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Global Leader
Clinigen Group plc
Annual Report and Accounts
2016
Clinigen Group is a global
pharmaceutical and services
company with a unique combination
of businesses focused on providing
access to medicines.
Clinigen’s mission is to deliver the
right medicine to the right patient
at the right time operating in three
areas of global medicine supply:
clinical trials, unlicensed and licensed
medicines.
LOCATIONS
11
CTS UNITS SHIPPED
715,000
COUNTRIES SUPPLIED
UNLICENSED UNITS SHIPPED
113
DIVISIONS
5
1,427,000
LICENSED UNITS SHIPPED
1,833,000
FINANCIAL HIGHLIGHTS
A strong financial performance
– Reported revenue up 84% to £339.9m
– Adjusted gross profit1 up 90%, driven by
acquisitions and organic growth
– Adjusted EPS1 up 25% to 35.0p
(2015: 28.0p)
– Reported EPS of 11.9p (2015: 6.5p) after
one off acquisition costs and post
acquisition restructuring costs
– £49.4m cash generated from operations,
up 213%
– Net debt decreased £8.1m to £68.1m after
£28.5m spent on acquisitions
– Full year dividend increased 18% to 4.0p
(2015: 3.4p)
– Strongest performances by Specialty
Pharmaceuticals (‘SP’), driven by revitalisation
of newer products2, and Clinical Trial
Services (‘CTS’)
– Integration of Idis and Link Healthcare (‘Link’)
acquisitions substantially complete
– Acquisition of Totect and Foscavir bag
line extension enhances SP portfolio
FINANCIAL PERFORMANCE
2016 ADJUSTED GROSS PROFIT (£M)1
2016 ADJUSTED EBITDA (£M)1
NET CASH/(DEBT) (£M)
90 %
16
15
14
13
53.7
41.2
35.1
102.1
16
15
14
13
73%
11 %
56.0
16
(68.1)
32.3
15
(76.2)
26.8
22.4
14
13
5.3
11.3
ADJUSTED BASIC EARNINGS PER SHARE
(PENCE)1
DIVIDEND PER SHARE (PENCE)
25%
18%
16
15
14
13
35.0
28.0
24.5
22.0
16
15
14
13
4.0
3.4
3.1
2.6
1 The adjusted results exclude share based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results
from the Joint Venture (‘JV’) in South Africa
2 Newer products refers to Ethyol, Cardioxane, and Savene
Building our global footprint
The Link Healthcare acquisition has extended the Group’s presence into Africa, Australia
and the Asia region
MAP KEY
TINT REPRESENTATIVE OF TURNOVER BY REGION
CLINIGEN GROUP OPERATIONS
LINK HEALTHCARE OPERATIONS
CUMBERLAND PHARMACEUTICALS (STRATEGIC ALLIANCE)
>£100m
£50m–£100m
<£50m
ADJUSTED GROSS PROFIT BY ACTIVITY1
ADJUSTED GROSS PROFIT BY REGION1
ADJUSTED GROSS PROFIT BY DIVISION1
CLINICAL TRIAL
SUPPLY
UNLICENSED
LICENSED
£19.7m
£44.0m
£38.4m
UK
EUROPE
USA
REST OF WORLD
£19.3m
£38.9m
£29.3m
£14.6m
CTS
£19.7m
MANAGED ACCESS £26.5m
GLOBAL ACCESS
£13.8m
LINK HEALTHCARE £10.2m
SPECIALTY PHARMA £31.9m
1 The adjusted results exclude share based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results from the Joint Venture in
South Africa
Contents
OVERVIEW
02 Dashboard
04 Business model
GOVERNANCE
36 Board of Directors
38 Corporate governance statement
40 Remuneration Report
42 Report of the Directors
STRATEGIC REPORT
06 Market overview
08 Chairman's statement
10 Chief Executive Officer's statement
13 Key performance indicators
14 Strategy in action
16 Chief Executive Officer-designate's statement
17 Strategic priorities
18 Clinigen Clinical Trial Services
20
22
24 Link Healthcare
26 Clinigen Specialty Pharmaceuticals
28 Chief Financial Officer's statement
32 Principal risks
34 Corporate responsibility
Idis Managed Access
Idis Global Access
FINANCIAL STATEMENTS
45
Independent auditors’ report
46 Consolidated income statement
46 Consolidated statement of comprehensive income
47 Consolidated statement of financial position
48 Consolidated statement of cash flows
49 Consolidated statement of changes in equity
50
Notes forming part of the consolidated financial
statements
Independent auditors’ report
82
84 Company balance sheet
86 Notes to the Company balance sheet
96 Adviser and investor contacts
KLARI REIS
Fro m h e r pa i nt i n g s tu d i o i n
S a n Fra n cisco, C a l i fo r n ia , K l a r i uses
t h e to o ls a n d te ch n i q u es of sci e n ce
to create h e r a r t wo r k . O u r cove r
featu res o n e of h e r 150 p i e ce p et r i
d ish i ns t a l l at i o ns . D et a i l e d i ma g es
of h e r co l o r f u l p et r i creat i o ns c a n b e
fo u n d o n pa g es 15 a n d 39 a n d o n h e r
we bsi te at w w w. k l a r i a r t .co m
01
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWOVERVIEWFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT1 AAA is the Africa, Australia and Asia region2 Newer products refers to Ethyol, Cardioxane, and Savene0203Clinigen Group plc Clinigen Group plc Annual Report and Accounts 2016Annual Report and Accounts 2016Building global leadershipDASHBOARDThe Group is focused on three areas of global medicine supply; clinical trials, unlicensed and licensed medicines, operating with five synergistic divisions.Clinigen is unique in offering access to medicines at all stages of the pharmaceutical product life cycle from clinical trials and managing early access programmes through to mature products towards the end of their life cycle. HOW DID WE PERFORM IN THIS YEAR?WHAT ARE OUR BUSINESS SYNERGIES?Our unique business model and our ability to operate across all three stages of the product life cycle bring key benefits to value for the Group.1Centralised customer service department is scalable, efficient and cost effective 2Superior regulatory, pharmacovigilance and quality management knowledge required in Specialty Pharmaceuticals provides competitive advantage in services divisions 3Unparalleled knowledge of the complex global supply chain environment for both licensed and unlicensed products provides strong distribution capabilities and synergies4Broad and embedded relationships with pharmaceutical companies and pharmacists provide cross-selling opportunitiesDelivering the right medicine, to the right patient, at the right time. 1World-class customer service every time2Become the “go to” global leader in ethical access to unlicensed medicines3Increase our profile with customers and opinion leaders 4Upgrade technology platform5Extend global footprint into remaining key markets WHAT WAS THE MARKET BACKDROP?WHAT ARE OUR STRATEGIC PRIORITIES?HOW ARE WE STRUCTURED?WHAT IS OUR INVESTMENT CASE?Supply and management of quality assured comparator drugs and services to clinical trialsProvides exclusive access to pre-licensed innovative medicines with high unmet medical needOn-demand access for hospital pharmacists to medicines which are unlicensed at their point of careAcquires global rights and revitalises hospital only and critical care medicinesLocal exclusive access to unlicensed, licensed or generic medicines in the AAA1 region PG 18 PG 20 PG 22 PG 24 PG 262016 highlights –Increased penetration into cornerstone clients –Further development of expanded services reinforcing our market- leading position –Wider business capability following Idis and Link acquisitions harnessed to cross-sell into new clients –Development of value added services, including launch of Clinigen Consulting Services –Customer services centralised –Increased client penetration –Increased number of exclusive supply agreements –Customer services centralised –Increased pipeline of new products –Building scale in Asia –Increased portfolio of licensed and unlicensed drugs –Gaining benefits from leveraging Group client base and procurement capability –Newer products2 collectively increased gross profits by over 30% –Newer products now represent 36% of divisional gross profit (2015: 30%) –Acquisition of Totect expands Dexrazoxane portfolio into the US –Development of Foscavir bag line extension –Strategic alliance formed with Cumberland Pharmaceuticals in USADJUSTED GROSS PROFIT (£m)1£102.1m2015: £53.7mADJUSTED BASIC EARNINGS PER SHARE (PENCE)135.0p2015: 28.0pADJUSTED EBITDA (£m)1£56.0m2015: £32.3mDIVIDEND PER SHARE (PENCE) 4.0p2015: 3.4pIn each of the three markets in which we operate, conditions and trends continue to be favourable with increased demand for a global specialist service provider.Clinical trialsTrend to outsource continues, clients increasingly wanting a global solution, regulatory environment becoming more complex, comparator drugs increasingly used over placebos, and growth in investigator initiated trials ('IITs'). LicensedIncreased scrutiny on price of drugs has led to pharmaceutical companies wanting to divest to trusted partners.MARKET-LEADING POSITIONS #1 IN CTS, MANAGED ACCESS AND GLOBAL ACCESSGLOBAL CAPABILITY SUPPLYING INTO 113 COUNTRIESUNIQUE COMBINATION OF BUSINESSES EXTENDING ACROSS PHARMACEUTICAL PRODUCT LIFE CYCLE WITH CLEAR SYNERGIESSIGNIFICANT LONG-TERM GROWTH POTENTIAL BOTH ORGANIC AND ACQUISITIONAL GROWTH OPPORTUNITYEXPERIENCED MANAGEMENT TEAM DELIVERING TRACK RECORD OF GROWTHTRUSTED ETHICAL SUPPLIER DEEP RELATIONSHIPS WITH PHYSICIANS AND BIG PHARMAUNPARALLELED KNOWLEDGE AND EXPERTISE IN SUPPLY OF UNLICENSED MEDICINESHIGHLY CASH GENERATIVE WITH STRONG COST CONTROL#11 The adjusted results exclude share-based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results from the joint venture in South AfricaUnlicensedGrowth in emerging pharmaceutical markets, increased threat from counterfeit products, rising demand for real world ('RW') data and increased patient advocacy.FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW3637Clinigen Group plc Clinigen Group plc Annual Report and Accounts 2016Annual Report and Accounts 2016Board of DirectorsGOVERNANCEPETER ALLENNon-Executive ChairmanSHAUN CHILTONDeputy Chief Executive OfficerPETER GEORGEChief Executive OfficerMARTIN ABELLChief Financial OfficerJOHN HARTUPNon-Executive DirectorIAN NICHOLSONNon-Executive DirectorROBIN SIBSONNon-Executive DirectorJOHN BACONNon-Executive DirectorAppointed: August 2012Appointed: Director in July 2013 and Deputy Chief Executive Officer in July 2015Appointed: June 2010Appointed: Director in August 2015 and CFO in October 2015Appointed: May 2011Appointed: September 2012Appointed: Non-Executive Director January 2016Appointed: October 2015Committees: Nomination (Chairman), Audit and Risk, RemunerationCommittees: NoneCommittees: NoneCommittees: NoneCommittees: Audit and Risk (Chairman), Nomination, RemunerationCommittees: Remuneration (Chairman), Audit and Risk, NominationCommittees: NoneCommittees: NoneProfile: Peter has a wealth of experience and has held key senior positions in a number of companies in the healthcare industry and played a significant role in their growth. Peter spent 12 years at Celltech Group plc (1992-2004) as CFO and Deputy CEO, 6 years at ProStaken Group plc as Chairman (2007-13) and interim CEO (2010-11) and three years as Chairman of Proximagen Neurosciences plc (2009-12).Profile: Shaun holds responsibility for the Group achieving its key performance indicators on a day to day basis and plays a central role in setting and executing the Group strategy. He previously held the position of President within KnowledgePoint360 Group, a global pharmaceutical information and services operation. Shaun has 20 years’ experience in the industry across a range of disciplines, including commercial, strategic, operational and sales and marketing roles for companies such as Pfizer and Sanofi.Shaun will become CEO in November 2016.Profile:Peter joined Clinigen when it formed and has been at the forefront of the strategic decisions and resulting growth Clinigen has achieved. Peter has an extensive range of experience, starting his career in the UK’s National Health Service before utilizing and strengthening his experience in the pharmaceutical industry where he has held a number of senior international roles including Executive VP for Wolters Kluwer Health, with responsibility for European and Asia Pacific regions, CEO at Penn Pharma Limited where he led a £67m management buy-out in 2007 and Chief Operating Officer for Unilabs Clinical Trials International Limited. Peter was CEO of the Year in the 2014 European Mediscience Awards.Peter is retiring as CEO in November 2016 but will remain on the Board as a Non-Executive Director.Profile: Before joining Clinigen, Martin worked at the FTSE 250 recruitment group Hays plc. At Hays, Martin spent the first part of his career as Head of Investor Relations and M&A, and was later appointed Finance Director for the Continental Europe and Rest of World division which operated across 21 countries with revenues of over £1bn. Previously, Martin held several financial roles at the FTSE 100 logistics group, Exel plc (now part of Deutsche Post) including Financial Controller of two of the UK divisions. He is a qualified Chartered Accountant, having trained at PwC in the M&A Transaction Services team.Profile: John has over 30 years’ experience as a corporate lawyer dealing with corporate finance and commercial contract issues across a number of industries. Formerly Managing Partner at Ricksons LLP and subsequently became a Partner at DWF LLP.Profile:Ian has considerable experience as both an Executive Director and as a Non-Executive Director. Ian is CEO of F2G Limited.Profile: Robin joined Clinigen’s forerunner in 2003 and has been a consistent and skilled presence through the evolution of Clinigen. He retired from the role of CFO in October 2015 to become a Non-Executive Director and to focus on his charitable interests.He has over 30 years’ experience in the pharmaceutical industry, holding a number of senior, executive, finance roles for companies such as Abbott, Boots and BASF.Robin is retiring as a Non-Executive Director in November 2016.Profile: Previously Chairman of Link Healthcare, John Bacon founded the organisation in the 1990s thereby pioneering the supply of specialist pharmaceuticals in the Australasian markets. He has qualifications in both science and business and prior to forming Link Healthcare, held senior positions in both fields across the Asia-Pacific region.External appointments: Peter has a wealth of experience on the Boards of both private and publicly owned companies, including Chairman, CEO and CFO positions. He is also currently Chairman of Advanced Medical Solutions Plc, Future Plc, Oxford Nanopore Technologies Plc and Diurnal Ltd.External appointments: None.External appointments: Peter is currently a Non-Executive Director of Ergomed Plc.External appointments: None.External appointments: None.External appointments: Ian currently holds positions as Non-Executive Director of Consort Medical plc and Bioventix plc, where he is the Non-Executive Chairman. Ian is also Chairman of the investment committee at Cancer Research UK Pioneer Fund, Director of Casewell Consulting Limited and an Operating Partner at Advent Life Sciences LLP.External appointments: Director Mount Cook Property Limited, Director Mount Cook Activity Limited.External appointments: None.Our experienced Board has a significant track record and a wealth of knowledge across the biotechnology, pharmaceutical and healthcare sectors spanning private and publicly quoted companies.FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW45Clinigen Group plc Annual Report and Accounts 201644Clinigen Group plc Annual Report and Accounts 2016DIRECTORS’ INDEMNITIESThe officers of the Company and its subsidiaries would be indemnified in respect of proceedings which might be brought by a third party. No cover is provided in respect of any fraudulent or dishonest actions.EMPLOYEESThe policies relating to employees are discussed in the Corporate Responsibility section of the Strategic Report. POLITICAL DONATIONSIn line with the established policy, the Group made no political donations.Although the Group does not make, and does not intend