.9

0.6

158.7

Note

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

The notes on pages 81 to 116 form part of these financial statements.

BTG plc Annual Report and Accounts 2014FinancialsConsolidated statement of changes in equity

At 1 April 2012 (previously reported)

Impact of changes in accounting policies

At 1 April 2012 (restated)

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

At 31 March 2013

Share
capital
£m

32.7

–

32.7

Share
premium
£m

188.3

–

188.3

Merger
reserve
£m

317.8

–

317.8

Other
reserves
£m

(4.0)

–

(4.0)

Retained
earnings1

£m

(128.6)

5.3

(123.3)

–

0.1

–

0.3

–

4.2

–

4.2

–

16.4

–

0.5

(3.7)

13.2

–

0.6

4.7

Total
equity1
£m

406.2

5.3

411.5

16.4

4.2

0.5

(3.7)

17.4

0.4

0.6

4.7

32.8

188.6

317.8

0.2

(104.8)

434.6

The 12 months ended 31 March 2012 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

At 1 April 2013 (previously reported)

Impact of changes in accounting policies

At 1 April 2013 (restated)

Profit for the year

Foreign exchange translation differences

Actuarial loss 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

At 31 March 2014

Share
capital
£m

32.8

–

32.8

Share
premium
£m

188.6

–

188.6

Merger
reserve
£m

317.8

–

317.8

–

3.3

–

100.1

–

Other reserves
£m

0.2

–

0.2

–

(32.4)

–

(32.4)

–

Retained
earnings2

£m

(108.4)

3.6

(104.8)

24.3

–

(6.0)

0.8

19.1

–

0.4

5.3

Total
equity2
£m

431.0

3.6

434.6

24.3

(32.4)

(6.0)

0.8

(13.3)

103.4

0.4

5.3

36.1

288.7

317.8

(32.2)

(80.0)

530.4

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

The notes on pages 81 to 116 form part of these financial statements.

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 2014 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 19 May 2014.

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
The following new accounting standards and amendments to standards have been adopted by the Group in these consolidated
financial statements for the year ended 31 March 2014, with a date of initial application of 1 April 2013.

a. Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)
b.
c.

IAS 19 Employee Benefits (2011)
IFRS 13 Fair Value Measurement

The effects of these changes are described below.

(a) Presentation of Items of Other Comprehensive Income
As a result of amendments to IAS 1 ‘Presentation of Financial Statements’, the Group has modified the presentation of
items of other comprehensive income in its consolidated statement of comprehensive income, to present separately items that
may be reclassified to profit or loss in the future from those that would not be. Comparative information has also been
re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

(b) Employee Benefits
The Group adopted the revised IAS 19 ‘Employee Benefits’, with an initial date of application on 1 April 2013.

The Group now applies the liability discount rate to determine the net interest income/expense on the net defined benefit obligation
and interest income on the scheme assets. Previously, the Group determined interest income on scheme assets on their long-term
rate of expected return. The effect on the income statement has an equal and opposite effect in other comprehensive income. This
change does not impact the Group’s net assets.

The Group has also removed the administrative expenses reserve from the defined benefit obligation. This change results in a
one-off credit to opening reserves and a corresponding increase in net assets. It also changes the allowance for pension scheme
administrative costs in the income statement, from the previous assumed amount within current service cost and interest cost, to
the new approach of recognising the schemes costs when the related services are provided.

The new standard also changes a number of disclosure requirements for post employment arrangements.

The adoption of the new standard has been applied retrospectively. The impact of the restatements to the prior year comparatives is
shown in note 22.

(c) Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such
measurements are required or permitted by other IFRSs. It unifies the definition of fair values as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Other accounting standards adopted in the year
No standards and interpretations recently adopted by the EU have a significant impact on the Group.

Accounting standards issued but not yet effective
No standards and interpretations issued by the EU but not yet effective are 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 Strategic Report on pages 2 to 34.
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.

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:

• 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;
• Many of the Group’s sales are life-saving in nature, providing some protection against an uncertain economic outlook; and
• In April 2013, the Group signed a £60m multi-currency revolving credit facility providing access to funds for a period of three years
to April 2016. This facility remains undrawn.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

1. General information continued
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:

– EKOS Corporation in July 2013;
– Targeted Therapies Division of Nordion Inc. in July 2013;
– Biocompatibles International plc on 27 January 2011; and
– Protherics PLC on 4 December 2008.

The costs relate to the following:
• Amortisation and impairment arising on intangible assets acquired;
• Transaction costs incurred with professional advisers in relation to the completion of the corporate acquisitions;
• The release of the fair value uplift of inventory acquired;
• Reorganisation costs predominantly comprising acquisition related redundancy programmes, property costs, and asset
impairments; and
• Fair 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
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.

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.

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.

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.

Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations.

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

2. Significant accounting policies continued
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.

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’.

(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.

(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:

• Developed technology: expected cash generating life, taking into account specific product and market characteristics for each
developed technology;
• Contractual relationships: period to expiry of the contract;
• In-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;

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

2. Significant accounting policies continued
• Computer software: the shorter of the licence period and three years;
• Patents: period to patent expiry; and
• Purchase 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

(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.

(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.

2. Significant accounting policies continued
(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 within Operating expenses 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.

(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. 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.

Administrative costs of running the scheme are expensed directly in the Income Statement.

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.

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

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

(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.

2. Significant accounting policies continued
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.

(q) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortised cost except for the contingent consideration 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 in line 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:

1. Are the milestone payments non-refundable?
2.

Does the achievement of the milestone involve a degree of risk that was not reasonably assured at the inception of
the arrangement?
Is substantive effort involved in achieving the milestone?
Is the amount of the milestone payment reasonable in relation to the effort expended or the risk associated with the
achievement of the milestone?

3.
4.

5. How 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 Intellectual Property Rights (IPR)
Outright sales or assignments of IPR are treated as disposals of non-current assets.

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, in line 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
Net financial income 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.

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.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

2. Significant accounting policies continued
(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.

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.

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 in line with the requirements of IFRS3
(revised). The most significant of these relate to:
• Deferred 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; and
• Inventory; 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.

Revenue recognition
As described in note 2(r), 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.

As detailed in note 29, on 8 August 2012 BTG announced the top-line data from a Phase 2b 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
terminated its licence agreement and associated arrangement with BTG. BTG does not anticipate conducting any further
development of AZD9773. Consequently revenue of £8.6m was recognised for the 12 months ended 31 March 2013 within
milestones and one-off income in the Licensing operating segment. The components of this revenue were:
• The release of deferred income associated with previous received milestones from AstraZeneca in relation to AZD9773 work
streams totalling £6.1m; plus
• Compensation 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.

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.

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.

3. Critical accounting judgements and key sources of estimation uncertainty continued
Fair value of listed and unlisted investments
Note 15 explains the basis for estimating the fair value of listed and unlisted investments.

4. Operating segments
The Group is aligned behind three reportable segments, being Interventional Medicine, Specialty Pharmaceuticals and Licensing.

The acquisition of EKOS Corporation on 5 July 2013 and the Targeted Therapies division of Nordion Inc. on 13 July 2013 are included
within the Interventional Medicine operating segment.

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 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.

Revenue

Cost of sales

Gross profit

Selling, general and administrative expenses

Contribution

Amortisation and impairment of acquired intangibles assets

Foreign exchange losses

Research and development

Profit on disposal of property, plant and equipment and
intangible assets

Acquisition and reorganisation costs

Operating profit

Financial income

Financial expense

Profit before tax

Tax

Profit for the year

Unallocated assets

Year ended 31 March 2014

Interventional
Medicine1
£m

Specialty
Pharmaceuticals
£m

79.1

(22.5)

56.6

(42.8)

13.8

102.3

(20.9)

81.4

(22.7)

58.7

Licensing
£m

109.1

(51.6)

57.5

(18.5)

39.0

Total
£m

290.5

(95.0)

195.5

(84.0)

111.5

(23.3)

(5.0)

(47.2)

1.1

(9.8)

27.3

8.2

(2.2)

33.3

(9.0)

24.3

711.7

2014 Cost of Sales includes a £1.9m release of a fair value adjustment to inventory purchased on the acquisition of EKOS on 5 July 2013 within the Interventional
Medicine segment. This release represents the reversal of a fair value uplift applied to inventory purchased on acquisition recognised through the income
statement as the product is sold.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

4. Operating segments continued

Revenue

Cost of sales

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 property, plant and equipment
and intangible assets

Acquisition and reorganisation credit

Operating profit

Financial income

Financial expense

Profit before tax

Tax

Profit for the year

Unallocated assets

Year ended 31 March 2013

Interventional
Medicine2
£m

Specialty
Pharmaceuticals2
£m

36.1

(5.6)

30.5

(17.5)

13.0

97.2

(21.6)

75.6

(20.2)

55.4

Licensing2
£m

100.4

(40.0)

60.4

(20.3)

40.1

Total2
£m

233.7

(67.2)

166.5

(58.0)

108.5

(43.4)

3.1

(41.2)

(1.8)

0.4

0.1

25.7

1.1

(2.7)

24.1

(7.7)

16.4

544.9

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

Revenue analysis
Analysis of revenue, based on the geographical location of customers and the source of revenue is provided below:

Geographical analysis

USA

Europe (excluding UK)

Other regions

Revenue from major products and services

Product sales

Royalties

Other

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

256.1

14.6

11.9

7.9

290.5

202.8

21.2

5.3

4.4

233.7

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

180.1

110.4

–

290.5

134.3

90.8

8.6

233.7

4. Operating segments continued
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 £83.8m (2013: One licence generated
£49.9m).

The Group’s marketed products are sold both directly and through distribution agreements in the USA, Europe and Asia Pacific
region. No individual customer generated income in excess of 10% of the Group revenue (2013: Two customers generated £25.2m
and £24.8m respectively).

5. Acquisition and reorganisation costs

EKOS Corporation Acquisition Costs

Targeted Therapies division of Nordion Inc. Acquisition Costs

Other

Total (Charge)/Credit for the year

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

(4.1)

(5.7)

–

(9.8)

–

0.1

The Group considers ‘acquisition and reorganisation costs’ to include transaction costs of completing the acquisition and those
costs resulting directly from decisions to rationalise both operating sites and business operations (see accounting policies in
note 1).

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

Net foreign exchange losses/(gains)

Research and development expenses

Staff costs

Operating lease rentals payable on property

Acquisition adjustments and reorganisation costs including release
of onerous lease provision

Year ended
31 March
2014
£m

Year ended
31 March
20131
£m

3.4

24.3

5.0

47.2

63.7

2.3

9.8

4.9

45.1

(3.1)

41.2

49.8

1.7

(0.1)

Note

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

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 pursuant to legislation

Audit of Pension scheme trust

Other 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
2014
£’000

Year ended
31 March
20131
£’000

165

295

–

121

265

–

A description of the work of the Audit Committee is set out on pages 46 to 49 of the Governance section and includes an explanation
of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditor.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

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
2014
£m

Year ended
31 March
20131
£m

48.0

6.9

2.9

0.6

5.3

63.7

38.6

4.3

1.9

0.3

4.7

49.8

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

Key management personnel are considered to be the directors and their remuneration is disclosed within the directors’
remuneration report on pages 51 to 68. In addition to the disclosures in the Directors’ remuneration report, the charge to income in
respect of equity-settled transactions of key management personnel, in accordance with IFRS2, was £1.2m (2013: £1.2m).

The average number of persons employed by the Group during the year (including executive directors), analysed by category, was
as follows:

Year ended
31 March
2014
Number

Year ended
31 March
2013
Number

396

312

776

326

201

569

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

0.2

7.5

0.5

8.2

1.1

–

1.1

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

–

1.4

0.8

2.2

2.6

–

0.1

2.7

Management

Research and production

Sales, administration and business support

8. Financial income

Interest receivable on money-market and bank deposits

Fair value changes of foreign exchange forward contracts

Other

Financial income

9. Financial expense

Fair value changes of foreign exchange forward contracts

Fair value changes on contingent consideration

Others

Financial expense

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

Adjustment to tax rates

Total tax charge/(credit) for the year

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

–

14.5

(0.8)

13.7

(5.0)

0.3

9.0

3.6

2.6

(2.1)

4.1

1.8

7.7

In addition to the tax charge in the income statement, a deferred tax credit of £0.8m has been recognised in the consolidated
statement of other comprehensive income.

UK corporation tax is calculated at 23% (2013: 24%) 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 23% (2013: 24%)

Effect of overseas tax rates

Change in unrecognised deferred tax assets

Non-deductible expenses

Effect of patent box deduction

Adjustment to tax rates

Adjustments in respect of prior years

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

33.3

7.6

4.3

(3.1)

4.9

(2.8)

0.3

(2.2)

9.0

24.1

5.8

2.9

(1.3)

2.3

(0.3)

1.8

(3.5)

7.7

An analysis of amounts included in the consolidated statement of financial position in respect of income taxes is shown below:

Current assets

UK corporation tax receivable

Overseas corporate tax receivable

Current liabilities

UK corporation tax payable

Overseas corporate tax payable

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

0.9

0.6

1.5

–

7.4

–

0.4

0.8

1.2

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.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

10. Tax continued
Deferred tax asset

Deferred tax asset recognised at 1 April

Income statement (charge)/credit

Currency Movements

Deferred tax asset recognised at 31 March

2014
£m

0.9

–

(0.1)

0.8

2013
£m

1.0

(0.1)

–

0.9

The deferred tax asset relates to short term timing differences in Australia. It has been recognised using a tax rate of 30% (2013:
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 £90.4m (2013 restated for IAS19 Revised: £43.8m) 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 £109.2m arise on
intangible assets recognised at fair value on acquisitions, £2.8m on pension fund surplus and £0.9m on short term timing
differences. 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

Note

At 1 April 2012

Adjustments re prior years

Income statement (debit)/credit

Currency movements

Other

At 1 April 2013

Impact of changes in accounting policies1

At 1 April 2013 (restated)

Adjustments re prior years

Acquisitions

Income statement (debit)/credit

Other comprehensive income (credit)

Offset against current tax payable

Currency movements

At 31 March 2014

37.9

1.3

(17.4)

–

0.5

22.3

–

22.3

1.5

7.0

(6.2)

–

(1.1)

(1.0)

22.5

(73.1)

–

12.5

(1.6)

(1.9)

(64.1)

(2.0)

(66.1)

–

(66.2)

9.4

0.8

–

9.2

(35.2)

1.3

(4.9)

(1.6)

(1.4)

(41.8)

(2.0)

(43.8)

1.5

(59.2)

3.2

0.8

(1.1)

8.2

(112.9)

(90.4)

1 The financial position as at 31 March 2013 has been restated following the adoption of IAS 19 Revised.

Reductions in the rate of corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015 were substantively enacted on
17 July 2013. This will reduce the company’s future current tax charge accordingly. The UK deferred tax assets and liabilities at
31 March 2014 have been calculated based on the rate of 21% or 20% depending on when the timing difference is expected
to reverse.

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 which have arisen 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. 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 2019.

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.

10. Tax continued
The total amount of tax losses and timing differences not recognised is shown below:

Tax losses

Deductible temporary differences

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

Year ended
31 March
2014
£m

142.4

14.8

157.2

Year ended
31 March
2013
£m

120.0

30.4

150.4

Year ended
31 March
2014

24.3

Year ended
31 March
20131

16.4

6.8

6.7

5.0

355.2

4.6

359.8

326.9

4.0

330.9

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

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 inventory (i)

Amortisation of acquired intangible fixed assets (ii)

Acquisition and reorganisation costs (iii)

Fair values changes on contingent consideration (iv)

Underlying earnings

Underlying profit per share (p)

Basic

Diluted

Year ended
31 March
2014

24.3

Year ended
31 March
20131

16.4

1.2

15.3

9.3

1.4

51.5

14.5

14.3

–

31.1

(0.1)

–

47.4

14.5

14.3

The 12 months ended 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

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:

(i)

In the year ended 31 March 2014 there was £0.7m tax impact on fair value adjustment of inventory acquired of £1.9m
(2013: nil)

(ii) The release of deferred tax liability of £8.0m (2013: £12.3m) has been deducted from the amortisation and impairment of

acquired intangible assets of £23.3m (2013: £43.4m) as shown in the consolidated income statement.

(iii) In the year ended 31 March 2014 there was £0.5m tax impact on reorganisation credits of £9.8m. In the year ended 31 March

2013, £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.