to make, political donations, the definition of political donations under the Companies Act 2006 includes broad and potentially ambiguous definitions of the terms “political donation” and “political expenditure”, which may apply to some normal business activities which would not generally be considered to be political in nature. As in previous years, a resolution will be proposed at the AGM seeking shareholder approval for the Directors to be given authority, to make political donations and/or to incur political expenditure, in each case within the meaning of the Companies Act 2006. The Directors wish to emphasise that the proposed resolution is sought on a purely precautionary basis in order to avoid inadvertent contravention of the Companies Act 2006. The Board has no intention of entering into any party political activities.PROVISION OF INFORMATION TO THE AUDITORSEach of the Directors at the time when this Report of the Directors is approved has confirmed that: –so far as that Director is aware, there is no relevant audit information of which the Company’s and the Group’s auditors are unaware; and –that Director has taken all the steps that ought to have been taken as a Director in order to be aware of any information needed by the Company and the Group’s auditors in connection with preparing their report and to establish that the Company and the Group’s auditors are aware of that information.AGM NOTICEThe notice convening the AGM to be held on 11 November 2016, together with an explanation of the resolutions to be proposed at the meeting, is contained in a separate circular to shareholders.INDEPENDENT AUDITORSThe auditors, PricewaterhouseCoopers LLP, have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the forthcoming AGM.This report was approved by the Board and signed by order of the Board:MARTIN ABELLChief Financial Officer27 September 2016Report of the Directorsfor the year ended 30 June 2016GOVERNANCE CONTINUEDIndependent Auditors’ reportto the members of Clinigen Group plcReport on the group financial statementsOUR OPINIONIn our opinion, Clinigen Group plc’s group financial statements (the “financial statements”): –give a true and fair view of the state of the group’s affairs as at 30 June 2016 and of its profit and cash flows for the year then ended; –have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and –have been prepared in accordance with the requirements of the Companies Act 2006.WHAT WE HAVE AUDITEDThe financial statements, included within the Annual Report, comprise: –the consolidated statement of financial position as at 30 June 2016; –the consolidated income statement and statement of comprehensive income for the year then ended; –the statement of cash flows for the year then ended; –the statement of changes in equity for the year then ended; and –the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union, and applicable law.In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006In our opinion, 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.OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTIONADEQUACY OF INFORMATION AND EXPLANATIONS RECEIVEDUnder the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.DIRECTORS’ REMUNERATIONUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDITOUR RESPONSIBILITIES AND THOSE OF THE DIRECTORSAs explained more fully in the Directors’ Responsibilities Statement set out on page 82, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVESWe conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: –whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; –the reasonableness of significant accounting estimates made by the directors; and –the overall presentation of the financial statements.We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.OTHER MATTERWe have reported separately on the company financial statements of Clinigen Group plc for the year ended 30 June 2016.ANDREW HAMMOND (SENIOR STATUTORY AUDITOR)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsBirmingham27 September 2015FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWMARKET SIZE$1.5bn – $2.5bnMARKET SIZE$5.0bn – $10.0bn07Clinigen Group plc Annual Report and Accounts 201606Clinigen Group plc Annual Report and Accounts 2016Connecting our marketsMARKET OVERVIEWThe unlicensed market in which the Group operates can be split into three areas, clinical trial supply, Managed Access programmes and global ‘point of care’ access. We are market leaders in each of the markets we operate with a strategic priority of being recognised as the “go to” global market leader in ethical access to unlicensed medicines.ACCESS TO MEDICINESThere is a high and ever increasing global unmet need for ethical supply of good quality unlicensed medicines from a trusted source. 80% of the world’s population, an estimated 5.5bn people, have low or non-existent access to medicines1. Population growth, an increasingly elderly population, growing incidences of chronic diseases, increasing patient knowledge, and concerns around counterfeit medicines are all driving increasing demand for quality medicines which are unlicensed at the ‘point of care’.Clinigen is the only company to provide global access to medicines across all three routes available to a patient, through clinical trials, unlicensed or licensed supply. Each market has unique market drivers and barriers to entry. However a common theme that exists in all the markets in which we operate is the relatively high growth rate and the increasing demand for a global solution. EMERGING PHARMACEUTICAL MARKETSAs many economies become wealthier, populations increase and awareness of available healthcare improves, there is a significant growth opportunity in emerging markets. By 2010 healthcare spending in emerging markets had overtaken that of the EU5 (Germany, France, Italy, Spain and the UK) with spending expected to amount to 30% of the global pharmaceutical market by the end of 2016 (20% in 2011)2. Due to the complexity, particularly regulatory, of the diverse infrastructure, the approach in commercialising such opportunities require a niche and specialist service provider. The acquisition of Link in October 2015 has provided the Group with access to a wider customer base and an increased global reach enabling more efficient distribution to healthcare professionals in the AAA region. We supply a global reach with local expertise and have a track record of excellence through understanding of complex regulatory environments and specialist knowledge.MARKET DRIVERS –Trend is to outsource clinical trials –Comparator drugs increasingly used over placebos –Increase in more expensive biologic/biosimilar drugs –Growth in IITs –Clients increasingly requiring a global solutionMARKET DRIVERS –Structural growth in emerging pharmaceutical markets –Increased role of patient advocacy groups demanding best treatments –Demand for RW data –Geography specific drug shortages –Increase in counterfeit products –Clients increasingly requiring a global solutionMARKET DRIVERS –Mature product divestment by large Pharmaceutical companies –Clients increasingly requiring a global solutionSP PRODUCT PORTFOLIO5DIFFERENTIATORS –Broad and embedded relationships with pharmaceutical companies and pharmacists –Focus on mature, hospital only products –Certify product for authenticity –Deep understanding of complexity of regulatory environment –Centralised customer servicesDIFFERENTIATORS –Broad and embedded relationships with pharmaceutical companies –Local market knowledge –Global supply chain and distribution network –Not reliant on sales force –Revitalisation capabilityLOCAL MARKETED LICENSES>100COUNTERFEIT MEDICINESCounterfeit or sub-standard medicines are becoming increasing prevalent. In March 2016 Clinigen became a full member of the European Alliance for Access to Safe Medicines (EAASM) and Alliance for Safe Online Pharmacy in the EU (ASOP EU), two key European alliances in the fight to protect patients from the threat of counterfeit drugs. A key focus in tackling the threat is educating patients and healthcare professionals of the dangers of internet pharmacies. Some estimates indicate that the global threat of counterfeit pharmaceutical drugs is up to $75bn, a 90% rise in five years3. Often, the pharmacies appear legitimate but are often unethical, selling substandard, falsified or counterfeit medicines and drugs that are untested and unapproved or even banned. Many products don’t require a prescription to supply a prescription-only drug and can be dangerous and pose a serious health risk if self-prescribed.Access to unlicensed medicines, which include drugs that have received regulatory approval but may not be available in a patient’s own country, can help to meet this unmet need. Clinigen is dedicated to providing an ethical, compliant route for healthcare professionals to source medicines, meeting this need through its Idis Global Access division. We manage our supply chain closely and guard against the risk of counterfeit products reaching the patient.80%1WORLD’S POPULATION THAT HAVE LOW OR NON-EXISTENT ACCESS TO MEDICINES30%2GLOBAL PHARMACEUTICAL MARKET SPEND IN EMERGING PHARMACEUTICAL MARKETS$75bn3GLOBAL THREAT OF COUNTERFEIT PHARMACEUTICAL DRUGSREAL WORLD DATAThere is increased demand for data within the pharmaceutical industry about patients’ use of medicines in a realistic healthcare setting, otherwise known as Real World (RW) data. The adoption of new medicines is increasingly reliant on evidence based criteria. Traditional randomised clinical trials, which for a long time were seen as the best method of obtaining clinical data, now are considered to have limitations. The capture of RW data is beginning to become significant in the approval and adoption of medicines. Demand for RW data is universal with many countries now realising its importance. The gathering of RW data plays a significant role in ensuring patients have ethical access to innovative medicines, a key strategic priority for Clinigen. As a response to this market trend, the Group has developed the Clinigen Consulting Services offering within its Idis Managed Access division. This offering advises the pharmaceutical industry on policy and is important to future growth. CLINICAL TRIAL SUPPLYUNLICENSEDLICENSEDManaged by our Clinigen Clinical Trial Services division.Covers exclusive Managed Access programmes managed by Idis Managed Access and the ethical on-demand unlicensed supply managed by Idis Global Access and Link Healthcare.Managed by our Clinigen Specialty Pharmaceuticals and Link Healthcare divisions.1 http://www.talkingdrugs.org/dying-for-relief-access-to-pain-medication-and-suicide-in-russia 24 April 20152 http://www.strategyand.pwc.com/media/file/Strategyand_Pharma-Emerging-Markets-2.0.pdf3 http://safeonlinerx.com/wp-content/uploads/2016/02/Key-Facts-and-Patient-Harms-02-2016.pdfDIFFERENTIATORS –Deep well-established relationship with pharmaceutical companies –Global supply chain and distribution network –Certify product is authentic –Superior pharmacovigilance and quality management knowledge –Deep understanding of complexity of regulatory environment –Expanded services and IIT offeringClinigen Group plc Annual Report and Accounts 2016
DASHBOARD
Building global leadership
HOW ARE WE STRUCTURED?
The Group is focused on three areas of global
medicine supply: clinical trials, unlicensed and
licensed medicines, operating with five
synergistic divisions.
Supply and
management of
quality assured
comparator drugs
and services to
clinical trials
Provides exclusive
access to pre-
licensed innovative
medicines with high
unmet medical need
On-demand access
for hospital
pharmacists to
medicines which are
unlicensed at their
point of care
Local exclusive
access to unlicensed,
licensed or generic
medicines in the
AAA1 region
Acquires global rights
and revitalises
hospital only and
critical care
medicines
PG 18
PG 20
PG 22
PG 24
PG 26
2016 highlights
–
Increased penetration
into cornerstone clients
Further development of
expanded services
reinforcing our market-
leading position
–
– Wider business capability
following Idis and Link
acquisitions harnessed to
cross-sell into new clients
– Development of value
added services, including
launch of Clinigen
Consulting Services
– Customer services
–
centralised
Increased client
penetration
–
Increased number
of exclusive supply
agreements
– Customer services
–
centralised
Increased pipeline of new
products
– Building scale in Asia
–
Increased portfolio of
licensed and unlicensed
drugs
– Gaining benefits from
leveraging Group client
base and procurement
capability
1 AAA is the Africa, Australia and Asia region
2 Newer products refers to Ethyol, Cardioxane, and Savene
– Newer products2
collectively increased
gross profits by over 30%
– Newer products now
represent 36% of
divisional gross profit
(2015: 30%)
– Acquisition of Totect
expands Dexrazoxane
portfolio into the US
– Development of Foscavir
bag line extension
– Strategic alliance formed
with Cumberland
Pharmaceuticals in the US
HOW DID WE PERFORM IN THIS YEAR? WHAT WAS THE MARKET BACKDROP?
ADJUSTED GROSS PROFIT
(£m)1
ADJUSTED EBITDA
(£m)1
£102.1m
£56.0m
2015: £53.7m
2015: £32.3 m
ADJUSTED BASIC EARNINGS
PER SHARE (PENCE)1
DIVIDEND PER SHARE
(PENCE)
35.0p
2015: 28.0 p
4.0p
2015: 3.4 p
1 The adjusted results exclude share-based payment costs, amortisation,
non-underlying costs and include the 50% share of the unaudited results from
the joint venture in South Africa
02
In each of the three markets in which we operate,
conditions and trends continue to be favourable with
increased demand for a global specialist service provider.
Clinical trials
Trend to outsource
continues, clients
increasingly wanting a global
solution, regulatory
environment becoming
more complex, comparator
drugs increasingly used over
placebos, and growth
in investigator initiated
trials ('IITs').
Unlicensed
Growth in emerging
pharmaceutical markets,
increased threat from
counterfeit products, rising
demand for Real World
('RW') data and increased
patient advocacy.
Licensed
Increased scrutiny on price
of drugs has led to
pharmaceutical companies
wanting to divest to trusted
partners.
Clinigen Group plc Annual Report and Accounts 2016 STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
WHAT IS OUR INVESTMENT CASE?
Clinigen is unique in offering access to medicines at all
stages of the pharmaceutical product life cycle from clinical
trials and managing early access programmes through to
mature products towards the end of their life cycle.
UNIQUE COMBINATION
OF BUSINESSES
E X T EN D I N G ACROS S
PH A RM ACEU T I C A L
PRO D U CT L I FE CYCL E
W I T H CL E A R SY N ERG I E S
MARKET-LEADING
POSITIONS
#1 I N CTS , M A N AG ED
ACCE S S A N D G LO BA L
ACCE S S
SIGNIFICANT LONG-TERM
GROWTH POTENTIAL
BOT H O RGA N I C
A N D ACQ U ISI T I O N A L
G ROW T H O PPO RT U N I T Y
HIGHLY CASH
GENERATIVE
W I T H ST RO N G COST
CO N T RO L
#1
UNPARALLELED
KNOWLEDGE AND
EXPERTISE
I N SU PPLY O F
U N L I CENSED M ED I CI N E S
GLOBAL CAPABILITY
SU PPLY I N G I N TO
113 CO U N T R I E S
TRUSTED ETHICAL
SUPPLIER
D EEP R EL AT I O NSH I PS
W I T H PH YSI CI A NS A N D
B I G PH A RM A
EXPERIENCED
MANAGEMENT
TEAM
D EL I V ER I N G T R ACK
R ECO R D O F G ROW T H
WHAT ARE OUR BUSINESS
SYNERGIES?
WHAT ARE OUR STRATEGIC
PRIORITIES?
Our unique business model and our ability to operate
across all three stages of the product life cycle bring
key benefits maximising value for the Group.
Delivering the right medicine, to the right patient,
at the right time.