(iv) No tax adjustment was required on the fair value changes on the contingent consideration.

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

12. Goodwill

At 1 April 2012

At 1 April 2013

Acquisitions

Currency Movements

At 31 March 2014

Accumulated impairment losses

At 1 April 2012, 1 April 2013 and 31 March 2014

Net book value at 31 March 2014

Net book value at 1 April 2013

Net book value at 1 April 2012

£m

59.2

71.1

(6.7)

123.6

–

123.6

59.2

Additions to Interventional Medicine of £71.1m related to the acquisitions of EKOS Corporation and the Targeted Therapies Division
of Nordion Inc. (see note 33).

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 2014.

Goodwill arose on the acquisitions of Protherics PLC and Biocompatibles International plc, EKOS Corporation and the Targeted
Therapies Division of Nordion Inc. 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 Interventional Medicine £87.1m (2013: £22.6m) as relating to Specialty Pharmaceuticals,
£16.4m (2013: £16.4m), and in relation to Licensing £20.1m (2013: £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 7% (2013: 8%) to
23% (2013: 22%) representing the range of asset classes being tested including established royalty streams, launched marketed
products and in-process research and development projects and 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.

The Group do not consider that there are any reasonable possible sensitivities that could result in an impairment charge. The Group
have considered the following specific individual sensitivities:
• A 1% increase in the discount rates used would not trigger an impairment;
• A 5% reduction in operating cashflows would not trigger an impairment.

13. Intangible assets

Cost

At 1 April 2012

Additions

Disposals

Currency movements

At 1 April 2013

Acquisitions

Additions

Disposals

Currency movements

At 31 March 2014

Amortisation

At 1 April 2012

Provided during the year

Impairments

Write back on disposals

Currency movements

At 1 April 2013

Provided during the year

Write back on disposals

Currency movements

At 31 March 2014

Net book value

At 31 March 2014

At 1 April 2013

At 1 April 2012

Developed
technology
£m

Contractual
relation-
ships
£m

Note

In-process
research
and
develop-
ment
£m

Computer
software
£m

Purchase of
contractual
rights
£m

Patents
£m

Total
£m

234.1

–

(4.8)

5.8

235.1

227.8

–

(2.0)

(32.4)

428.5

29.1

12.5

–

(4.8)

0.8

37.6

22.8

(0.5)

(2.5)

57.4

371.1

197.5

205.0

40.1

–

(0.2)

1.6

41.5

–

(2.9)

38.6

13.5

2.0

24.0

(0.2)

1.3

40.6

0.5

–

(2.8)

38.3

0.3

0.9

26.6

14.8

–

(8.9)

(0.1)

5.8

17.6

0.5

–

(1.6)

22.3

9.7

–

5.0

(8.9)

–

5.8

–

5.8

16.5

–

5.1

0.6

0.2

–

0.8

0.1

0.2

–

1.1

0.1

–

0.2

–

0.4

0.7

0.6

0.5

13.3

0.7

(0.6)

1.1

14.5

–

0.2

–

(1.6)

13.1

10.6

0.8

0.3

(0.6)

1.0

12.1

0.4

–

(1.7)

10.8

2.3

2.4

2.7

15.7

318.6

1.8

–

0.9

18.4

–

(1.4)

17.0

9.6

0.4

–

0.6

10.6

0.4

–

(1.0)

10.0

7.0

7.8

6.1

2.7

(14.5)

9.3

316.1

245.5

0.9

(2.0)

(39.9)

520.6

72.6

15.8

29.3

(14.5)

3.7

106.9

24.3

(0.5)

(8.0)

122.7

397.9

209.2

246.0

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’.

Developed technology
Developed technology includes EkoSonic® acquired in EKOS Corporation (see note 33), TheraSphere® acquired in the Targeted
Therapies Division of Nordion Inc. (see note 33), 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:

EkoSonic®

TheraSphere®

CroFab®

DigiFab®

DC Bead® and LC Bead®

31 March
2014
£m

105.8

90.3

63.3

20.5

84.1

31 March
2013
£m

–

73.1

23.6

91.2

Remaining
amortisation
period at
31 March
2014

14.3 years

19.7 years

11.8 years

BTG plc Annual Report and Accounts 2014Financials

Notes to the consolidated financial statements

13. Intangible assets continued
In-process research and development
Additions to in-process research and development includes Targeted Therapies assets acquired in the Targeted Therapies Division
of Nordion Inc. (see note 33).

Targeted Therapies assets

31 March
2014
£m

15.9

31 March
2013
£m

–

Remaining
amortisation
period at
31 March
2014

–

In the prior year an impairment charge of £22.5m was 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).

14. Property, plant and equipment

Group

Cost or valuation

At 1 April 2012

Additions

Transfers

Disposals

Currency movements

At 1 April 2013

Acquisitions

Additions

Disposals

Currency movements

At 31 March 2014

Depreciation

At 1 April 2012

Provided during the year

Impairments

Disposals

Currency movements

At 1 April 2013

Provided during the year

Disposals

Currency movements

At 31 March 2014

Net book value

At 31 March 2014

At 1 April 2013

At 1 April 2012

Leasehold
improvements
£m

Freehold
land and buildings
£m

Note

Plant and
machinery,
Furniture and
equipment
£m

Assets in the
course of
construction
£m

1.3

0.1

0.3

–

1.7

0.4

3.0

–

(0.1)

5.0

0.3

0.2

–

0.5

–

1.0

4.0

1.2

1.0

13.2

3.4

–

0.8

17.4

–

0.3

–

(2.8)

14.9

2.1

0.6

0.1

–

0.1

2.9

0.4

–

(0.6)

2.7

12.2

14.5

11.1

15.9

1.8

0.6

(0.9)

0.3

17.7

1.0

4.9

(5.3)

(1.3)

17.0

10.2

2.3

1.6

(0.9)

0.3

13.5

2.5

(4.9)

(0.8)

10.3

6.7

4.2

5.7

4.2

2.2

(0.9)

–

0.1

5.6

–

3.5

(0.4)

(0.2)

8.5

–

0.1

–

0.1

–

0.1

8.4

5.5

4.2

Total
£m

34.6

7.5

–

(0.9)

1.2

42.4

1.4

11.7

(5.7)

(4.4)

45.4

12.6

3.1

1.8

(0.9)

0.4

17.0

3.4

(4.9)

(1.4)

14.1

31.3

25.4

22.0

The net book value of plant and machinery and furniture, fixtures and equipment includes nil (2013: £0.2m) in respect of assets held
under finance lease and hire purchase agreements. Depreciation for the year on those assets was nil (2013: £0.1m).

As detailed in note 29, in the prior year property, plant and equipment write-downs associated with assets used in the development
of AZD9773 of £1.8m were recognised in the amounts written off property, plant and equipment. This adjustment was not reflected
in the acquisition adjustments and reorganisation costs column.

15. Other investments

At 1 April

Additions

Impairment charge

At 31 March

2014
£m

3.0

–

3.0

2013
£m

3.0

–

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
2014
£m

31 March
2013
£m

12.0

11.5

3.5

27.0

10.0

11.6

1.7

23.3

In the year a fair value adjustment of £1.9m was recognised through cost of sales (see note 4) leaving nil fair value uplift recognised
on the acquisition of EKOS remaining (see note 33). Inventory to the value of £1.8m (2013: £1.6m) 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
2014
£m

31 March
2013
£m

28.8

9.0

37.3

75.1

19.2

6.5

28.8

54.5

Managing credit risk:
‘Revenues receivable, net of provisions’ represents marketed product sales sold both directly and through distribution agreements
for the period to 31 March 2014 and certain other amounts receivable under licence agreements.

The ageing of these amounts was as follows:

Not past due

0–30 days

31–90 days

> 90 days

Total

2014
Gross
£m

24.8

2.7

0.9

29.3

2014
Provision
£m

–

(0.5)

2013
Gross
£m

17.0

1.6

0.3

1.1

20.0

2013
Provision
£m

–

(0.8)

Provisions for bad debts of £0.5m (31 March 2013: £0.8m) have been made to write down the value of doubtful receivables
to estimated recoverable amounts. The credit to income for the year to 31 March 2014 in respect of reversal of provisions for bad
debts was £0.2m (2013: charge of nil).

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

18. Cash and cash equivalents

Bank balances

Cash and cash equivalents in statement of cash flows

19. Equity
Other reserves are analysed as follows:

At 1 April 2012

Total recognised income and expense

At 1 April 2013

Total recognised income and expense

At 31 March 2014

31 March
2014
£m

38.2

31 March
2013
£m

158.7

Translation
reserve
£m

Fair value
reserve
£m

Total other
reserves
£m

(4.1)

4.2

0.1

(32.4)

(32.3)

0.1

–

0.1

–

0.1

(4.0)

4.2

0.2

(32.4)

(32.2)

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

Number

328,276,871

33,309,663

361,586,534

2014
£m

Number

32.8

327,292,865

3.3

984,006

36.1

328,276,871

2013
£m

32.7

0.1

32.8

In May 2013, BTG completed a share placing for a total of 32,208,030 new ordinary shares at a price of 330p per placing share,
raising proceeds of £106.3m being £103.1m net of expenses.

The remainder of 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.

20. Trade and other payables

Amounts falling due within one year

Trade payables

Accruals and deferred income

Contingent consideration

Other creditors

Amounts falling due after more than one year

Accruals and deferred income

Contingent consideration

Other creditors

100

31 March
2014
£m

31 March
2013
£m

14.0

59.3

3.4

3.2

79.9

0.3

2.1

0.2

2.6

9.4

47.6

–

4.6

61.6

0.3

–

0.2

0.5

21. Derivative financial instruments

Contracts with positive fair values:

Forward foreign exchange contracts due within one year

Forward foreign exchange contracts due after more than one year

Derivative instrument assets

Contracts with negative fair values:

Forward foreign exchange contracts

Derivative instrument assets

31 March
2014
£m

31 March
2013
£m

4.4

0.9

5.3

–

2.2

The Group utilises foreign currency derivatives to hedge significant future transactions and cash flows.

At 31 March 2014 the Group had forward contracts to sell US$144m in the period to June 2015 at rates in the range £1:US$1.51 to
£1:US$1.65. The fair value of these derivative financial instruments was marked to market at 31 March 2014 as an asset at £5.3m.

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.

The fair value gain/loss for the year associated with these forward contracts was included within ‘Financial income/expense’.

A 5% strengthening of the US$ as at 31 March 2014, all other variables being unchanged, would result in a reduction of £4.2m
within ‘Financial income’ in the income statement and a fair value asset of £1.2m within ‘Derivative instruments’ within assets.
A 5% weakening of the US$ would result in a £4.2m increase in ‘Financial income’ and a fair value asset of £9.6m within ‘Derivative
instruments’ within assets.

22. Retirement benefit schemes
As disclosed in note 1, the Group adopted IAS19 ‘Employee Benefits’ Revised and has applied it from 1 April 2013.

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 plan is a registered scheme under the provisions of Schedule 36 of the
Finance Act 2004 and assets are held in a legally separate, trustee-administered fund. The trustees are required by law to act in the
best interest of the plan participants and are responsible for setting the plan’s investment and governance policies.

The results of the formal valuation of the plan as at 31 March 2013 were updated to the accounting date by an independent
qualified actuary in accordance with IAS19.

The plan exposes the Group to inflation risk, interest rate risk, market investment and longevity risk. The Group is not exposed to any
unusual, entity specific or plan specific risks. The plan has a history of granting increases to pensions in line with price inflation, and
these increases are reflected in the measurement of the obligation.

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 estimated amount of total employer contributions expected to be paid to the plan during 2014/15 is £4.1m
(2013/14 actual: £3.6m).

The IAS19 position of the plan is generally expected to be different to the triennial funding valuation assessment. The two main
drivers of this difference are the requirements for prudence in the funding basis (compared to the IAS19 best-estimate principle),
and the IAS19 requirements to use a discount rate based on high quality corporate bonds (compared to a prudent expectation of
actual asset returns for funding). This can sometimes lead to a situation where the IAS19 measure shows a surplus while the
funding measure shows a deficit, with associated deficit recovery contributions payable by the Group.

The following table sets out the key IAS19 assumptions used for the plan:

Retail price inflation

Discount rate

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

31 March
2014

3.6% p.a.

4.4% p.a.

88.4

90.8

31 March
2013

3.6% p.a.

4.4% p.a.

87.5

89.1

31 March
2012

3.5% p.a.

4.7% p.a.

87.3

88.9

Assumptions regarding future mortality experience are set based on actuarial advice and in accordance with published statistics.
The mortality tables used at both year-ends 2013 and 2014 are S1NA tables based on year of birth, with a multiplicative adjustment
factor to reflect the Group’s assessment of the average current mortality rates of the plan members relative to the tables. Amongst
the UK population, there is a continuing trend for a generation to live longer than the preceding generation, and this has been
reflected in the longevity assumption by adopting CI core projections and also incorporating a minimum long-term rate of
improvement in longevity of 1.5%/1.25% p.a. for males and females respectively 2014 (1% p.a. for both males and females in 2013).

101

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

22. Retirement benefit schemes continued
The following table sets out related IAS19 assumptions used:

Pension increases in deferment – RPI inflation

Pension increases in payment – RPI inflation

Pension increases in payment – inflation capped at 2.5%

General salary increases

31 March
2014

3.6% p.a.

2.3% p.a.

3.6% p.a.

31 March
2013

3.6% p.a.

2.3% p.a.

3.6% p.a.

31 March
2012

3.5% p.a.

2.3% p.a.

3.5% p.a.

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

Net asset recognised in the statement of financial position

31 March
2014
£m

(110.9)

118.9

8.0

31 March
2013
£m

(110.7)

121.0

10.3

31 March
2012
£m

(103.5)

108.5

5.0

A net asset is presented in the statement of financial position within non-current assets.

The IAS19 expense is made up of the current service cost, plan administrative expenses, interest cost on the defined benefit
obligation and interest income on plans assets, all of which are shown in the change in defined benefit obligation and assets tables
below. The expense has been included in ‘Operating expenses: Selling, general and administrative expenses’.

The allocation of the plan’s assets is as follows:

Equity instruments

Diversified growth funds

Inflation linked bonds

Corporate bonds

Cash/net current assets

31 March
2014

31 March
2013

31 March
2012

16.0%

14.0%

55.0%

14.0%

1.0%

15.0%

14.0%

56.0%

14.0%

1.0%

15.0%

14.0%

56.0%

14.0%

1.0%

There are no direct investments in the Group’s own shares or property occupied by any member of the Group.

All asset classes have quoted prices in active markets, with the exception of one of the two diversified growth funds (around 7% of
the overall portfolio). Diversified growth funds invest in a range of underlying asset classes and derivatives: typically equities, bonds
(including high yield and emerging market debt), hedge funds, commodities, infrastructure and property, and vary their allocations
to these markets tactically. They aim to achieve long term returns that are broadly in line with the long term equity returns, but with
lower volatility and an element of capital preservation.

In setting the investment strategy the trustees considered the views of the Group, their assessment of the Group’s covenant
supporting the actuarial risks faced by the plan, the risk and rewards of a number of possible asset allocation options, the suitability
of a wide range of asset classes within each strategy across and within asset classes, and the need for appropriate diversification
amongst different asset classes.

Changes in the present value of the defined benefit obligation, the fair value of the plan assets and the net asset/(liability) over the
year ending 31 March 2014 are as follows:

Year ending 31 March 2014

Beginning of the year

Employer’s part of the current service cost

Interest cost/income

Administrative costs

Contributions by the employer

Contributions from plan members

Actuarial gain/loss – experience

Actuarial gain/loss – financial assumptions

Actuarial gain/loss – demographic assumptions

Benefits paid

End of the Year

102

Obligation
£m

(110.7)

Plan Assets
£m

121.0

(0.4)

(4.8)

–

(0.1)

2.1

–

(1.8)

4.8

(110.9)

–

5.3

–

3.6

0.1

(6.3)

–

(4.8)

118.9

Net asset/
(liability)
£m

10.3

(0.4)

0.5

–

3.6

–

(4.2)

–

(1.8)

–

8.0

22. Retirement benefit schemes continued
Changes in the present value of the defined benefit obligation, the fair value of the plan assets and the net asset/liability over the
year ending 31 March 2013 are as follows:

Year ending 31 March 2013

Beginning of the year

Employer’s part of the current service cost

Interest cost/income

Administrative costs

Contributions by the employer

Contributions from plan members

Actuarial gain/loss – experience

Actuarial gain/loss – financial assumptions

Actuarial gain/loss – demographic assumptions

Benefits paid

End of the Year

Obligation
£m

(103.5)

Plan Assets
£m

108.5

(0.4)

(4.7)

–

(0.1)

0.9

(5.9)

(1.6)

4.6

(110.7)

–

5.1

–

4.6

0.1

7.3

–

(4.6)

121.0

Net asset/
(liability)
£m

5.0

(0.4)

0.4

–

4.6

–

8.2

(5.9)

(1.6)

–

10.3

The actual return on the plan assets over 2014 was a loss of £1.0m (2013: gain of £12.1m).