1
2
3
4
Centralised customer service department is
scalable, efficient and cost effective
Superior regulatory, pharmacovigilance
and quality management knowledge required in
Specialty Pharmaceuticals provides competitive
advantage in services divisions
Unparalleled knowledge of the complex global
supply chain environment for both licensed and
unlicensed products provides strong distribution
capabilities and synergies
Broad and embedded relationships with
pharmaceutical companies and pharmacists
provide cross-selling opportunities
1 World-class customer service every time
2
3
4
5
Become the “go to” global leader in ethical
access to unlicensed medicines
Increase our profile with customers and
opinion leaders
Upgrade technology platform
Extend global footprint into remaining
key markets
03
OVERVIEWClinigen Group plc Annual Report and Accounts 2016 BUSINESS MODEL
Trusted global leaders
in access to medicines
CLINICAL TRIAL SUPPLY
UNLICENSED
PHARMACEUTICAL COMPANIES
HOSPITAL PHARMACISTS AND KEY OPINION LE ADERS
19%
26%
14%
Supply and management of
quality assured comparator
drugs co-therapies and
services to all phases of clinical
trials as well as Investigator
Initiated Trials (IITs).
Market leader in exclusive access to
pre-licensed innovative medicines
with high unmet medical need
through ethical and trusted
regulatory compliant solutions for
over 100 innovative medicines.
On-demand access of over
1,500 product lines, for hospital
pharmacists, where these
medicines are unlicensed at
the patients 'point of care'.
Other value added services include ancillary
supply sourcing, Direct to Site logistics (DS)
and Demand Driven and Delivery (DDLD),
providing solutions to complex challenges.
Through strategic services, identifies
global usage patterns and provides Real
World (RW) data to ensure products
are ready for commercial launch.
Our local experience and global regulatory
expertise enable us to offer a solution to
pharmacists and physicians to provide both
regularly required and one-off, urgent and
often critical unlicensed medicines, through
trusted, fully audited, supply routes.
•
•
•
•
Innovative new medicines
Similar distribution and user
patterns, IITs and Managed Access
programmes
Utilising relabelling capabilities
RW data capture opportunities
•
•
Demand for Real World (RW) data
and exclusive supply agreements
help extend products beyond pre-
launch/innovative medicines to
‘point of care’ access
GA exclusive supply offers
alternative managed access to
products commercially launched in
restricted markets
U N DE RPI N N E D BY OPE R ATI ONAL SE RVI CE S CUSTOM ER SERV I CE S/Q UA LIT Y/REGU L ATORY
LOG ISTI C S/SA LE S & M A RK ETI N G/SYSTEMS/FI N A N CE
04
Clinigen Group plc Annual Report and Accounts 2016
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
There are only three ways for a patient to ethically access a
medicine: through clinical trials, unlicensed or licensed supply.
Our unique business model allows us to manage access to all
three routes worldwide. We add insight, expertise and value at
every stage of the product life cycle.
UNLICENSED
LICENSED
HOSPITAL PHARMACISTS AND KEY OPINION LE ADERS
Product Life Cycle
Customer Groups
Business Divisions
10%
31%
Share of Gross Profit
Local point of care and
exclusive access to unlicensed,
licensed and branded generic
medicines in the AAA1 region.
With over 100 local market licences in
the AAA region and branded generic
antiretroviral & chronic & acute care
products in Southern Africa.
Acquires global and regional
rights and revitalises hospital
only and critical care medicines
benefiting from the ability to utilise
unlicensed supply services enabled
by our unique business model.
Product revitalisation is driven by
comprehensive logistical, regulatory and
global market intelligence expertise.
A product portfolio of five wholly and owned
global licenses has been strengthened
by the 100+ locally licensed branded
generics from Link Healthcare.
Synergies
• Unlicensed: Leverage infrastructure
in AAA to strengthen GA unlicensed
supply model
• Licensed: Internationalise local
licensed products
• Utilise infrastructure to control own
supply of SP portfolio
1 AAA is the Africa, Australia and Asia region
U N DE RPI N N E D BY OPE R ATI ONAL SE RVI CE S CUSTOM ER SERV I CE S/Q UA LIT Y/REGU L ATORY
LOG ISTI C S/SA LE S & M A RK ETI N G/SYSTEMS/FI N A N CE
05
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016
MARKET OVERVIEW
Connecting our markets
The unlicensed market in which the Group operates can be split into three areas, clinical trial supply,
Managed Access programmes and global ‘point of care’ access. We are market leaders in each of the
markets we operate with a strategic priority of being recognised as the “go to” global market leader in
ethical access to unlicensed medicines.
COUNTERFEIT MEDICINES
Counterfeit or sub-standard medicines are
becoming increasing prevalent. In March
2016 Clinigen became a full member of
the European Alliance for Access to Safe
Medicines (EAASM) and Alliance for Safe
Online Pharmacy in the EU (ASOP EU), two
key European alliances in the fight to protect
patients from the threat of counterfeit drugs.
A key focus in tackling the threat is educating
patients and healthcare professionals of
the dangers of internet pharmacies. Some
estimates indicate that the global threat
of counterfeit pharmaceutical drugs is up
to $75bn, a 90% rise in five years3. Often,
the pharmacies appear legitimate but
are often unethical, selling substandard,
falsified or counterfeit medicines and drugs
that are untested and unapproved or even
banned. Many products don’t require a
prescription to supply a prescription-only
drug and can be dangerous and pose a
serious health risk if self-prescribed.
Access to unlicensed medicines, which
include drugs that have received regulatory
approval but may not be available in a
patient’s own country, can help to meet
this unmet need. Clinigen is dedicated
to providing an ethical, compliant route
for healthcare professionals to source
medicines, meeting this need through
its Idis Global Access division. We
manage our supply chain closely and
guard against the risk of counterfeit
products reaching the patient.
80%1
WORLD’S POPULATION THAT HAVE
LOW OR NON-EXISTENT ACCESS
TO MEDICINES
30%2
GLOBAL PHARMACEUTICAL MARKET
SPEND IN EMERGING PHARMACEUTICAL
MARKETS
$75bn3
GLOBAL THREAT OF COUNTERFEIT
PHARMACEUTICAL DRUGS
REAL WORLD DATA
There is increased demand for data within
the pharmaceutical industry about patients’
use of medicines in a realistic healthcare
setting, otherwise known as Real World
(RW) data. The adoption of new medicines
is increasingly reliant on evidence based
criteria. Traditional randomised clinical
trials, which for a long time were seen as
the best method of obtaining clinical data,
now are considered to have limitations.
The capture of RW data is beginning to
become significant in the approval and
adoption of medicines. Demand for RW
data is universal with many countries now
realising its importance. The gathering of
RW data plays a significant role in ensuring
patients have ethical access to innovative
medicines, a key strategic priority for
Clinigen. As a response to this market trend,
the Group has developed the Clinigen
Consulting Services offering within its Idis
Managed Access division. This offering
advises the pharmaceutical industry on
policy and is important to future growth.
ACCESS TO MEDICINES
There is a high and ever increasing global
unmet need for ethical supply of good
quality unlicensed medicines from a trusted
source. 80% of the world’s population, an
estimated 5.5bn people, have low or non-
existent access to medicines1. Population
growth, an increasingly elderly population,
growing incidences of chronic diseases,
increasing patient knowledge, and concerns
around counterfeit medicines are all driving
increasing demand for quality medicines
which are unlicensed at the ‘point of care’.
Clinigen is the only company to provide
global access to medicines across all three
routes available to a patient, through clinical
trials, unlicensed or licensed supply. Each
market has unique market drivers and
barriers to entry. However a common theme
that exists in all the markets in which we
operate is the relatively high growth rate and
the increasing demand for a global solution.
EMERGING PHARMACEUTICAL
MARKETS
As many economies become wealthier,
populations increase and awareness of
available healthcare improves, there is a
significant growth opportunity in emerging
markets. By 2010 healthcare spending in
emerging markets had overtaken that of the
EU5 (Germany, France, Italy, Spain and the
UK) with spending expected to amount to
30% of the global pharmaceutical market
by the end of 2016 (20% in 2011)2. Due to
the complexity, particularly regulatory, of
the diverse infrastructure, the approach in
commercialising such opportunities require
a niche and specialist service provider. The
acquisition of Link in October 2015 has
provided the Group with access to a wider
customer base and an increased global
reach enabling more efficient distribution to
healthcare professionals in the AAA region.
We supply a global reach with local expertise
and have a track record of excellence through
understanding of complex regulatory
environments and specialist knowledge.
06
Clinigen Group plc Annual Report and Accounts 2016 CLINICAL TRIAL SUPPLY
Managed by our Clinigen Clinical Trial Services
division.
UNLICENSED
Covers exclusive Managed Access
programmes managed by Idis Managed Access
and the ethical on-demand unlicensed supply
managed by Idis Global Access and
Link Healthcare.
LICENSED
Managed by our Clinigen Specialty
Pharmaceuticals and Link Healthcare
divisions.
MARKET DRIVERS
– Trend is to outsource
clinical trials
– Comparator drugs
increasingly used over
placebos
DIFFERENTIATORS
– Deep well-established
relationship with
pharmaceutical companies
– Global supply chain and
distribution network
– Increase in more expensive
biologic/biosimilar drugs
– Growth in IITs
– Clients increasingly requiring
– Certify product is authentic
– Superior pharmacovigilance
and quality management
knowledge
a global solution
– Deep understanding of
complexity of regulatory
environment
– Expanded services and IIT
offering
MARKET SIZE
$1.5bn – $2.5bn
MARKET DRIVERS
– Structural growth in
emerging pharmaceutical
markets
– Increased role of patient
advocacy groups
demanding best treatments
– Demand for RW data
– Geography specific drug
shortages
– Increase in counterfeit
products
DIFFERENTIATORS
– Broad and embedded
relationships with
pharmaceutical companies
and pharmacists
– Focus on mature, hospital
only products
– Certify product for
authenticity
– Deep understanding of
complexity of regulatory
environment
– Clients increasingly requiring
– Centralised customer
a global solution
services
MARKET SIZE
$5.0bn – $10.0bn
MARKET DRIVERS
– Mature product divestment
by large Pharmaceutical
companies
– Clients increasingly requiring
a global solution
DIFFERENTIATORS
– Broad and embedded
relationships with
pharmaceutical companies
– Local market knowledge
– Global supply chain and
distribution network
– Not reliant on sales force
– Revitalisation capability
SP PRODUCT PORTFOLIO
LOCAL MARKETED LICENSES
5
>100
1 http://www.talkingdrugs.org/dying-for-relief-access-to-pain-medication-and-suicide-in-russia 24 April 2015
2 http://www.strategyand.pwc.com/media/file/Strategyand_Pharma-Emerging-Markets-2.0.pdf
3 http://safeonlinerx.com/wp-content/uploads/2016/02/Key-Facts-and-Patient-Harms-02-2016.pdf
07
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CHAIRMAN’S STATEMENT
Integration of acquisitions completes
transformation of the Group
“The acquisition and integration of Idis and Link
Healthcare have transformed the Group over
the last 18 months.”
PETER ALLEN
Non-Executive Chairman
1 The adjusted results exclude share based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results from the Joint Venture in
South Africa
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken from i) 12 monthly management information for Clinigen and Idis,
and ii) for Link Healthcare, the eight months ended 30 June 2016 and for the eight months ended 30 June 2015. The pro forma calculation has also removed the effect of the
termination of the Global Access low margin contract in November 2015
THE CLINIGEN FOUNDATIONS
% OF THE WORLD’S
POPULATION WHICH HAS
LOW OR NON-EXISTENT
ACCESS TO MEDICINES 1
WAYS TO GET A DRUG
INTO A HUMAN SUBJECT
THOUGHT LEADERSHIP
DRIVES OUR BUSINESS
GLOBAL COVERAGE,
LOCAL KNOWLEDGE
80%
3
OUR GUIDING PRINCIPLES
Our mission is to be the trusted global provider of access to medicines,
delivering the right medicine, to the right patient, at the right time.
1 http://www.talkingdrugs.org/dying-for-relief-access-to-pain-medication-and-suicide-in-russia 24 April 2015
08
Clinigen Group plc Annual Report and Accounts 2016 It is four years since our IPO and I am pleased
to report on another strong year delivering
on our promises for growth, further new
products and corporate acquisitions.
to show strong and positive market
dynamics. We are confident that there are
new and immature parts of the market
that Clinigen is best placed to develop.
One of the reasons Clinigen has grown
rapidly since inception is its talented people;
their professionalism and expertise has
enabled us to become market leaders with
an ethical offering focused on global access
to medicines. Being global leaders we are
able to raise the standards, offering excellent
quality control and customer services. We
also recognise that adding new talent is
an important part of growth particularly
when integrating large acquisitions.
We announced on 28 September that Peter
George will be retiring as CEO at the AGM on
11 November, but will remain on the Board
as a non-executive director. On behalf of the
Group, we thank Peter for doing a tremendous
job developing and growing Clinigen over the
last six years. He built the business from a small
private company to its current position as a
leading global pharmaceutical products and
services business with a market capitalisation
of some £750m. He led the listing four years
ago, the first in the sector for five years,
and the two substantial transformational
acquisitions over the last 18 months.
Shaun Chilton, who joined Clinigen in
January 2012 and, as part of our succession
planning, was promoted to Deputy CEO
in July 2015, will take over as CEO. Shaun
has been instrumental in the development
and success of the Group over the last four
years, and alongside Peter, has played a
key part in formulating and executing the
Group strategy. The business has more
opportunities ahead of it now than ever
before and I and the Board are confident that
Shaun is the right individual to take the Group
onto the next stage of its development.
Robin Sibson will also retire as a Non-
Executive Director to focus on his charitable
interests. Robin joined over 12 years ago
as one of the original team in the business
which evolved into Clinigen. He has played
an important role in the development and
success of the Group both in his former
capacity as CFO and more recently as
a non-executive director. The Board
would like to thank him for his services
and wishes him well for the future.
During the past 18 months, the wider
management team has been strengthened
with a new CFO, Medical, Commercial and
Operations Officers coming on board.
This has enabled the Group to manage
the integration of the acquisitions whilst
maintaining a focus on organic growth.
These changes are intended to prepare the
Group for the next stage in its development.
We recognise that Clinigen is one of the
largest companies on AIM and we are
committed therefore, as far as is reasonably
practicable, to ensure the Group is managed
in accordance with the principles set out in
the UK Corporate Governance Code. The
Board believes that effective corporate
governance will assist in the delivery of
our corporate strategy, the generation of
shareholder value and the safeguarding
of shareholders’ long-term interests.
We thank all our stakeholders –
customers, suppliers, employees and
shareholders – whose continued support
has contributed to our success.
PETER ALLEN
Non-Executive Chairman
27 September 2016
Overall the Group has performed very well.
Reported revenue increased by 84% and
reported gross profit increased by 79%. Pro
forma2 adjusted EBITDA1 growth, the best
measure of organic profit growth, increased
by 10%, with Clinical Trial Services and
Specialty Pharma the strongest performers.
I am particularly pleased that the Group has
also achieved an excellent cash flow
performance reducing net debt by £8.1m to
£68.1m despite spending £28.5m on the initial
cash consideration for the Link and product
acquisitions during the year.
The Directors have maintained a
progressive dividend policy. Subject to
approval at the AGM on 11 November
2016, the Board proposes to pay a final
dividend of 2.7p. Together with the interim
dividend of 1.3p paid in April, this makes a
combined dividend of 4.0p, representing
an increase of 18% versus last year.
Clinigen has come a long way since
its inception six years ago and since
joining AIM in September 2012. We have
delivered strong shareholder returns
with more than a five-fold uplift in market
cap over the four years. This year marks
the completion of the transformation
of the Group as a result of acquisitions
and integrations: the integration of Idis,
the acquisition of Link, the US strategic
alliance with Cumberland Pharmaceuticals,
and the additions of the new product
Totect and Foscavir bag line extension
have all played their part in driving this.
The markets which Clinigen focuses on,
clinical trials, unlicensed medicines and
niche licensed hospital medicines continue
CLINIGEN'S DEVELOPMENT
2010-
2016
2012
2010
– Clinigen Group formed by Peter George
– Acquires its first product, Foscavir
2011
– Recognised as the fastest-growing
private company in the UK by the
Sunday Times Virgin Fast Track 100
2013
2014
– Lists on the AIM of the London Stock
Exchange – the first UK healthcare
company to list in London in five years
– Wins Best Newcomer at the London
– Extends headquarters in Burton-on-
Stock Exchange AIM Awards
Trent, UK
– Acquires its second product, Cardioxane
– Acquires its third product, Savene and
2015
– Acquires Idis in April 2015 to
become the global leader in
providing ethical compliant
access to unlicensed medicines
– Acquires Link Healthcare in October
2015 to expand its ability to provide
access to medicines for patients in the
Africa, Australia and Asia region
fourth product, Ethyol
2016
– Acquires it fifth product, Totect, and
Foscavir bag line extension
09
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CHIEF EXECUTIVE OFFICER’S STATEMENT
Building the platform
for future growth
PETER GEORGE
Chief Executive Officer
“The integration of Idis and Link Healthcare has
transformed the Group, achieving our ambition of
becoming the global market leader in the management
and supply of both unlicensed and clinical trial medicines.”
A transformed Group - a description we
are making a lot in this report, however,
I believe it is well founded. The acquisitions
in the past 18 months have more than
doubled the revenue and profit of the
business and expanded the business from
120 people based in Burton and Philadelphia
to over 500 staff based in 11 strategically
important locations around the world.
the market, an unmet clinical and patient
need, so we started delivering the right
medicine to the right patient at the right
time. With only three ways to get a medicine
into a human subject: in a clinical trial, as
a licensed product, or if it is not licensed
at the ‘point of care’, as an unlicensed
medicine, we structured our business
model to support these three ways.
The purpose of this rapid expansion has
been to achieve our strategic objectives
of being the global leader in clinical trial
and unlicensed medicines access, and to
develop a global footprint that enabled and
supported these positions, as well as the
distribution of our own revitalised medicines
portfolio. I am pleased with the progress
we have made, and in particular, in how well
the Idis and Link Healthcare businesses
have fitted into the Clinigen Group.
The business started with the aim of
improving medicines access to the
estimated 5.5 billion people worldwide
who have limited or no access to the best
medicines they need to treat their disease
at the ‘point of care’. There was a gap in
Just over six years later, these founding
principles remain the same and so does our
focus. When we look at the growth of the
business since it was founded, it is clear this
strategy is working and what is more exciting,
is that the opportunity to further develop
these markets continues to be strong.
2016 OVERVIEW OF RESULTS
Alongside the significant strategic
progress in the year and the integration
of the acquisitions, Clinigen has delivered
a strong financial performance.
Reported gross profit increased 79%,
indicating the step change in scale
following the acquisitions of Idis in April
2015 and Link Healthcare (‘Link’) in
10
Clinigen Group plc Annual Report and Accounts 2016 October 2015. Adjusted gross profit1 on
a pro forma basis2, viewed as the best
indicator of organic growth, was up 7%.
Clinical Trials. In FY16 Clinigen CTS signed an
exclusive contract with Baxter for the supply
of all its ancillary products into Clinical Trials.
Key highlights include another outstanding
year for Clinical Trial Services (CTS),
increasing gross profits by 21% on a
pro forma basis, and excellent growth
by the newer Specialty Pharmaceutical
(SP) products (Ethyol, Cardioxane and
Savene), which collectively increased
their gross profits by 31%.
Adjusted EBITDA increased by 73% to
£56.0m, and on a pro forma basis, adjusted
EBITDA increased by 10% representing
good organic growth against the backdrop
of the acquisition and integration activity.
The combination of organic growth and the
acquisitions has led to a 25% increase in
EPS to 35.0p (2015: 28.0p). Reported EPS
increased by 83% to 11.9p (2015: 6.5p).
ACQUISITIONS AND INTEGRATION
The two acquisitions of Idis and Link and the
introduction of new service offerings has
enabled the Group to extract cross-selling
opportunities and synergies across all of the
divisions. There is now a full flow through
the business and a clear link from CTS right
through to SP, with each division tying into
the next and offering growth potential.
IITs, Direct to Site (DS) logistics and Demand
Driven Labelling and Delivery, are all new
service offerings within CTS which start
demonstrating these synergies, bringing
a closer relationship with Managed Access
programmes (MAPs). Fundamentally, IITs
and MAPs are very similar, both targeting
innovative new medicines, with similar
distribution and user patterns, as well as
both utilising repacking and relabelling
capabilities already available within MAPs.
Further synergies are being found
through the exclusive supply agreements
developing in Global Access (GA). These
are for markets where a medicine will not
be licensed and extends the managed
access model beyond the pre-launch and
‘innovative new drug’ phase into the ‘point
of care’ access. GA has already signed five
such agreements and expects to close
more in FY17. These exclusive supply
agreements are an important initiative to
drive brand recognition and encourage
more hospital pharmacists to use GA.
The acquisition of Link, and to a lesser
extent our strategic partnership with
Cumberland Pharmaceuticals, has enabled
us to take control of our own licensed
products in more markets, resulting in
the cancellation of other distribution
agreements in US, Japan, Australia, New
Zealand, Southern Africa and Singapore.
In addition, Link brings more than 100
actively marketed licensed products to
the Group. When an unlicensed medicine
in the Africa, Australia and Asia region
shows high usage or an imported medicine
is repeatedly in short supply, then taking
it through to license or manufacturing a
generic may be the best solution. Most
are single market licenses and some are
either multiple market products or have the
potential to be. Link supplies either branded
or generic products depending on the
maturity and value of the market. This is an
example of where synergies exist between
GA, Link and SP, and during calendar year
2016, through Link, the Group has licensed
or made application to license 10 of these
types of medicines in six markets.
One of our strategic goals discussed in last
year’s Annual Report was to grow these
additional new services of IITs and DS supply.
These services now account for 6% of CTS
gross profit in FY16. We also discussed
developing an improved supply of ancillary
products which are a key component of
The Group’s new ability to offer this
commercial solution across its footprint of
North America, EMEA, Asia and Australasia
has made it an attractive solution to
many of our customers. We expect to see
continued growth in these types of exclusive
or local license supply agreements.
The synergies highlighted above illustrate
that the post-acquisition integration
is substantially complete. Whilst the
above are just some examples, it shows
strong cross-divisional synergies are
being achieved and there are more in
development. In addition, the Group is
at advanced stages of centralising HR,
finance, logistics, quality, regulatory
and medical support functions. The
centralisation of customer services across
the divisions has already been completed.
TECHNOLOGY
The remaining integration projects are IT
and e-commerce related. The introduction
of Oracle based Enterprise Resource
Planning ('ERP') software is expected to
substantially complete in calendar year
2017. This will make the business more
efficient and scalable, standardising
many processes across the Group, and
support e-commerce solutions.
PRODUCTS
During FY16, the Group added to its
Specialty Pharmaceutical portfolio. The
Totect acquisition completed the Group’s
global Dexrazoxane offering which together
with work being undertaken to resolve
Article 31 is important in the revitalisation
of this portfolio. The strategic alliance
with Cumberland Pharmaceuticals
will gather pace in FY17 with Ethyol
transferred to them in May 2016.
In addition we announced the extension to
the Foscavir brand, with the development
of the Foscavir bag line extension. It is our
belief that this will extend the life cycle of the
product and is a further hurdle to competitor
activity. Product line extension was one
of the areas of product revitalisation that
Clinigen had not previously demonstrated.
The Group continues to identify and
bid for further global assets. The Link
business is also developing a number of
our own branded generic products to be
launched in local markets where shortage
of supply or unmet demand warrants.
1 The adjusted results exclude share-based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results from the Joint Venture in
South Africa
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken from i) 12 monthly management information for Clinigen and Idis, and
ii) for Link Healthcare, the eight months ended 30 June 2016 and for the eight months ended 30 June 2015. The pro forma calculation has also removed the effect of the termination
of the Global Access low margin contract in November 2015
11
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 as a non-executive director. It has been a
pleasure and privilege to create and lead
Clinigen over the last six years with the IPO,
strong organic growth and the two recent
transformational acquisitions being the
highlights. I would like to thank all of the
Group’s employees around the world - we
have been only able to create this substantial
business thanks to their hard work and
commitment. I would also like to thank Shaun
for his invaluable input and I look forward
to supporting him as he takes the business
to the next stage in its development.
PETER GEORGE
Chief Executive Officer
27 September 2016
CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED
KEY PERFORMANCE INDICATORS
The Group has maintained constant
growth through the development of
strong business plans and very clear,
achievable and measured objectives;
Key Performance Indicators ('KPIs'). This
principle is also being implanted into the
Idis and Link business cultures and for
them, as historically for Clinigen, KPIs will
be monitored monthly right through to
their completion, underpinning a 'can do'
culture and driving strong future growth.
Whilst the Group has a strong relationship
with its customers and key opinion leaders,
we believe this profile can be increased
further. Becoming the global 'go to' brand
for hospital pharmacists is a target, but we
can broaden and deepen our relationships
with pharmaceutical customers too.
This will happen in FY17 with a joined up
Group business development process,
ensuring both key accounts and key target
customers are managed globally across
all divisions. This central resource will also
look to extend our global footprint into
remaining key markets where a direct
Clinigen presence may benefit the business.
Strategically the Group sees technology
as an enabler for the business and two
initiatives are under way. The implementation
of ClinigenOne, the Group's Oracle based
ERP system is business critical and as such
is being done in conjunction with Oracle
Consulting Services; this is expected to be
substantially complete during calendar year
2017. In addition the Group is developing
the Clinigen Intelligence Database ('CID'),
which is essentially Clinigen’s intellectual
property of country by country, medicine
by medicine, import, shipping and customs
requirements; this is also a key enabler in
providing world-class customer services.
What measures do we use to ensure we
have achieved or are on our way to achieving
our KPIs? The obvious key metrics are
financial and these essentially remain
the same as last year. As we have stated
previously, revenue is not a good measure,
as two of the largest divisions CTS and MA
have revenue lines that are not reflective
of performance. Adjusted gross profit
and adjusted EBITDA are viewed as the
best measures of financial performance,
together providing the best insight into top
line and profit growth. In addition working
capital as a percentage of revenue is used
to measure the efficient use of cash.
Non-financial KPIs are often harder to
measure. However our first one is simple and
hasn’t changed since IPO: the acquisition
and revitalisation of new products. What has
changed since that time is that the process
can not only be through the acquisition
of global or regional rights, as has always
been the case with Clinigen, but now it
can be through the development of local
products and licenses as with Link, and
both methods will be targets for FY17.
Becoming the global “go to” provider of
unlicensed medicines and building scale in
unlicensed supply is harder to demonstrate
and measure, but we feel there are a
number of meaningful metrics that will
demonstrate progress: (i) the number of
exclusive supply agreements in GA (ii) the
development of the IT/digital platform
particularly the e-commerce solution, and
(iii) evidence of promotional and educational
meetings and material targeting hospital
pharmacists such as a ‘point of care’ journal.
The final KPI relates to gaining market
share through the expansion of Clinigen’s
customer base, particularly the number
of active hospital pharmacists.
After continuing to hit strategic goals
and delivering strong growth year on year
for the four years since our IPO, we have
demonstrated that we keep our promises.
We work hard as a management team to
stay focused on delivering great shareholder
returns and value for all of our stakeholders.
CHANGE IN CEO
I will be retiring as CEO at the AGM on
11 November, but will remain on the Board
12
Clinigen Group plc Annual Report and Accounts 2016 Key performance indicators
The Board utilises a number of KPIs to enable a consistent method of analysing performance, in
addition to allowing the Directors to benchmark performance against similar businesses and the
Group’s business plan. The KPIs utilised by the Board can be split into both key financial performance
and non-financial performance indicators.
FINANCIAL
ADJUSTED GROSS PROFIT (£M)1
ADJUSTED EBITDA1
WORKING CAPITAL AS % OF REVENUE
90%
16
15
14
13
53.7
41.2
35.1
102.1
73%
32.3
26.8
22.4
16
15
14
13
56.0
(1)%
(6)%
16
15
14
13
5%
1%
Measures the profit achieved on sales after taking
account of cost of goods, selling and distribution
costs. This is viewed as the main measure of top
line growth.
Adjusted gross profit1 increased 90%, and on a
pro forma basis2, viewed as the best indicator of
organic growth, was up 7%in the year.
Measures the profit achieved on sales after taking
account of the direct costs and overheads but
before interest, depreciation, amortisation and
non-underlying costs as defined in note 6, see
page 61.
The Group achieved an underlying EBITDA for the
year of £56.0m representing a 73% increase on the
prior year. On a pro forma basis2, viewed as the
best indicator of organic growth, EBITDA
increased by 10%.
Effective working capital management is a key focus
for the Group. This includes managing stock levels,
debtor days and creditor payment terms. In the last
two years the Group has had a negative net working
capital position as at 30 June, indicating efficient
use of cash.
NON-FINANCIAL
ACQUISITION AND REVITALISATION OF
NEW PRODUCTS
TO BECOME THE GLOBAL “GO TO”
PROVIDER OF UNLICENSED AND SHORT
SUPPLY MEDICINES
EXPANSION OF CUSTOMER BASE
Acquiring new products and revitalising them is a
core part of the Group’s strategy. This year the
Group’s first product, Foscavir, achieved 5% growth
in in-market sales. The newer products, Ethyol,
Cardioxane and Savene collectively increased gross
profit by more than 30%. During the year, the Group
acquired a new product, Totect, and developed the
Foscavir bag line extension.
Building scale in the unlicensed market,
demonstrated by:
i) number of exclusive supply agreements in GA
ii) development of the IT/digital platform
particularly the e-commerce solution
iii) evidence of promotional and educational
meetings and material targeting hospital
pharmacists such as a ‘point of care’ journal/
partnerships with EAASM and ASOP
As referred to in the Operational Review,
Clinigen CTS and Idis MA have expanded their
customer base during the year. In addition,
Idis GA introduces new customers to the Group.