The weighted average duration of the defined benefit obligation at the end of the reporting period is 16 years (2013: 17 years).

The administrative costs shown above are nil as they paid directly by the Group and are expensed separately outside IAS19.

The sensitivities regarding the principal assumptions used to measure the plan obligations are:

Discount Rate

RPI inflation

Life expectancy

Change in assumption

Decrease 0.1%

Increase 0.1%

Increase 1 year

Increase in Obligation

Increase in Plan Assets

Increase in Net Liability

31 March
2014
£m

31 March
2013
£m

31 March
2014
£m

31 March
2013
£m

31 March
2014
£m

31 March
2013
£m

1.7

1.4

3.7

1.7

1.4

3.7

1.5

1.4

–

1.6

1.5

–

0.2

–

3.7

0.1

(0.1)

3.7

The sensitivity information has been derived using projected cash flows valued using the relevant assumptions and membership
profile as at 31 March 2014. The sensitivity methodology has not changed from prior years. Extrapolation of these results beyond
the sensitivity figures shown may not be appropriate.

IAS 19 (Revised)
Restatements to Consolidated Statement of Financial Position
The transition impact of IAS 19 (revised) on the statement of financial position is due to the removal of the reserve for plan
administrative expense in the defined benefit obligation and is show in the table below.

IAS 19 (Previous)

Present value of defined benefit obligation

Fair value of scheme assets

Net asset/(liability) recognised in the statement of financial position

IAS 19 (Revised)

Present value of defined benefit obligation

Fair value of scheme assets

Net asset/(liability) recognised in the statement of financial position

Restatement impact

Present value of defined benefit obligation

Fair value of scheme assets

Net asset/(liability) recognised in the statement of financial position

31 March
2014
£m

31 March
2013
£m

31 March
2012
£m

116.4

(118.9)

2.5

110.9

(118.9)

8.0

5.5

–

5.5

116.3

(121.0)

4.7

110.7

(121.0)

10.3

5.6

–

5.6

108.6

(108.5)

0.1

103.5

(108.5)

5.0

5.1

–

5.1

103

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

22. Retirement benefit schemes continued
The restatement of the statement of financial position as at 31 March 2013 is shown below.

Assets

Employee Benefits

Equity

Retained Earnings

Liabilities

Employee Benefits

Deferred Taxation

31 March 2013

Impact of
IAS19
Revised
£m

Previously
Published
£m

4.7

(108.4)

–

41.8

5.6

3.6

–

2.0

Restated
£m

Previously
Published
£m

10.3

–

(104.8)

(128.6)

–

43.8

(0.1)

35.2

31 March 2012

Impact of
IAS19
Revised
£m

5.0

5.3

0.1

(0.2)

Restatements to Consolidated Income Statement
There is no material impact on the consolidated income statement for the 12 months ending 31 March 2013.

Restatements to Consolidated Other Comprehensive Income

12 months ended 31 March 2013

Foreign Exchange Differences

Actuarial gain on defined benefit pension scheme

Deferred tax on defined benefit pension scheme asset

Other comprehensive income for the year

Previously
Published
£m

4.2

0.1

(1.6)

2.7

Impact of
IAS19
Revised
£m

–

0.4

(2.1)

(1.7)

Restated
£m

5.0

(123.3)

–

35.0

Restated
£m

4.2

0.5

(3.7)

1.0

Defined contribution schemes
The Group offers defined contribution pension schemes for its UK, US, Canadian, European and Australian employees. The total
income statement charge in relation to these schemes was £2.9m (2013: £1.9m).

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.

104

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
directors’ remuneration report on pages 51 to 68.

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

31 March
2014

31 March
2013

0.4% – 1.0% 0.1% – 0.7%

Nil

29% – 31% 29% – 40%

3 years

6 years

3.37 years

3.25 years

2.13 years

n/a

3 – 5 years

2 – 3 years

3 years

161.7p

136.3p

96.0p

323.4p

368.0p

3 years

158.6p

129.9p

100.7p

355.7p

380.5p

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 directors’ remuneration report on pages 51 to 68 for further information.

105

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

23. Share based payments continued
Details of options and awards under the Group’s share plans are shown in the tables below.

2014
Number of share
options
(000)

2014
Weighted
average
exercise
price (p)

2013
Number of
share options
(000)

2013
Weighted
average
exercise
price (p)

1,682

(54)

(89)

1,565

676

459

208

(62)

(95)

510

–

(24)

(40)

–

262.3

395.1

273.2

117.2

269.6

186.8

245.2

289.5

272.7

161.2

274.0

–

305.3

332.0

340.0

248.8

339.9

–

1,427

341

(79)

(7)

1,682

436

475

177

(38)

(155)

459

–

(2)

(25)

–

225.2

384.2

132.7

106.3

262.3

161.7

183.5

320.2

219.3

147.0

245.2

–

216.4

349.5

326.3

173.2

305.3

–

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

106

23. Share based payments continued
Options outstanding at 31 March 2014

Share options granted in year ended 31 March

2005

2007

2010

2011

2012

2013

2014

Sharesave plan options granted in year ended 31 March

2012

2013

2014

Stock purchase plan options granted in year ended 31 March

2012

2013

Number
(000)

Weighted exercise
price (p)

Latest
exercise date year
ended
31 March

290

329

537

333

1,565

174

139

197

510

106.3

143.5

179.3

201.3

298.5

384.1

395.1

219.5

320.2

289.5

349.5

332.0

2015

2017

2020

2021

2022

2023

2017

2015

2016

2017

2015

2016

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 three years. In 2013, amendments to the rules of the Plan and the
terms of new performance conditions were approved at the AGM. These included the opportunity for executive directors only to
voluntarily elect to carry-forward and put at risk for a further two years shares that would have vested under the core award after
three years into a Multiplier award.

A 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

2014
Number of
share awards
(000)

2013
Number of
share awards
(000)

3,361

2,000

(350)

(869)

4,142

–

142

–

(19)

–

123

–

3,108

1,347

(288)

(806)

3,361

–

142

–

142

–

107

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

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

2014
Number of
share awards
(000)

2013
Number of
share awards
(000)

757

192

(37)

(342)

570

–

682

240

(14)

(151)

757

–

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 proration for time,
at the discretion of the Committee. For further details see the directors’ remuneration report on pages 51 to 68.

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 2014 nil (31 March 2013: 124,008) 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 2014 the
Trust held 720,699 (31 March 2013: 1,063,029) shares in BTG plc and a further 12,596 (31 March 2013: 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.

At 31 March 2014 the Trust has nil shares set aside under the Deferred Share Bonus Plan (31 March 2013: 347,900).

108

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

2014

Leases
£m

Reorganisation
£m

0.8

–

0.2

–

Total
£m

1.0

–

0.2

(0.1)

(0.2)

–

0.9

0.4

0.5

0.9

–

0.1

–

0.1

–

1.0

0.5

1.0

2013

Leases
£m

Reorganisation
£m

1.7

(0.4)

–

(0.5)

–

0.8

0.4

0.8

0.1

–

0.1

–

0.2

–

0.2

Total
£m

1.8

(0.4)

0.1

(0.5)

–

1.0

0.6

0.4

1.0

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 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 U.S. Management maintains regular communication
with the customers and monitors both sales to and payments from customers to minimise the credit risk exposure.

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. In April 2013, the Group signed a £60m multi-currency revolving credit facility providing access to funds for a
period of three years to April 2016. This has not been utilised in the period.

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, Canadian 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 Canadian
dollars, 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).

109

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

26. Financial risk management objectives and policies continued
Sensitivity analysis
A 5% weakening of the US$ at 31 March 2014 would have resulted in the following decrease in profit:

Decrease in profit

31 March
2014
£m

2.0

31 March
2013
£m

1.3

Interest rate risk
The Group seeks to mitigate partially against increased interest rates while 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:
• To safeguard the Group’s ability to continue as a going concern;
• To provide an adequate return to investors based on the level of risk undertaken;
• To 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; and
• To 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
2014
£m

530.4

711.7

74.5%

31 March
20131
£m

434.6

544.9

79.7%

The financial position as at 31 March 2013 has been restated following the adoption of IAS 19 Revised. See accounting policies in note 1 and retirement benefit
schemes in note 22 for further details.

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.

110

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 2013

Cash and cash equivalents

Forward contracts

Other investments

Trade and other receivables

Trade and other payables

31 March 2014

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

–

3.0

–

(0.8)

–

3.0

–

(5.5)

–

(2.2)

–

5.3

–

Amortised
cost
£m

158.7

–

54.5

(61.3)

38.2

–

75.1

(77.0)

Total
carrying
value
£m

158.7

(2.2)

3.0

54.5

(62.1)

38.2

5.3

3.0

75.1

Fair value
£m

158.7

(2.2)

3.0

54.5

(62.1)

38.2

5.3

3.0

75.1

(82.5)

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

At 31 March 2013

Financial assets recognised at fair value

Investments

Financial liabilities recognised at fair value

Forward contracts

Fair value of other contingent consideration

At 31 March 2014

Financial assets recognised at fair value

Forward contracts

Investments

Financial liabilities recognised at fair value

Fair value of other contingent consideration

Level 1
£m

Level 2
£m

Level 3
£m

–

3.0

(2.2)

–

5.3

3.0

–

(0.8)

–

Total
£m

3.0

(2.2)

(0.8)

5.3

3.0

(5.5)

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 predominantly represent the contingent consideration payable on achievement of revenue targets by
EKOS following the acquisition of EKOS Corporation in July 2013 (see note 33) and 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.

The movement in these level 3 financial liabilities is shown below:

At 1 April

Acquisitions

Movements in Fair Value

Paid during the year

Currency Movements

At 31 March

2014
£m

(0.8)

(17.5)

(0.9)

11.9

1.8

(5.5)

2013
£m

(0.7)

–

(0.1)

–

(0.8)

111

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

26. Financial risk management objectives and policies continued
Contractual maturity analysis of financial assets/(liabilities)

Forward foreign exchange contracts that mature within:

0–3 months

3–6 months

6–12 months

>12 months

Total

31 March
2014
£m

31 March
2013
£m

1.3

1.1

2.0

0.9

5.3

(0.6)

(1.6)

–

(2.2)

Net gains and losses on financial assets and liabilities
Foreign exchange losses of £5.0m (2013: gains of £3.1m) were recognised within Operating profit in relation to settlement of trade
receivables and payables.

The Group recognised a fair value gain of £7.5m (2013: loss of £2.6m) relating to forward foreign exchange contracts within ‘Financial
income’ (2013: ‘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 recognising any changes between fair value at initial recognition and fair value at year-end to reflect a change in factors,
including time.

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 2014
Property
£m

31 March 2013
Property
£m

2.5

6.5

–

9.0

1.4

2.8

0.3

4.5

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, Canada, Germany, and Australia. These leases have terms of
up to five 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.

112

28. Other financial commitments
The Group has entered into agreements with a number of early-stage companies and venture capital funds. At 31 March 2014 the
Group is committed to invest nil under these agreements (2013: nil).

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 £1.5m in litigation costs (2013: £1.1m).

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.

29. AZD9773 (CytoFab®)
In the prior year, on 8 August 2012 BTG announced the top-line data from a Phase 2b 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
terminated its licence agreement and associated arrangement with BTG. BTG does not anticipate conducting any further
development of AZD9773. Consequently the following transactions were recognised in the 12 months ended 31 March 2013:
• Revenue of £8.6m was recognised within milestones and one-off income in the Licensing operating segment. The components of
this revenue were:

–

The release of deferred income associated with previous received milestones from AstraZeneca in relation to AZD9773 work
streams totalling £6.1m; plus

– Compensation for early contract termination of £2.5m.

• An impairment charge of £22.5m was recognised in amortisation and impairment of acquired intangibles in the acquisition
adjustments and reorganisation costs column;
• Property, plant and equipment write-downs associated with assets used in the development of AZD9773 of £1.8m were
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 44 concerning Giles Kerr, payments made by BTG to Oxford University
and Isis Innovations Ltd under the relevant licence agreements were £nil for the year ended 31 March 2014 (£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 2014
(2013: nil).

Key management personnel are considered to be the directors and their remuneration is disclosed within the directors’
remuneration report on pages 51 to 68.

31. Disposal of Brachytherapy business
In September 2013, BTG announced the sale of its Brachytherapy business to Eckert & Ziegler Group, based in Berlin, Germany for
a payment of US$5.0m on closing plus a 30% share of revenues from the transferring products for a period of 12 months
commencing either with the start of production by Eckert & Ziegler or on January 2014, whichever is first. The deal completed on
1 November 2013. The profit on disposal of the Brachytherapy business of £0.4m is included within the profit on disposal of
property plant and equipment and intangible assets of £1.1m in the Income Statement. The net proceeds of the disposal are
included within Net proceeds from disposal of property and equipment and intangible assets in the cash flow statement.

113

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

32. Group entities
The significant subsidiary undertakings of BTG plc at 31 March 2014 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

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

Protherics Medicines Development Limited

Ordinary

Investment and management of group companies

Development, management and commercialisation of IPR

BTG International Inc., Delaware, USA

Common stock

Protherics UK Ltd

BTG Australasia Pty Ltd
Australia

Protherics Utah Inc.
Tennessee USA

Biocompatibles International Ltd*

Biocompatibles UK Ltd

Biocompatibles, Inc.
Delaware USA

BTG International Germany GmbH
(formally known as CellMed AG.)
Germany

BTG International Canada Inc.
Canada

EKOS Corporation
Delaware USA

Ordinary

Research, development, manufacture and sale of
pharmaceutical products and potential drugs

Manufacture and sale of pharmaceutical products and
potential drugs

Common stock

The research, development, manufacture and sale of
pharmaceutical products and potential drugs

Ordinary

Investment and management of group companies

Commercialisation of Bead products

Common stock

Commercialisation and distribution of Bead products
and Therasphere®

No par value
shares

Research and development

Common shares Support of Therasphere® business

Common stock Manufacture and commercialisation of therapeutic

ultrasound devices

BTG International Healthcare Ltd

Ordinary

Group financing

BTG International Healthcare Inc.

Common stock

Group financing

BTG International Healthcare LLC

Ordinary

Group financing

* Indicates direct subsidiary of BTG plc.

33. Business Combinations
In July 2013, BTG completed the acquisitions of EKOS Corporation (EKOS) and the Targeted Therapies Division of Nordion Inc.

a) EKOS Corporation (EKOS)
BTG completed the acquisition of 100% of EKOS on 5 July 2013 for an initial cash consideration of £118.7m ($178.8m) and up to
$40m in contingent consideration based upon future performance milestones. The contingent consideration had a carrying value
equal to its fair value of £17.5m using acquisition date trading assumptions and forecasts to assess the likelihood of payments to be
made. The purchase price allocation is the final determination of the fair values of assets acquired and liabilities assumed.

EKOS owns, manufactures and distributes the EkoSonic® Endovascular System (EkoSonic®), a differentiated interventional
medicine product using a locoregional approach in the treatment of severe blood clots. EkoSonic® is cleared for use in the US and
the EU. The acquisition is a complementary transaction in line with BTG’s existing strategy of growing its Interventional Medicine
business, following its acquisition of Biocompatibles International plc in 2011.

At acquisition, intangible assets principally comprised £123.2m relating to EkoSonic® developed technology. The fair value of this
asset has been estimated using an income approach, using the excess earnings method. The estimated useful life of the technology
is 15 years, and amortisation expense will be recorded on a straight-line basis. Goodwill arising of £47.8m, which is not deductible
for tax purposes, has been assigned to the Interventional Medicine operating segment. Goodwill includes the values of tax impacts,
assembled workforce and future potential indications for EkoSonic® which at the time of acquisition did not meet the criteria for
recognition as separate intangible assets.