Opportunities of utilising the expanded customer
base across the five operating businesses will be
reviewed in FY17.
5 PRODUCTS
5 EXCLUSIVE GLOBAL ACCESS SUPPLY
AGREEMENTS
>6,000 CUSTOMERS
1 The adjusted results exclude share-based payment costs, amortisation, non-underlying costs and include the 50% share of the unaudited results from the Joint Venture in South Africa
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken from i) 12 monthly management information for Clinigen and Idis, and
ii) for Link Healthcare, the eight months ended 30 June 2016 and for the eight months ended 30 June 2015. The pro forma calculation has also removed the effect of the termination
of the Global Access low margin contract in November 2015
13
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 STRATEGY IN ACTION
Product
revitalisation
Product revitalisation is a key factor
in driving growth in the Specialty
Pharmaceutical division and has
been, since Clinigen was formed
in 2010, contributing significantly
to the success of the Group.
WHAT IS REVITALISATION?
The pharmaceutical industry has evolved over the last few
decades from one dominated by blockbuster products to one
that has seen the rise of Biologics and personalised medicine.
This has resulted in many drugs falling out of favour with both
medical practitioners and manufacturers who do not see a long
VALUE CHAIN PATHWAY
term benefit in maintaining an older product in multiple markets
that has increasing regulatory costs, often with declining sales.
This has led to some diseases, orphan indications and niche
therapeutic areas, being deprived of medications that still have a
medical benefit, creating an ‘unmet need’. This gap has often been
unintentionally created by the industry itself and creates the
revitalisation opportunity. Clinigen has always focused on fulfilling
this unmet need through acquiring and revitalising niche hospital-
only medicines.
It is our mission to identify and acquire specialist, niche medicines
that do not fit the standard portfolios of larger pharmaceutical
manufacturers. These products may have been neglected in the
markets in which they are licensed or received a lack of medical or
marketing support in either existing or new locations. Frequently
they have gone into shortage of supply and are no longer easily
available. Importantly, with our expertise and global capabilities we
ensure that patients not currently benefiting from these medicines
can do so in the future by ensuring they stay on the market.
All potential products are assessed in terms of an eight step 'Value
Chain Pathway' illustrated below with different products leveraging all
or some of the levers of revitalisation.
IDENTIFICATION
REGULATORY
GEOGRAPHICAL
COVERAGE
SALES &
PROMOTION
MARKETING
PRICING
SUPPLY CHAIN
MANAGEMENT
DISTRIBUTION
CASE STUDY
Foscavir
Foscavir was acquired in 2010 from
AstraZeneca at a time when it was
a declining product with little added
value in the AstraZeneca portfolio.
At the time of the purchase, it was
commercialised as a product for use
in the treatment of Cytomegalovirus
('CMV') retinitis in an HIV/AIDS setting.
Our analysis allowed us to see the potential for the treatment of
CMV in other immune-suppressed diseases such as bone marrow
or solid organ transplants. The product was being used in these
therapies in many geographies ‘off-label’, but in other territories
it kept going into shortage of supply. Therefore, to leverage the
full potential of the product, we had to support the Key Opinion
Leader ('KOL') community who saw its value in these new disease
areas. We added bone marrow transplant to the license label in
numerous markets and we promised KOLs that we would not
allow it to go into shortage of supply. As a result, it is now included
in treatment protocols for viral infections in transplantation.
Furthermore, as bone marrow transplants became more
prevalent, the product was required in a lot of territories
where it was not previously commercially available. Clinigen
was able to facilitate its supply through either licensing it
in new territories, such as the US, or through our expertise
in unlicensed supply. In five years Clinigen has been able
to turn Foscavir from a £5m revenue declining asset, into
a product that now generates over £20m per annum.
The story does not end there, as revitalisation is an ongoing
process and we are currently working with partners on several
clinical studies including a human herpesvirus 6 ('HHV6') study in
Japan and have also acquired a new delivery system for Foscavir
in bags as opposed to bottles giving many advantages to the
end user. These new developments, alongside the continued
growth in the bone marrow and solid organ transplant markets,
is expected to continue to drive demand for Foscavir.
Foscavir revitalisation has given us the skill set to successfully
identify and revitalise our other assets and we are already seeing
good results from our work with Ethyol, Savene and Cardioxane.
In addition, with our acquisition of Link and strategic partnership
with Cumberland Pharmaceuticals in the US, we now have the
ability to control more of the value chain. In Japan, we have just
established our own licensed affiliate and will be transferring our
assets into our name in what is the world’s second largest market.
In the US, we have entered a commercialisation agreement for
Ethyol, the first product Clinigen has licensed to Cumberland
Pharmaceuticals under the strategic alliance entered into late last
year. We are confident that, along with our revitalisation strategy
and extended global footprint, we can achieve good growth within
the Specialty Pharmaceutical division.
We are proud of our proven track record of growing the use
of our medicines through improved access and awareness
worldwide and the Specialty Pharmaceutical division will continue
to be a core contributor to the overall success of Clinigen.
14
Clinigen Group plc Annual Report and Accounts 2016 SPECIALTY
PHARMACEUTICAL
PORTFOLIO:
1. FOSCAVIR
2. CARDIOXANE
3. SAVENE
4. ETHYOL
5. TOTECT
ACQUIRED
2010
SALES INCREASE IN
SEVEN YEARS1
5X
LICENSED MARKETS
UNLICENSED MARKETS
17
25
1 Covers the period from 2009 to 2016
Beam me up Scotty, by Klari Reis
15
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CHIEF EXECUTIVE OFFICER-DESIGNATE'S STATEMENT
Operational Review
SHAUN CHILTON
Chief Executive Officer-designate
The successful integration of the Idis and Link
acquisitions completed a transformational
year for the Group. The Group is now the
global market leader in the management
and supply of unlicensed and clinical trial
medicines and has the operational
infrastructure to drive sustained organic
growth in these important, developing
markets. An important expansion into the
Africa, Australia and Asia region in particular
has opened up a new level of opportunity
at a time when many pharmaceutical and
biotechnology companies are looking for
a specialist partner to work with them
across these territories.
In addition, by striking a strategic alliance
with Cumberland Pharmaceuticals in
the US, we achieved another important
step in building out our global footprint,
establishing a presence in a key market
for maximising the commercial potential
of our own products. In keeping with our
mission of ‘right medicine, right patient, right
time’, we are now able to offer a solution
at each key stage of a pharmaceutical
product life cycle and, critically important
for the future, we have the ability to harness
global expertise with local knowledge
through the Idis and Link additions.
SHAUN CHILTON
Chief Executive Officer-designate
27 September 2016
16
Clinigen Group plc Annual Report and Accounts 2016 Strategic priorities
Delivering the right medicine, to the right patient, at the right time.
The Groups strategic priorities for FY17 remain
rooted in its founding principle of delivering
the right medicine, to the right patient, at
the right time. Now with our global footprint
the Group is even more capable of doing this.
We have set a goal to become the global
leader in ethical access to unlicensed
medicines. We set this goal last year, and in
reality we have probably achieved it already,
as we undoubtedly have the largest sales in
unlicensed medicines. However, we are only
scratching the surface of this, as yet,
untapped global market. Our target going
forward therefore is to take this goal to the
next level and be the recognised and trusted
“go to” solution for hospital pharmacists and
healthcare professionals for the supply of
medicines not available at the patient’s 'point
of care'.
To maintain a market leading position we
need a world class customer service, every
time. Therefore we try to instil in our people
an understanding that the patient, who is the
beneficiary of all of our products or services,
should be thought of as a friend or a family
member. If we do this we are motivated
to care more, if we care more we are all
motivated to provide outstanding customer
service and the patient and healthcare
professional receives a world-leading
customer experience. We are working hard
on bringing the Idis and Link brands to the
same levels of quality and customer care
already expected from and delivered by the
Clinigen brand, and then keeping them there.
WORLD-CLASS CUSTOMER
SERVICE EVERY TIME
BECOME THE “GO TO” GLOBAL
LEADER IN ETHICAL ACCESS
TO UNLICENSED MEDICINES
INCREASE OUR PROFILE
WITH CUSTOMERS AND
OPINION LEADERS
PROGRESS
– Implementation of a 24/7 call centre
– Consistent customer service feedback
PROGRESS
– Integration of Idis substantially
complete
PROGRESS
– Work with 20/25 ‘Big Pharma’
companies
developed
– Achieved ServiceMark accreditation
for world class customer service
– Market leader in Managed Access
– Market leader in on-demand 'point of
– Supplied to over 6,000 customers
– Work with Key Opinion Leaders (KOL)
care' unlicensed access
in select areas
2017 OBJECTIVES
– Build a Clinigen culture based on
continuous improvement
2017 OBJECTIVES
– Introduce quality seal to raise
standards
– Process alignment in operational
– Introduce e-commerce platform
2017 OBJECTIVES
– Broaden and deepen our relationships
with pharmaceutical customers
– Drive KOL engagement across
centres
for unlicensed supply
markets
– Develop 48 hour customer response
– Build the brand amongst hospital
times for all new enquiries
pharmacists
– Expand engagement with hospital
pharmacists and pharmacy groups
UPGRADE TECHNOLOGY
PLATFORM
PROGRESS
– Cliniport managing MA programmes
– Implementation of new ClinigenOne
ERP system started
– Development of e-commerce system
started
2017 OBJECTIVES
– Continue implementation of
ClinigenOne ERP
– Continue development of
e-commerce system
– Develop Clinigen Intelligence
Database (CID)
EXTEND GLOBAL FOOTPRINT
INTO REMAINING KEY
MARKETS
PROGRESS
– US strategic alliance with Cumberland
Pharmaceuticals in September 2015
– Acquisition of Link in October 2015
providing coverage in the Africa,
Australia and Asia region
– Started transfer of Foscavir registration
to our own business in Japan
2017 OBJECTIVES
– Complete transfer of Foscavir to our
own business in Japan
– Expand African footprint
– Drive growth through Asia from
Singapore hub
– Review options to upscale capability in
LATAM
17
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016
OPERATIONAL REVIEW CONTINUED
Clinigen Clinical
Trial Services
'Clinigen CTS' is the global market leader in the supply
and management of quality assured comparator
medicines and services to clinical trials. It has been
another very positive year in the growth story of the
CTS business and there are some compelling reasons
the Group expects the growth to continue.
There are some strong market dynamics
in the sector within which the Clinigen CTS
business operates: increasing demand from
regulatory and reimbursement bodies for
pharmaceutical and biotech companies to
produce new medicines that are superior
than the current standard of care; an
increase in the number of clinical trials that
require a comparator medicine to around
60% of all phase III and 30% of phase IV
clinical trials; an increase in the outsourcing
of this activity by pharmaceutical and biotech
companies who value the expertise, cost-
effectiveness and anonymity a specialist
3rd party partner provides; the rise in
development of biologics and biosimilars
along with an increase in the number of
trials run in the ‘pharmerging’ markets.
As the clinical trial process becomes ever
more complex and expensive to manage,
the regulatory requirements continue to
tighten and the use of more specialised
medicines as comparators grows, a
market estimated to be around $1.5bn,
should continue to grow at a good pace.
1 The adjusted results exclude share based payment costs, amortisation and non-underlying costs
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken
from i) 12 monthly management information for Clinigen and Idis, and ii) for Link Healthcare, the eight months
ended 30 June 2016 and for the eight months ended 30 June 2015
RESULTS FOR YEAR
ENDED 30 JUN 20161,2
PROFILE
SUPPLY AND MANAGEMENT OF QUALITY ASSURED
COMPARATOR DRUGS AND SERVICES TO CLINICAL TRIALS
£137.9m
REVENUE
Gross profit by customer
£19.7m
■ Top 10 customers ■ Other
GROSS PROFIT +21%
Units purchased by source
83%
17%
60%
25%
15%
■ Europe ■ Americas ■ Other
Numbers of clients served:
83
18
Clinigen Group plc Annual Report and Accounts 2016 The division, representing 19% of
Group gross profits, achieved another
excellent year of growth increasing gross
profits by 21% on a pro forma basis2.
This performance reflects increased
penetration into key cornerstone clients,
the winning of new clients among the world’s
largest 25 pharmaceutical companies
and the roll out of added value services
to compliment CTS’ core offering.
While the core business of Clinigen CTS
has traditionally been the global sourcing
and supply of comparator medicines, in
FY16 the Group continued to transition the
business from a ‘pure play’ supplies business
to a more specialist management partner
through the successful launch of some
complementary, value-added services.
The development and launch of these
specialist services has been driven by the
evolution of the clinical trial environment
whereby data is not just gathered from
large, randomised clinical trials but also
increasingly through smaller Investigator
Initiated Trials (IITs). It is estimated that
around 80% of the top 25 pharmaceutical
companies have a dedicated IIT
management team as companies are
realising the importance of this activity to
further understanding of their products and
the disease areas they are focused upon.
These developments in the market, along
with the increasing demands from clients
for a broader solution, have highlighted
some unmet and underserved needs
that we are now able to meet through
more specialised offerings. For example,
in addition to comparator medicines, we
also now supply ancillary products and
equipment, and local language labelling
and information to meet the local/regional
patient management requirements. In
addition we are developing a dedicated IIT
offering. In extending the service offerings
of CTS, we have opened up the opportunity
in this discrete market sector which is
estimated to be around $1bn in size.
The clinical trial services market place is
dynamic and competitive but as the global
market leader, Clinigen CTS will continue
to grow through exploiting its competitive
advantages: extensive understanding of
the complex regulatory environment, a
trusted partner with a reputation for high
quality service and the global scale of its
offerings. During FY16, the Group took
steps to increase our penetration of key,
cornerstone clients, resulting in a 20%
increase in revenue from those clients who
spent more than £5m. We have also taken
a more strategic approach to acquiring
new clients by harnessing the combined
business development capabilities
across the Group, in particular with the
Managed Access division where there is
natural overlap in company targets.
CUSTOMER SPEND STRATIFICATION
< £100k
£100k – £1m
£1m – £5m
> £5m
50 clients
15 clients
9 clients
9 clients
CHARACTERISTICS
– Global market leader
– Strong reputation with deep understanding of regulatory
environment
– Global reach with local expertise
– Quality management system
GROSS PROFIT FROM EXPANDED
SERVICES
£1.3m
UNITS SHIPPED IN FY16
715,000
MARKET DRIVERS
– Trend towards outsourcing clinical trials
– Clients requiring a global solution
– Comparator drugs increasingly used over placebos
– Growth in IITs
PRIORITIES
– Further development of expanded services
– Formalise IIT service offering
– Increase client penetration
– Extend markets
19
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 OPERATIONAL REVIEW CONTINUED
Idis Managed Access
Idis Managed Access ('Idis MA') is the global market
leader in providing exclusive access to early phase,
innovative medicines in those disease areas where there
is high unmet medical need. While this is a relatively new
market segment, there are a number of reasons why this
is a very exciting area with compelling growth drivers. Idis
MA ran programmes for 19 of the top 25 pharmaceutical
and biotech companies in the world, shipping 268,000
units of drugs across 107 countries. At the year end,
there were 108 programmes under management and
85% of products shipped on behalf of Idis MA’s clients
were provided free of charge to patients.
1 The adjusted results exclude share based payment costs, amortisation and non-underlying costs
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken
from i) 12 monthly management information for Clinigen and Idis, and ii) for Link Healthcare, the eight months ended
30 June 2016 and for the eight months ended 30 June 2015
Pharmaceutical companies feel that
ethically they should provide access to
potentially life-saving medicines still
in clinical trial for those patients with
potentially life-threatening diseases.
Diseases such as oncology, haematology,
CNS, infectious disease, immunology
and orphan disease all have the highest
level of unmet medical need and these
diseases account for the vast majority of the
pharmaceutical and biotech R&D pipeline.
Managed Access programmes provide
important information at the pre-launch
phase for companies and are a great
opportunity to engage with and educate
key opinion leaders and key treatment
centres while products are still in clinical
trials in order to potentially accelerate
uptake of the product post-launch.
There is an increasing focus from the
industry and regulators on the generation
of Real World (RW) data to establish the
long-term safety profile of a medicine
and this is the type of data that can be
captured through an MA programme. An MA
programme also can help better profile which
patients will benefit from the products and
RESULTS FOR YEAR
ENDED 30 JUNE 20161,2
PROFILE
PROVIDES EXCLUSIVE ACCESS TO PRE-LICENSED INNOVATIVE
MEDICINES WITH HIGH UNMET MEDICAL NEED
£100.8m
REVENUE
Units shipped
£26.5m
■ Free of charge programes ■ Paid for
85%
15%
GROSS PROFIT +5%
Units shipped by region
70%
19%
■ Europe ■ Americas ■ Asia Pacific ■ Other
Number of programmes:
108
20
Clinigen Group plc Annual Report and Accounts 2016 and programme modelling tools, and
capturing and managing RW data.
The division, representing 26% of Group
gross profits, had a good year after taking
account of a complex integration following
the Idis acquisition. Overall gross profit
increased 5% on a pro forma basis with
improving performance through the year.
The business enters the new financial
year with good momentum following a
number of programmes starting in the
second half of the last financial year. The
priorities this year are to expand value added
services, including the development of
our strategic services, further strengthen
customer services and achieve better
penetration of new and existing clients.
strengthen the pricing and reimbursement
dossiers for the company. Outsourcing the
activities involved in setting up and managing
an access programme is an increasingly
attractive option for pharmaceutical
companies with the complexity of the
unlicensed regulatory environment and
the specialist knowledge and expertise
required in managing the distribution of
medicines to over a 100 different countries.
As the market leader with around 30% of the
addressable market, Idis MA differentiates
itself from the competition in a number of
ways – knowledge of the global regulatory
landscape; strength of relationships within
the industry (Idis MA works with 19 out of
the top 25 pharmaceutical companies) and
the specialist resources and capabilities built
up over a ten year period. These are high
barriers to entry to current and potential
competitors and in FY16 we are consolidating
our market leader position with the launch
of complementary strategic services.
These new services are an important
step in extending our relationships
with key clients and include unlicensed
medicine policy development, forecasting
% OF GROSS PROFIT FROM
PROGRAMMES WHICH STARTED IN
FY16
26%
NUMBER OF TOP 25
PHARMACEUTICAL AND BIOTECH
COMPANIES AS CUSTOMERS
19
UNITS SHIPPED IN FY16
268,000
CHARACTERISTICS
– Global market leader
– International service and distribution network
– Exclusive programmes with 19/25 world’s biggest
pharmaceutical companies
– High barriers to entry
– Defensive pricing structure
MARKET DRIVERS
– Trend towards outsourcing early access programmes
– Increase in patient advocacy forums driving early demand for
new drugs
– Structural regulatory changes (i.e. ‘Right to Try’)
– Demand for RW data
PRIORITIES
– Expand value added services
– Further strengthen customer services
– Increase number of clients
21
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 OPERATIONAL REVIEW CONTINUED
Idis Global Access
Idis Global Access ('Idis GA') is the global market leader in
the ethical supply of ‘on demand’ unlicensed or short
supply medicines to patients, at their ‘point of care’, via
their physicians. The sourcing and supply of medicines
which are unlicensed or in short supply is difficult and
highly complex and as a result there is a high unmet
clinical and patient need.
1 The adjusted results exclude share based payment costs, amortisation and non-underlying costs
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken
from i) 12 monthly management information for Clinigen and Idis, and ii) for Link Healthcare, the eight months ended
30 June 2016 and for the eight months ended 30 June 2015. The pro forma calculation has also removed the effect
of the termination of the Global Access low margin contract in November 2015
3 EFPIA: Patients W.A.I.T Indicator; 2011 Report – based on EFPIA’s database (first EU marketing authorisation in the
period 2008-2010)
GA is at the early stages of capitalising on
the significant international opportunity.
Even in Europe, the average time between
the date of EU market authorisation and
the drug being available varies between
four months to 18 months3. It is the
Group’s belief that a trusted source of
high quality medicines, legally shipped in a
timely manner to healthcare professionals
worldwide is a market necessity.
Patient awareness and knowledge of
available treatments has been heightened
by the internet and global patient forums.
The patient knows what they want and
the medicine not being available at their
‘point of care’ is not a barrier to them.
Internet pharmacies are meeting some of
this unmet demand, but with low quality,
counterfeit and often dangerous products.
Healthcare professionals regularly have
to source product through untried and
untrusted routes. Clinigen has gathered
immense sourcing expertise and local
knowledge of regulatory frameworks. We
ensure products are from trusted sources
and we only supply through the hospital
pharmacy to the prescribing physician.
RESULTS FOR YEAR
ENDED 30 JUNE 20161,2
PROFILE
ON-DEMAND ACCESS, FOR HOSPITAL PHARMACISTS, TO MEDICINES
WHICH ARE UNLICENSED AT THEIR ‘POINT OF CARE’
£39.6m
REVENUE -12%
Gross profit by products
£13.8m
57%
22%
21%
■ Top 20 products ■ 20–50 ■ Other
GROSS PROFIT +1%
Gross profit by region
34.9%
GROSS PROFIT % +4.4%
72%
26%
■ UK & Ireland ■ Europe ■ Other
Number of countries shipped to:
50
22
Clinigen Group plc Annual Report and Accounts 2016 Clinigen is the global market leader in
providing access to unlicensed medicines.
However, we are not even scratching the
surface of this high demand sector. It is
our belief that a trusted source of high
quality medicines, legally shipped in a
timely manner to healthcare professionals
world-wide is a market necessity and
through Idis Global Access the Group
intends to become the global “go to”
solution for pharmacists and physicians.
Idis is the market leader and “go to” solution
in the UK, where 72% of the gross profit
is derived and one in three imported
unlicensed medicines comes through Idis
GA. Link is strong in the supply of unlicensed
medicines in the Africa, Australia and Asia
(AAA) region and the emerging markets
certainly offer significant growth potential.
Combining this capability, adding service
levels and quality standards offered nowhere
else, the Group plans to build market
share over the next two to three years.
Through an e-commerce platform
specifically aimed at improving access
to medicines, Idis GA is planning
educational and information programs
aimed at the global hospital pharmacy
community. In addition, Idis GA will provide
unprecedented guarantees and checks on
the authenticity of the products supplied.
ClinigenOne, the Groups ERP solution,
when implemented, will enable
standardised global service levels through
a centralised customer services solution.
The e-commerce platform will be able
to leverage the Group's sourcing and
procurement capability. This together
with the marketing campaign aimed
at the pharmacy community will drive
international expansion and growth.
Idis GA is targeting exclusive supply
arrangements for certain high demand or
niche medicines, which will ensure more
pharmacists come into contact with our
service offering. These exclusive supply
arrangements together with the equally
exclusive Managed Access programmes,
differentiate Idis as a specialist in the
unlicensed supply arena. To date Idis GA has
signed five such agreements on a multi-
country basis and has a number of other local
agreements through Link in the AAA region.
This division, representing 14% of Group
gross profits, recorded gross profit slightly
ahead of last year on a pro forma basis2.
Excluding the terminated low margin
commercial contract, the gross margin
increased from 41% last year to 45% on a
pro forma basis due to a change in product
mix and initiatives taken to strengthen the
commercial model and reduce costs.
NUMBER OF EXCLUSIVE SUPPLY
AGREEMENTS
5
NUMBER OF PRODUCT LINES
1,570
UNITS SHIPPED IN FY16
437,000
CHARACTERISTICS
– Global market leader
– Expertise and local knowledge of regulatory frameworks
– “Go to” solution for pharmacists and physicians in the UK
– Trusted provider
MARKET DRIVERS
– High unmet need
– Growth in emerging pharmaceutical markets
– Increased threat from counterfeit products
– Clients requiring a global solution
PRIORITIES
– Drive international expansion
– Build relationships and profile with pharmacists in key markets
– Centralise customer services
– Leverage group sourcing and procurement capability
– Strengthen pipeline of new products
– Develop e-commerce platform
23
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 OPERATIONAL REVIEW CONTINUED
Link Healthcare
Link Healthcare ('Link') provides local and regional
commercial access to licensed and unlicensed products,
and specialist pharmaceutical and medical technology
products in the regions of Africa, Australia and Asia
('AAA').
1 The adjusted results exclude share-based payment costs, amortisation, non-underlying costs and include the 50%
share of the unaudited results from the joint venture in South Africa
2 Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken
from i) 12 monthly management information for Clinigen and Idis, and ii) for Link Healthcare, the eight months ended
30 June 2016 and for the eight months ended 30 June 2015
Link, representing 10% of the Group’s
gross profit, is the market leader in
Australia, New Zealand and South Africa
for the provision of unlicensed medicine
and offers a range of licensed products
including specialty and generic medicines.
Link is also developing services across
Southern and Central Africa, in Hong
Kong, Singapore, Malaysia and Japan.
Link has more than 100 actively marketed
licensed products. Most are single market
licences, and some are either multiple
market products or have the potential
to be. Link supplies either branded or
generic products depending on the
maturity and value of the market.
Using a strong in-house regulatory team
with detailed knowledge of local markets
and in collaboration with partners, the
business develops a number of its own
branded generic products for launch
in local markets where shortage of
supply or unmet demand warrants.
These actively marketed medicines account
for 46% of Link’s gross profit. These include
a full range of antiretroviral ('ARV') drugs
for management of HIV in Southern Africa,
as well as a wide selection of chronic and
RESULTS FOR YEAR
ENDED 30 JUNE 20161,2
PROFILE
LOCAL EXCLUSIVE ACCESS TO UNLICENSED, LICENSED OR GENERIC
MEDICINES IN THE AAA REGION
£28.7m
REVENUE +3%
Gross profit by activity
£10.2m
46%
36%
18%
■ Licensed drugs ■ Unlicensed drugs ■ Other
GROSS PROFIT -11%
Gross profit by region
35.8%
GROSS PROFIT % -6.1%
49%
41% 10%
■ Africa ■ Australia/New Zealand ■ Asia
Date of acquisition:
30 October 2015
24
Clinigen Group plc Annual Report and Accounts 2016
The gross margin reduced from 42% to
36% on a pro forma basis due to a change
in product mix and the depreciation
of the local currencies, particularly
in South Africa, making the cost of
drugs more expensive to purchase.
The priorities this year are to build the Asian
business, build and roll out the portfolio
of licensed and unlicensed medicines
and leverage the Group client base and
procurement capabilities. The business has
made a good start to this year and is well
positioned to drive strong organic growth.
acute care medicines. These include those
covering antibiotics, diabetes care, pain
management, addiction management,
anti-hypertensives, anti-epileptics, acute
porphyria, cancer care, gastrointestinal,
dermatology and treatments for central
nervous system indications. Currently
there are over 40 further products in
development for launch in future years.
An example of the product registrations
planned for 2017 include, Trasylol, used to
reduce bleeding during complex surgery,
such as heart and liver surgery. Product
registration is under way in Australia, New
Zealand, Singapore and Malaysia. Also in
2017 a product already licensed by us in
Singapore, Penthrox (Methoxyflurane),
which is used in an emergency situation
such as by ambulance staff, to reduce
pain, is being registered in Hong Kong.
Unlicensed medicine access is the
second largest part of the Link business
accounting for 36% of gross profit. This
business, entirely focused on the AAA
region is the same as Clinigen’s GA
division, with strong relationships with local
hospital pharmacists in these regions.
By utilising local knowledge and relationships
and applying the same standards,
procurement processes and guarantees
of authenticity for the products supplied,
this part of the Link business can extend
the global reach of, and be rolled into, the
Clinigen GA business under the Idis brand
once the earn out period completes in FY17.
The remaining 18% of Link’s gross profit is
from the supply of diagnostic kits, diabetes
management and wound care products,
sharing the same customer base as the
other two parts of the business. The
non-core ‘Over The Counter’ pharmacy
business, representing a small part of the
Australian business, was closed in the year.
The business had a solid underlying
performance with the strongest
growth coming from South Africa and
the developing Asian business. Whilst
reported results for Link have been
affected this year by the depreciation
of local currencies, particularly in South
Africa, gross profit was ahead of last
year on a constant currency basis.
NUMBER OF LOCAL MARKETED
LICENCES
CHARACTERISTICS
– Market leader in Aus/NZ and S.Africa for provision of unlicensed
medicine
>100
– Range of licensed products including branded and generic
– Full in-house regulatory team
– AAA regional capability
– Strong partnerships with pharmacists
NUMBER OF GENERIC PRODUCTS
MARKET DRIVERS
– Growth of unlicensed medicine in emerging pharmaceutical
69
markets
– Increasing demand and need for low priced generics
– Demand to internationalise regional products
– Increasing need to address shortages of supply
UNITS SHIPPED IN EIGHT MONTHS
TO 30 JUNE 2016
2.2m
PRIORITIES
– Leverage Group client base and procurement capabilities
– Build scale of Asian business
– Build portfolio of licensed and unlicensed medicines
25
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 OPERATIONAL REVIEW CONTINUED
Clinigen Specialty Pharmaceuticals
Clinigen Specialty Pharmaceuticals ('CSP') Clinigen SP is
a global specialty pharmaceutical business that acquires
the global rights to niche, hospital-only and critical care
medicines. With five products in two portfolios (oncology
support and infectious disease), Clinigen SP has come a
long way since acquiring its first product, Foscavir, from
AstraZeneca in 2010.
The Clinigen SP business model is focused
upon not just acquiring the global rights
to products, but importantly, driving the
revitalisation of these products through
a range of different but complementary
initiatives that ultimately stimulate
demand leading to revenue and profit
growth.