Under the terms of the acquisition aggreement BTG may be due to make further contingent payments dependent upon EKOS
achieving certain revenue targets. These comprise up to $20m payable in respect of 2013 and up to $20m payable in respect of
2014 and 2015 in aggregate. Total contingent payments will not exceed $40m. During the year BTG paid the contingent payment in
respect of 2013 of $20.0m (£11.9m). The remaining contingent payment on the Statement of Financial Position is considered by
management to be a level 3 financial instrument (note 26).

114

33. Business Combinations continued

Book Value
£m

Fair Value
Adjustment
£m

Fair Value
£m

ASSETS

Non-current assets:

Intangible assets

Property, plant & equipment

Current assets:

Inventories

Trade and other receivables

Cash and cash equivalents

LIABILITIES

Current liabilities:

Trade and other payables

Non-current liabilities:

Trade and other payables

Deferred tax liabilities

Assets acquired

Goodwill

Total assets acquired

Cash consideration paid

Contingent consideration

Total Consideration

Cash and cash equivalents included in undertaking acquired

Cash consideration paid

Net cash outflow arising on acquisition and in cash flow statement

0.1

1.4

2.7

3.0

3.1

(4.8)

(0.4)

–

5.1

123.2

–

1.9

–

(41.8)

83.3

123.3

1.4

4.6

3.0

3.1

(4.8)

(0.4)

(41.8)

88.4

47.8

136.2

118.7

17.5

136.2

3.1

(118.7)

(115.6)

b) Targeted Therapies division of Nordion Inc.
On the 13 July 2013, BTG completed the acquisition of the Targeted Therapies Division of Nordion Inc. for a total cash consideration
of £132.8m (US$200.8m). The purchase price allocation is the final determination of the fair values of assets acquired and
liabilities assumed.

Targeted Therapies is a high growth business that is focused in utilising TheraSphere® for targeted interventional treatment of liver
cancer. TheraSphere® is a product comprising radioactive glass beads which target the tumour from within the body with a high
concentration of radiation, thereby limiting both damage to surrounding healthy tissue and side effects for the patient in
comparison to externally delivered radiation. The acquisition is a complementary transaction in line with BTG’s existing strategy of
growing its Interventional Medicine business, following its acquisition of Biocompatibles International plc in 2011.

At acquisition, intangible assets comprised of £104.6m relating to Targeted Therapies developed technology and £17.6m relating to
in process research and development assets. The fair value of these assets has been estimated using an income approach, using
the excess earnings method. The estimated useful life of the technology is 15 years, and amortisation expense will be recorded on a
straight-line basis. Goodwill arising of £23.3m, which is not deductible for tax purposes, has been assigned to the Interventional
Medicine operating segment. Goodwill includes the values of tax impacts and assembled workforce.

115

BTG plc Annual Report and Accounts 2014FinancialsNotes to the consolidated financial statements

33. Business Combinations continued

ASSETS

Non-current assets:

Intangible assets

Current assets:

Inventories

Trade and other receivables

LIABILITIES

Current liabilities:

Trade and other payables

Non-current liabilities:

Deferred tax liabilities

Assets acquired

Goodwill

Total consideration

Cash paid

Net cash outflow arising on acquisition and in cash flow statement

Book Value
£m

Fair Value
Adjustment
£m

Fair Value
£m

–

0.6

5.8

(1.7)

–

4.7

122.2

–

(17.4)

104.8

0.6

5.8

(1.7)

(17.4)

109.5

23.3

132.8

(132.8)

Revenue and Profit Impact of acquisitions
EKOS contributed revenues of £20.3m and operating profit before acquisition adjustments and reorganisation costs of £2.3m in the
period since acquisition. The Targeted Therapies Division of Nordion Inc. contributed revenues of £24.7m and operating profit before
acquisition adjustments and reorganisation costs of £7.3m in the period since acquisition.

If both acquisitions had taken place on 1 April 2013, the first day of the reporting period under review, revenue and profit before
tax and before acquisition adjustments and reorganisation costs of the combined group would have been £306.7m and
£73.3m respectively.

116

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

31 March
2014
£m

31 March
2013
£m

Note

617.5

72.0

–

72.0

689.5

36.1

288.7

317.8

44.2

686.8

–

2.7

–

2.7

369.3

215.7

–

215.7

585.0

32.8

188.6

317.8

43.1

582.3

–

2.7

–

2.7

689.5

585.0

The notes on pages 119 to 121 form part of these financial statements.

The financial statements were approved by the Board on 19 May 2014 and were signed on its behalf by:

Dr Louise Makin
Chief Executive Officer

Registered No: 2670500

Rolf Soderstrom
Chief Financial Officer

117

BTG plc Annual Report and Accounts 2014FinancialsCompany statement of cash flows
for the year ended 31 March 2014

Year ended
31 March
2014
£m

Year ended
31 March
2013
£m

Note

Loss after tax for the year

(Increase)/decrease in trade and other receivables

Decrease in trade and other payables

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

Company statement of changes in equity

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

At 1 April 2013

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 2014

Share
capital
£m

32.7

–

0.1

–

32.8

Share
capital
£m

32.8

–

3.3

–

36.1

Share
premium
£m

188.3

Merger
reserve
£m

317.8

–

0.3

–

188.6

317.8

Share
premium
£m

188.6

–

100.1

–

Merger
reserve
£m

317.8

–

288.7

317.8

The notes on pages 119 to 121 form part of these financial statements.

118

(4.6)

(99.8)

–

1.0

(103.4)

–

103.4

–

Retained
earnings
£m

41.1

(3.3)

–

(3.3)

–

0.6

4.7

43.1

Retained
earnings
£m

43.1

(4.6)

–

(4.6)

–

0.4

5.3

44.2

(3.3)

1.3

(0.3)

1.9

(0.4)

–

0.4

–

Total
equity
£m

579.9

(3.3)

–

(3.3)

0.4

0.6

4.7

582.3

Total
equity
£m

582.3

(4.6)

–

(4.6)

103.4

0.4

5.3

686.8

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 an
acquisition or disposal of part of the business, the cost or proceeds are 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 £4.6m (2013: £3.3m).

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
2014
£’000

Year ended
31 March
2013
£’000

Disclosures of individual Directors’ remuneration and associated costs required by the Companies Act 2006 and specified by the
Financial Services Authority are on pages 51 to 68 within the directors’ 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.

4. Investment in subsidiary undertakings

Cost

At 1 April 2012

Share based payments

At 1 April 2013

Transfers of investments to subsidiary companies

Share based payments

At 31 March 2014

£m

365.9

3.4

369.3

244.1

4.1

617.5

During the year BTG plc, in conjunction with the broader Group undertook the transfer of several investments within the Group
structure. There was no share-for-share consideration offered as part of these non-cash settled transactions.

A list of the Company’s principal subsidiary undertakings is shown in note 32 to the Group financial statements.

119

BTG plc Annual Report and Accounts 2014FinancialsNotes to the company financial statements

5. Trade and other receivables

Due within one year

Prepayments

Amounts owed by subsidiary undertakings

6. Capital and reserves

Company

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 1 April 2013

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 2014

31 March
2014
£m

31 March
2013
£m

0.8

71.2

72.0

Share
capital
£m

Share
premium
£m

Merger
reserve
£m

Retained
earnings
£m

32.7

188.3

317.8

–

0.1

–

32.8

–

3.3

–

36.1

–

0.3

–

188.6

317.8

–

100.1

–

288.7

–

317.8

41.1

(3.3)

0.6

–

4.7

43.1

(4.6)

0.4

–

5.3

44.2

0.4

215.3

215.7

Total
£m

579.9

(3.3)

0.6

0.4

4.7

582.3

(4.6)

0.4

103.4

5.3

686.8

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 International 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.

In May 2013, BTG completed a share placing for a total of 32,208,030 new ordinary shares at a price of 330p per placing share,
raising proceeds of £106.3m, being £103.1m net of expenses.

7. Trade and other payables

31 March
2014
£m

31 March
2013
£m

2.7

–

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.