The Clinigen approach to specialty
pharmaceuticals is to focus on those
medicines which are in the mature phase
of the product life cycle and are not a focus
or priority for investment for the current
owner. Provided they meet the criteria
Clinigen applies in assessing the potential
for a product, they will however become
a valuable asset for Clinigen. Unlike most
specialty pharmaceutical companies,
Clinigen does not rely on a traditional
country-based sales representative
model in order to drive growth.
By focusing on mature, niche products,
Clinigen SP is able to develop close
working relationships with Key Opinion
Leaders (KOLs) in the key treatment
centres around the world to drive demand
for, and growth in, its products.
1 The adjusted results exclude share based payment costs, amortisation and non-underlying costs
2 Newer products refers to Ethyol, Cardioxane, and Savene
RESULTS FOR YEAR
ENDED 30 JUNE 20161
PROFILE
ACQUIRES GLOBAL RIGHTS AND REVITALISES HOSPITAL ONLY AND
CRITICAL CARE MEDICINES
£37.1m
REVENUE +10%
Gross profit by product
£31.9m
64%
36%
■ Foscavir ■ Newer products2
GROSS PROFIT +10%
Revenue by region
86.0%
46%
44%
■ Europe ■ Americas ■ Asia Pacific ■ Other
GROSS PROFIT % -0.3%
Number of products:
5
26
Clinigen Group plc Annual Report and Accounts 2016
While the major revitalisation work has been
done on Foscavir, the SP team continues
to look at new applications such as in
the treatment of human herpes virus 6,
HHV6, and is preparing for the launch of
the Foscavir product bag line extension.
The focus for Clinigen SP in FY17 will be to
continue to pursue the revitalisation of all
five products, in particular: the introduction
of Totect into the US and completing the
challenge to the Article 31 with Cardioxane
as part of the overarching Dexrazoxane
revitalisation strategy; the re-launch of
Ethyol into the US through our commercial
partner Cumberland Pharmaceuticals
and the preparations for the introduction
of the new bag product line extension for
Foscavir. We are also focused on evaluating
the pipeline of potential new products.
Clinigen’s knowledge and expertise in
both licensed and unlicensed medicines
is of fundamental benefit to Clinigen
SP’s products since we have the ability to
manage the unlicensed markets ourselves,
effectively adding an extra dimension to
supporting the revitalisation of each product.
The division, representing 31% of Group
gross profit, increased gross profits by
10%. The strong growth was driven by
the revitalisation of the newer products,
Ethyol, Cardioxane, and Savene which
collectively achieved a 31% increase in
gross profit establishing themselves as an
increasingly important part of the portfolio.
The newer products now represent 36%
the division’s gross profit (2015: 30%). The
divisional gross margin remained broadly
unchanged at 86.0% (2015: 86.3%).
Ethyol, used to reduce the incidence of dry
mouth in patients undergoing high dose
radiation treatment, significantly increased
revenues with strong performance in the
Americas. To further drive the revitalisation
of Ethyol in the US, the product was
transferred to Cumberland Pharmaceuticals.
The technical transfer of the manufacturing
of Ethyol is complete and work is now being
undertaken to optimise batch yields to drive
future product manufacturing efficiencies.
The Dexrazoxane portfolio now combines
Cardioxane, Savene and the newly
acquired Totect product. Cardioxane is
used as a cardio protectant in oncology
(anthracycline) treatment and Savene is
used as an important emergency treatment
for extravasation (leakage) at the site
of injection of oncology (anthracycline)
treatments. Together, these two products
achieved significant growth in the year,
with Cardioxane benefiting from being
used as an adjuvant drug in the ongoing
clinical trials for new oncology drugs.
The process for the regulator’s
consideration of Article 31 (this article
restricts the usage of Cardioxane to certain
adult patient populations) is continuing.
Although the process is proving more
protracted than expected, Clinigen remains
confident about the data submitted to the
regulator and has the support of KOLs.
Totect, the US market equivalent
product of Savene, was acquired in
March 2016 providing an important
entry for the Dexrazoxane product into
the US. This product is expected to
start providing revenues in the second
half of the current financial year.
Foscavir, an anti-viral targeted at human
herpes viruses and used primarily in bone
marrow transplant patients, performed as
expected with in-market sales increasing
by 5%. Reported Foscavir revenues were
below last year due to the phasing of
bulk shipments to key distributors.
NUMBER OF PRODUCTS
COUNTRIES SUPPLIED
CHARACTERISTICS
– Product acquisitive
– Hospital only niche products for critical care
– Demand is KOL and hospital driven
– Knowledge and expertise in licensed and unlicensed markets
– Typically mature products
MARKET DRIVERS
– Large pharmaceutical narrowing focus to key therapy areas
leading to portfolio rationalisation
– Trusted partners with global capability
– Increasing focus and diagnosis in areas of chronic diseases
– Aging population trend increasing demand for medicines
– Product life cycle is extending
5
43
UNITS SHIPPED IN FY16
350,000
PRIORITIES
– Drive revitalisation of all products
– Challenge of Article 31
– Launch of Totect and Foscavir bag line extension
– Add further products to portfolio
27
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CHIEF FINANCIAL OFFICER’S STATEMENT
Another strong financial year
“This was a strong financial performance for the year
against a backdrop of significant integration activity.”
90%
HIGHLIGHTS
– Adjusted gross profit* up 90%, driven by
acquisitions and organic growth
– Adjusted EPS* up 25% to 35.0p
(2015: 28.0p)
INCREASE IN GROSS PROFIT*
– £49.4m cash generated from operations,
up 213%
– Net debt decreased £8.1m to £68.1m,
after £28.5m spend on acquisitions
– Full year dividend increased 18% to 4.0p
(2015: 3.4p)
Reported revenue increased by 84%,
reported gross profit increased by 79% and
reported EPS increased by 83% versus
last year, driven by both acquisitions and
organic growth.
In order to better understand the
performance of the Group, the results
presented throughout the remainder of this
overview are on an adjusted basis and, where
appropriate, on a pro forma basis. Adjusted
gross profit and adjusted EBITDA are viewed
as the best measures of financial
performance, together providing the best
insight into top line and profit growth.
Gross profit increased by 7% on a pro forma
basis** due to excellent growth from CTS,
strong growth of the newer products in the
SP division and the step up in performance in
MA in the second half.
213%
INCREASE IN CASH GENERATED
FROM OPERATIONS
25%
INCREASE IN EPS*
18%
INCREASE IN DIVIDEND PER SHARE
28
MARTIN ABELL
Chief Financial Officer
Administrative expenses* increased
significantly due to the acquisitions. On a
pro forma basis, adjusted administrative
expenses were broadly flat with synergies
achieved from the integration of the
acquisitions offset by measures taken
to strengthen the infrastructure and
management team to support future growth.
EBITDA increased by 10%, benefiting from
the increase in gross profits and pro forma
administrative expenses remaining
broadly flat.
This was a strong financial performance for
the year against a backdrop of significant
integration activity.
The table opposite shows the reconciling
items between adjusted EBITDA of £56.0m
(2015: £32.3m) and the reported EBITDA of
£41.0m (2015: £21.4m).
The adjustments to EBITDA comprise the
share based payment charges and
associated social security costs of £2.3m,
non-underlying costs totalling £7.5m, release
of fair value profit margin on acquired
inventory of £4.6m and a £0.6m adjustment
relating to the presentation of the Joint
Venture (‘JV’) earnings.
Within the non-underlying costs, there is
£1.4m of acquisition costs relating to Link,
and £5.6m of restructuring costs relating
Clinigen Group plc Annual Report and Accounts 2016 SUMMARY INCOME STATEMENT
Year ended 30 June Adjusted results* (£m)
Revenue
Gross profit
Administrative expenses
EBITDA
Depreciation
EBITA
Finance cost
Profit before tax
Basic earnings per share
Dividend per share
2016
344.1
102.1
(46.1)
56.0
(0.8)
55.2
(4.0)
51.2
35.0p
4.0p
2015
184.4
53.7
(21.4)
32.3
(0.3)
32.0
(0.9)
31.1
28.0p
3.4p
Growth
Actual
Pro forma**
7%
10%
87%
90%
(115)%
73%
72%
65%
25%
18%
mainly to the integration of the Idis and Link
acquisitions. These costs include £2.0m of
redundancy costs, £1.9m relating to
improving the Idis IT systems being used in
the short term before a new system is
implemented across the Group, and £1.0m
relating to the closure and integration of
offices. No further material restructuring or
acquisition costs relating to Idis or Link
Healthcare are expected.
The impairment of intangible fixed assets of
£0.5m represents further regulatory and
compliance costs relating to Vibativ (Vibativ
was impaired in full in the last financial year).
The rights and responsibilities relating to this
product were transferred back to
Theravance Biopharma on 4 August 2016.
Under IFRS3 (revised), stock acquired in a
business combination is valued at fair value
on acquisition, which includes the profit
margin in the stock’s carrying value. The
£4.6m adjustment represents the profit
margin associated with the acquired stock in
the acquisition of both Idis and Link. This
£4.6m profit margin is included in adjusted
EBITDA* to reflect better the underlying
profitability of the business but is excluded
from reported EBITDA.
The £0.6m adjustment relating to the JV
reflect that the adjusted results include the
Group’s 50% share of the South Africa JV in
each of the lines above profit after tax, whilst
in reported results the after tax income from
the JV is included as only one line below
profit from operations. The adjustment
cancels to zero at the Group profit after
taxation and earnings per share lines.
The table below shows the reconciliation items between adjusted EBITDA and reported EBITDA.
RECONCILIATION OF ADJUSTED EBITDA* TO REPORTED EBITDA
Year ended 30 June (£m)
Adjusted EBITDA
Share-based payment costs
Acquisition costs
Restructuring costs
Impairment of intangible fixed assets
Adjustment for fair value of acquired stock sold in the period
EBITDA of Joint Venture in South Africa
Total adjustments
Reported EBITDA
2016
56.0
(2.3)
(1.4)
(5.6)
(0.5)
(4.6)
(0.6)
(15.0)
41.0
2015
32.3
(2.3)
(5.7)
(2.5)
(0.4)
–
–
(10.9)
21.4
29
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CHIEF FINANCIAL OFFICER’S STATEMENT CONTINUED
RECONCILIATION OF ADJUSTED RESULTS* TO REPORTED RESULTS
JV accounting
2016 (£m)
Adjusted
results post JV
accounting
Adjustments
Reported
results
Adjusted
results*
2015 (£m)
Adjustments
(4.2)
2.8
(1.4)
0.8
(0.6)
–
–
(0.6)
–
0.4
(0.2)
0.2
–
–
–
339.9
(239.2)
100.7
(45.3)
55.4
–
(0.8)
54.6
(4.0)
0.4
51.0
(11.3)
39.7
35.0
34.6
–
(4.6)
(4.6)
(9.8)
(14.4)
(20.0)
–
(34.4)
(0.7)
–
(35.1)
8.9
(26.2)
(23.1)
(22.8)
339.9
(243.8)
96.1
(55.1)
41.0
(20.0)
(0.8)
20.2
(4.7)
0.4
15.9
(2.4)
13.5
11.9
11.8
184.4
(130.7)
53.7
(21.4)
32.3
–
(0.3)
32.0
(0.9)
–
31.1
(6.7)
24.4
28.0
27.2
–
–
–
(10.9)
(10.9)
(11.8)
(0.1)
(22.8)
–
–
(22.8)
4.1
(18.7)
(21.5)
(20.9)
Adjusted
results*
344.1
(242.0)
102.1
(46.1)
56.0
–
(0.8)
55.2
(4.0)
–
51.2
(11.5)
39.7
35.0
34.6
Reported
results
184.4
(130.7)
53.7
(32.3)
21.4
(11.8)
(0.4)
9.2
(0.9)
–
8.3
(2.6)
5.7
6.5
6.3
Revenue
Cost of sales
Gross profit
Admin expenses
EBITDA
Amortisation
Depreciation
Profit from operations
Finance cost
Share of profit of JV
Profit before tax
Taxation
Profit after tax
Basic EPS (p)
Diluted EPS (p)
The table above reconciles adjusted results
to reported results. The adjustments
relating to the JV reflect that the adjusted
results include the Group’s 50% share of the
South Africa JV in each of the lines above
profit after tax whilst in reported results the
after tax income from the JV is included as
only one line below profit from operations.
TAXATION
Taxation was £2.4m (2015: £2.6m) based
primarily on the prevailing UK and US tax
rates. This charge is calculated as £11.5m on
adjusted profit* of £51.2m, offset by a credit
of £8.9m in respect of the non-underlying
costs, amortisation and share incentive
schemes, and £0.2m of tax payable by the JV.
The other adjustments to EBITDA are as set
out in the earlier table above. The £0.7m
(2015: nil) adjustment to the net finance
charge is the non-cash interest charge
unwind of the discount applied to the
deferred consideration payable in respect
of Link.
DEPRECIATION AND AMORTISATION
Depreciation in the year was £0.8m (2015:
£0.3m) relating principally to fixtures, fittings
and equipment. Amortisation was £20.0m
(2015: £7.1m), of which £15.0m related to
corporate acquisitions, £4.3m related to SP
products, and £0.7m related to software.
FINANCE COST
The reported net finance cost was £4.7m
(2015: £0.9m). The adjusted net finance
cost*, excluding the non cash interest charge
unwind referred to above, was £4.0m (2015:
£0.9m) relating primarily to bank debt. The
increase is principally due to the debt taken
on to fund the acquisitions of Idis and Link.
Interest on the bank debt is payable on a
tiered scale based on the level of borrowing.
The average interest charge on gross debt
during the period was 3.15%.
The underlying effective tax rate increased
to 22.5% (2015: 21.5%) due to the increase in
overseas earnings in territories with a higher
tax rate.
EARNINGS PER SHARE
Reported basic earnings per share was
11.9p (2015: 6.5p). Adjusted basic earnings
per share*, calculated excluding share
based payment costs, amortisation and
non-underlying costs, increased by 25% to
35.0p (2015: 28.0p). The increase reflects
the Group’s higher adjusted profit from
operations.
A reconciliation of adjusted earnings per
share to reported earnings per share is
included in note 6 to the Report and
Accounts.
DIVIDEND
The Directors are committed to a
sustainable and progressive dividend policy
and expect interim and final dividend
payments to be split one-third to two-thirds
respectively.
In view of the good results, the Board
proposes a final dividend of 2.7p per share
(2015: 2.3p), resulting in an increase in the full
year dividend of 18% to 4.0p per share (2015:
3.4p). The full year dividend is covered by
nine times underlying earnings.
The final dividend will be paid, subject to
shareholder approval, on 25 November 2016
to shareholders on the register on
4 November 2016.
ACQUISITIONS
On 30 October 2015, the Group completed
the acquisition of Link. Total consideration is
£51.5m made up of an initial consideration of
£41.6m (comprising of £22.3m cash and
3,102,558 shares), payment for working
capital of £2.0m and a discounted estimated
contingent consideration of £7.8m.