120

8. Financial assets and liabilities

31 March 2013

Cash and cash equivalents

Trade and other receivables

Trade and other payables

31 March 2014

Cash and cash equivalents

Trade and other receivables

Trade and other payables

Designated
at fair value
£m

Amortised
cost
£m

–

215.7

(2.7)

–

72.0

(2.7)

Total
carrying
value
£m

–

215.7

(2.7)

–

72.0

(2.7)

Fair
value
£m

–

215.7

(2.7)

–

72.0

(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. In April 2013, the Group signed a £60m multi-currency revolving credit facility providing access
to funds for a period of three years to April 2016. This has not been utilised in the period.

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 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.

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.

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 44 concerning Giles Kerr, payments made by BTG to Oxford University
and Isis Innovations Ltd under the relevant licence agreements were nil for the year ended 31 March 2014 (£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 2014
(2013: nil).

Key management personnel are considered to be the Directors and their remuneration is disclosed within the directors’
remuneration report on pages 51 to 68.

121

BTG plc Annual Report and Accounts 2014FinancialsFive year financial record
for the year ended 31 March 2014
Consolidated Income statement

Revenue

Cost of sales

Gross profit

Selling, general and administrative expenses

Contribution

Amortisation and impairment of acquired
intangible 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

20141 3
£m

290.5

(95.0)

195.5

(84.0)

111.5

(23.3)

–

(5.0)

(47.2)

1.1

–

(9.8)

–

27.3

6.0

33.3

(9.0)

24.3

6.8p

6.7p

20133
£m

233.7

(67.2)

166.5

(58.0)

108.5

(43.4)

–

3.1

(41.2)

0.4

(1.8)

–

0.1

–

25.7

(1.6)

24.1

(7.7)

16.4

5.0p

2012
£m

197.0

(56.3)

140.7

(48.9)

91.8

(30.7)

–

2.6

(39.7)

0.2

(3.0)

(0.2)

(1.1)

–

19.9

3.1

23.0

(8.4)

14.6

4.5p

4.4p

20112
£m

111.4

(34.1)

77.3

(33.7)

43.6

(10.0)

(9.6)

(2.0)

(32.1)

1.5

–

(1.4)

(3.8)

–

(13.8)

3.0

(10.8)

20.0

9.2

3.4p

2010
£m

98.5

(32.8)

65.7

(25.3)

40.4

(9.1)

–

(4.0)

(26.7)

1.1

–

0.7

(0.3)

2.1

7.0

9.1

2.2

11.3

4.4p

The results for the year ended 31 March 2014 include the results of EKOS Corporation and the Targeted Therapies Division of Nordion Inc. from the date of
acquisition, being 5 July 2013 and 13 July 2013 respectively.

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.

Only financial years 2014 and 2013 have been restated for IAS19 revised. See accounting policies in note 1 and retirement benefit schemes in note 22 for
further details.

122

Five year financial record
for the year ended 31 March 2014
Consolidated statement of financial position

Goodwill

Intangible assets

Property, plant and equipment

Investment in associates

Other investments

Deferred tax asset

Employee benefits

Biological assets

Derivative financial instruments

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

20141 3
£m

123.6

397.9

31.3

–

3.0

0.8

8.0

–

0.9

565.5

146.2

711.7

36.1

288.7

317.8

(32.2)

(80.0)

530.4

93.5

87.8

181.3

711.7

2013
£m

59.2

209.2

25.4

–

3.0

0.9

10.3

–

308.0

236.9

544.9

32.8

188.6

317.8

0.2

(104.8)

434.6

44.7

65.6

110.3

544.9

20123
£m

59.2

246.0

22.0

–

3.0

1.0

–

0.3

–

331.5

174.3

505.8

32.7

188.3

317.8

(4.0)

(128.6)

406.2

41.3

58.3

99.6

505.8

20112 3
£m

59.2

271.0

24.8

–

2.7

0.9

–

0.3

–

358.9

129.6

488.5

32.7

188.2

317.8

(3.7)

(142.7)

392.3

43.9

52.3

96.2

488.5

20103
£m

30.3

152.7

10.6

–

3.7

0.6

–

197.9

113.1

311.0

25.8

188.1

158.1

(0.9)

(155.9)

215.2

52.4

43.4

95.8

311.0

The statement of financial position for 31 March 2014 includes the assets and liabilities acquired from EKOS Corporation and the Targeted Therapies Division
of Nordion Inc. during the year.

2 The statement of financial position for 31 March 2011 includes the assets and liabilities acquired from Biocompatibles International plc during the year

Only Financial Years 2014 and 2013 have been restated for IAS19 revised. See accounting policies in note 1 and retirement benefit schemes in note 22 for
further details.

Consolidated cash flow statement

Net cash from/(used in) operating activities

Net cash from/(used in) 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

Cash and cash equivalents at end of year

20141 3
£m

48.5

(269.4)

102.7

(118.2)

(2.3)

158.7

38.2

20133
£m

55.5

(4.5)

0.2

51.2

0.6

106.9

158.7

2012
£m

47.2

(3.9)

(0.2)

43.1

0.1

63.7

106.9

20111
£m

(12.0)

(5.5)

(0.6)

(18.1)

(0.8)

82.6

63.7

2 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

Only financial years 2014 and 2013 have been restated for IAS19 revised. See accounting policies in note 1 and retirement benefit schemes in note 22 for
further details.

2010
£m

5.8

(2.6)

1.4

4.6

(0.2)

78.2

82.6

123

BTG plc Annual Report and Accounts 2014FinancialsShareholder information

Financial calendar

Circulation of annual report for the year ended 31 March 2014

Annual General Meeting

Announcement of interim results for the six months ended 30 September 2014

Preliminary announcement of annual results for the year ended 31 March 2015

13 June 2014

16 July 2014

November 2014

May 2015

Shareholders
At 31 March 2014 there were 9,766 holders of ordinary shares in the Company. Their shareholdings are analysed as follows:

Size of shareholding

1 – 5,000

5,001 – 50,000

50,001 – 100,000

100,001 – 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

8,949

91.6

6,087,142

556

107

5.7

0.7

1.1

0.9

8,112,235

5,032,220

24,248,501

318,106,436

9,766

100.0

361,586,534

1.7

2.2

1.4

6.7

88.00

100.0

Number of
shareholders

Percentage of
total number of
shareholders

Number of
ordinary shares

Percentage of
ordinary shares

1,052

8,525

127

9,766

10.8

87.3

0.6

–

1.3

346,199,583

11,229,327

558,460

720,699

2,878,465

95.6

3.1

0.2

0.3

0.8

100.0

361,586,534

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 Asset Services, 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 0446
(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 Asset Services, 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 overleaf, where the register is held.

Registered office and head office
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

124

Registrars
Capita Asset Services
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 9
am to 5.30 pm, Monday to
Friday.)

Callers from outside the UK:
Tel: +44 (0)208 639 3399

Advisers
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 LLP
15 Canada Square
London E14 5GL
Tel: +44 (0)20 7311 1000
Fax:+44 (0)20 7311 3311

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 30 to 34 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.

Trademarks

BTG and the BTG roundel logo are registered trademarks of
BTG International Ltd.
The following is a non-exhaustive list of trademarks of the
BTG International group of companies mentioned in this Report:

Bead Block®
CroFab®
DC Bead®
DC BeadM1™
DigiFab®
EkoSonic®
LC Bead®
LC BeadM1™
TheraSphere®
Varithena™
Voraxaze®

Zytiga® is registered trademark of Johnson & Johnson, Inc.
BeneFix® is a registered trademark of Genetics Institute, now part
of Pfizer, Inc.
Lemtrada™ is a trademark for Genzyme Corporation’s
multiple sclerosis agent alemtuzumab. Genzyme Corporation
is a Sanofi company.

Printed on Amadeus 50 Silk which is produced using 50% recycled post-consumer waste and 50% wood fibre from fully sustainable forests
with FSC® certification. All pulps used are Elemental Chlorine Free (ECF). Printed in the UK by Pureprint using their alcofree and pureprint
environmental printing technology and vegetable inks were used throughout. Pureprint is a Carbon Neutral company. Both the manufacturing
mill and the printer are registered to the Environmental Management System ISO14001 and are Forest Stewardship Council (FSC)
chain-of-custody certified.

Designed and produced by MerchantCantos
Printed by Pureprint Group UK

www.btgplc.com

BTG International Ltd
5 Fleet Place
London EC4M 7RD
UK
Tel: +44 (0)20 7575 0000
Fax: +44 (0)20 7575 0010