The estimated contingent consideration has
been discounted and calculated based on
expected results. Any contingent
consideration payment would be payable in
October 2017 and are subject to
performance criteria.
In the eight months ended 30 June, Link
Healthcare reported revenue of £28.7m and
gross profit of £10.2m.
CASH FLOW AND NET DEBT
Cash flow performance was excellent in the
year with £49.4m cash generated from
operations, supported by an improvement in
underlying working capital.
The cash out flow for the initial consideration
for the Link acquisition was £22.4m (£24.3m
less £1.9m cash acquired). Capital
expenditure was £8.0m, of which £6.0m
related to the acquisition of the Totect
product, the line extension to Foscavir and
the technical transfer of the manufacture of
the Ethyol product. Capital expenditure will
increase in the current year due to the spend
on the Group ERP system that is being
implemented.
30
Clinigen Group plc Annual Report and Accounts 2016 OPERATING CASH FLOW
USES OF CASH FLOW
£56.0m
£(0.6)m
£3.0m
£(1.7)m
£(3.7)m
£(3.6)m
£49.9m
£22.4m
£7.5m
£6.0m
£2.0m
£4.1m
£8.1m
£(0.5)m
Adjusted
EBITDA
Joint
Venture
Working
capital
NI on share
schemes
Tax
paid
Interest
paid
Free cash
flow
Acquisition
Acquisition & restructuring cost
Capex on products
Other Capex
Dividend
Decreased net debt Other
The other main cash flows were tax paid of
£3.7m, interest paid of £3.6m and dividends
paid of £4.1m.
Overall net debt decreased £8.1m from
£76.2m at 30 June 2015 to £68.1m with the
cash consideration for the acquisition of Link
and the product acquisitions being financed
by the free cash flow from the business.
BALANCE SHEET
Intangible assets increased from £302.5m at
30 June 2015 to £333.7m principally due to
the acquisition of Link.
Net negative working capital of £3.8m was
similar to the position as at 30 June 2015
with the £7.0m working capital relating to the
Link business offset by improvements in the
working capital position in the remainder of
the Group. The improvement in underlying
working capital resulted from a combination
of improved working capital management,
particularly in respect of the legacy Idis
business, and favourable cash flow
movements around the year end.
TREASURY MANAGEMENT
The Group’s operations are financed by
retained earnings and bank borrowings, and
on occasions, issue of shares to finance
acquisitions.
As at 30 June 2016, the Group has a total
bank facility of £131.0m, consisting of a five
year term repayment loan of £36.0m which
matures in June 2020 and a revolving credit
facility (‘RCF’) of £95.0m which is available
until June 2020 and is renewable on a
monthly basis.
The Group has considerable headroom
against these facilities providing the
capability to continue to make product
acquisitions. Covenant terms apply to the
bank facilities comprising interest cover, cash
flow cover and adjusted leverage covenants.
All borrowings are in sterling and are
managed by the Group’s UK based Treasury
function, which manages the Group’s
treasury risk in accordance with policies set
by the Board.
Total deferred consideration across both
current and non current liabilities is £13.2m
(2015: nil) of which £8.5m relates to the
estimated contingent consideration on the
Link acquisition, payable subject to financial
performance, and £4.7m in respect of
milestone payments on product acquisitions.
The Group reduces its exposure to
currency fluctuations on translation by
typically managing currencies at Group
level using bank accounts denominated
in foreign currencies. Where there is
sufficient visibility of currency requirements,
forward contracts are used to hedge
exposure to foreign currency fluctuations.
The Group’s treasury function does not
engage in speculative transactions and
does not operate as a profit centre.
PRINCIPAL RISKS FACING
THE BUSINESS
Clinigen operates an embedded risk
management framework, which is monitored
and reviewed by the Board. There are a
number of potential risks and uncertainties
that could have a material impact on the
Group’s financial performance and position.
These include risks relating to competitive
threat, the regulatory environment, political
environment, counterfeit product
penetrating the supply chain and foreign
exchange. These risks and the Group’s
mitigating actions are set out in the 2016
Annual Report (pages 32 and 33).
MARTIN ABELL
Chief Financial Officer
27 September 2016
* The adjusted results exclude share-based payment costs, amortisation, non-underlying costs and include the 50%
share of the unaudited results from the Joint Venture in South Africa
** Year on year comparisons, referred to as ‘pro forma’ are calculated from the aggregated unaudited results taken
from i) 12 monthly management information for Clinigen and Idis, and ii) for Link Healthcare, the eight months ended
30 June 2016 and for the eight months ended 30 June 2015. The pro forma calculation has also removed the effect
of the termination of the Global Access low margin contract in November 2015
31
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 PRINCIPAL RISKS
Managing our risk
RISK
MANAGEMENT ACTIONS TO MITIGATE RISK
POLITICAL RISK
The Group’s expanded global footprint has increased
the exposure to adverse local political decisions and
economic events impacting the pharmaceutical
industry, which may affect the ability to supply,
local demand and/or pricing
The Group mitigates this risk by having an increasingly broad
product, service and geographical range limiting the impact of
events in any single territory.
The Group continually monitors developments in key geographies
and maintains strong relationships with regulatory bodies to enable
the Group to respond rapidly to local changes in circumstances
or events. The Group also takes account of political risk when
assessing new contracts or product acquisitions.
Brexit is not expected to have any adverse effects on the Group in
the short term. Whilst the outcomes are not yet clear, the Group’s
flexible operating model, the team’s deep understanding of
multinational regulatory process and with around 85% of revenues
being from international markets, it is expected that any medium to
long term implications will be manageable.
COMPETITIVE THREAT TO PRODUCT PORTFOLIO
The Group faces a threat to its Specialty Pharmaceutical
products from generic products and/or the development
of alternative therapies by competitors that can
significantly erode sales of our products
The continued diversification of the Group reduces the overall
effect on the Group if one of the products is impacted by significant
change in the competitive landscape. Finding and promoting new
users of our products and expanding into new geographies is a key
part of our product revitalisation strategy and this helps mitigate the
impact of competition in a particular geography or treatment area.
The Group closely monitors the competitive landscape in key markets
to ensure a rapid and appropriate response to changes in competition.
SUPPLY CHAIN
Shortage of supply of our products could put
patients at risk, damage the Group’s reputation and
impact profits
COMPLIANCE
Increased legislation and regulation could inhibit our
ability to conduct business in certain jurisdictions and
expose the Group to potential reputational damage and
financial penalties
The Group has effective supply chain management only working
with trusted manufacturing and global distribution partners which
the Group assess regularly. The Group also seeks to maintain
appropriate stock levels of its own products and related Active
Pharmaceutical Ingredient (API) to minimise the risk of shortage
of supply.
The Group has a business-wide compliance structure with resources
to comply with requirements embedded throughout the business.
The Group has invested in well-resourced and expert centralised
quality management and regulatory teams. In addition, a code is issued
to all employees and is supported by training and an engagement
programme to improve awareness of the Group’s values of ethics,
trust and quality. The Group is also regularly audited by customers and
regulatory authorities to ensure compliance and acts to address any
recommendations.
32
Clinigen Group plc Annual Report and Accounts 2016 RISK
MANAGEMENT ACTIONS TO MITIGATE RISK
COUNTERFEIT PRODUCTS
The Group’s reputation could be undermined through the
supply of counterfeit products
To the extent possible, the Group supplies its own products directly
to hospitals and healthcare professionals. The Group also has
industry leading quality management systems and audits supply
partners where appropriate.
RELIANCE ON TECHNOLOGY
The Group’s dependence on technology in our day-to-day
business means that systems failure and loss of data
would have a high impact on our operations
The Group’s technology strategy is regularly reviewed to ensure
that the systems it operates across the Group support its
strategic direction.
Ongoing asset life cycle management programmes mitigate risks of
hardware obsolescence whilst back-up procedures mitigate risk of
data loss.
The Group is currently undertaking an implementation of a new
ERP system designed to make the business systems more efficient
and scalable. The risk attached to this implementation has been
mitigated by a significant amount of planning work, the employment
of a specialist implementation partner and a robust governance
structure managing the implementation.
DATA SECURITY
The Group often manages confidential personal data in
the countries in which it operates. A material breach
exposes the Group to potential legal, financial and
reputational risk
The Group has data protection policies and procedures in place
across the business along with comprehensive cyber security
procedures to minimise the risk of data breach and leakage of
confidential information.
FOREIGN EXCHANGE
The Group has significant operations and activities
outside the UK and is therefore exposed to foreign
exchange risk
The Group’s main operational currencies are sterling, Euro, US
dollar and to a lesser extent the South African Rand and Australian
Dollar. The Group reduces its exposure to currency fluctuation on
translation by typically managing currencies at Group level using
bank accounts denominated in the principal foreign currencies for
payments and receipts. The Group seeks to optimise the matching
of currency surpluses generated to the foreign currency needs of
the wider Group, and where there is a sufficient visibility of currency
needs, forward contracts are used to hedge exposure to foreign
currency fluctuations.
The Group does not issue or use financial instruments of a
speculative nature and the Group’s treasury function does not act
as a profit centre.
33
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 CORPORATE RESPONSIBILITY
A responsible business
Clinigen originally began to address an unmet medical
need, with 80% of the world’s population having low or
non-existent access to medicines1. Through our global
supply and distribution network we are able to navigate
the regulatory hurdles to ensure we deliver the right
medicine, to the right patient, at the right time. In the last
financial year we shipped over four million unlicensed and
licensed units, helping patients in over 100 countries.
CORPORATE, SOCIAL AND
ETHICAL POLICIES
Clinigen recognises the importance of
balancing the interests of its customers,
shareholders, employees, suppliers and
the communities in which it operates.
Management of the environmental and
social issues that play a part in the business
is a key factor in the Group’s strategy
for success and in the practice of good
corporate governance. With this in mind,
the Group, through its management
team and its experienced quality and
regulatory department audit all suppliers
and manufacturers regularly to ensure they
reach the standards set and respond to any
improvement requests we make of them.
The Group aspires to carry out its business
to the highest ethical standards, treating
employees, suppliers and customers in a
professional, courteous and honest manner.
Ethical standards are included in our audit
schedule when reviewing our suppliers and
manufacturers to check the standards they
follow meet our expectations.
EMPLOYEES
The Group employs over 500 people in eight
countries and is committed to a policy of
equal opportunities in the recruitment,
engagement and retention of employees.
The multinational diversity of our team not
only supports our global service offering but
demonstrates our lack of barriers to
employment. Employees are supported to
undertake additional training, both internal
and external, to develop their skills which are
then often transferred across departments
or enable promotion.
Age, colour, gender, disability, ethnic origin,
national origin, marital status, sexual
orientation, religious or political view
is not seen as a barrier to employment
and is evidenced by the Group’s diverse
employment base. The Group would
34
support employees if they were to become
disabled whilst employed by the Group, and
those employees would be retained where
possible and training provided as required.
It is important we listen to our employees
and understand their views on Clinigen as
an employer. The Group operates a culture
of open communication through a range
of two-way mediums including: monthly
employee representative staff forums;
newsletters; and regular Group updates
from the CEO, Deputy CEO and CFO.
The strategic objectives of the Group are
communicated to the employees through
the monthly updates and at the annual
all staff conference. The employees are
encouraged to be a part of the Group’s
success through share ownership and
the Group’s employee share schemes.
The Group’s first employee engagement
survey was held during the year and senior
management take the findings of the survey
seriously and will act appropriately.
We recognise the importance of diversity,
including gender, at all levels of the company.
The Group already has a strong female
representation in both management and
operational boards. On our management
board, women comprise 33% of positions
for the UK and 29% for our international
operations. In addition, out of 308 employees
in the UK, approximately 58% are female and
approximately 29% of the senior managers
in the UK are female. We continue to actively
seek to recruit and advance women into
our top management. In preparation for the
introduction of mandatory gender pay gap
reporting in 2016, Clinigen will proactively
investigate and address gender pay gaps.
MODERN SLAVERY ACT
The Group fully supports aims of the
Modern Slavery Act 2015 to eradicate
human slavery and trafficking. In particular,
the Group wishes to ensure that no child
labour or servitude of any kind or human
trafficking has been involved in the supply
and distribution of products or services.
This statement is made pursuant to Section
54, Part 6 of the Modern Slavery Act 2015
and sets out the steps the Company has
taken to ensure that slavery and human
trafficking is not taking place in our supply
chains or in any part of our business.
As we have expanded with the merger
of Idis and Link, Clinigen has become
a worldwide supplier and distributor of
pharmaceutical products and services.
As part of our initiative to identify and
mitigate risk we have, or are in the
process of putting in place, systems to:
– Identify and assess potential risk areas in
our supply chains
– Mitigate the risk of slavery and human
trafficking occurring in our supply chains
– Monitor potential risk areas in our supply
chains
– Protect whistle blowers
The Group will continue to review the
position by a process of contract reviews,
third party audits and an ongoing monitoring
of our partners within the supply chain.
COMMUNITY
Clinigen participates in local community
projects that it feels are worthy and
appropriate and encourages employees to
get involved in local and national charitable
events, as well as deciding where charitable
donations are placed. An example of this is
the League Managers Association, with
whom we work to support local schools in
their Football Association level coaching.
Clinigen Group plc Annual Report and Accounts 2016 The Group has continued to support
Foundation MEM over a number of years,
which is a charity focusing on developing a
better life for a village in Cameroon which is
very close to some of our employees, and
The Anthony Nolan Trust, a charity very
relevant to Foscavir, the first product
acquired in 2010.
Clinigen work alongside Patient Group
Organisations in the MA division. We believe
greater patient involvement in personal
healthcare needs and also in the development
of local and national healthcare provision is an
important part of the future development of
effective healthcare services.
The Group made no political donations
during the year (2015: £nil) and made
charitable donations of £3k (2015: £15k).
HEALTH AND SAFETY
The Group recognises that health and
safety has positive benefits to the
organisation and that a commitment to a
high level of safety makes good business
sense. It also recognises that health and
safety is a business function and must,
therefore, continually improve, progress
and adapt to change. To achieve this
aim, appropriate levels of resource are
allocated to ensuring a positive health and
safety culture throughout the company.
The Group approach to health and safety
is based on the identification and control
of risks. Adequate planning, monitoring
and reviews of the health and safety
Policy are carried out in line with our Safety
Management System ('SMS') to ensure
continual improvement to our health and
safety standards.
TOP LEFT: Clinigen staff yacht racing during Cowes Week
TOP RIGHT: Clinigen sponsors the League Managers
Association who held a training event at Derby College in
February 2016
MIDDLE LEFT: Clinigen sponsors Phantom of the Opera
FC, winners of the MacMillan Cup
MIDDLE RIGHT: Clinigen staff taking part in the UK
Challenge
ABOVE: Clinigen partners Foundation MEM and
sponsored a trip to Cameroon in September 2015
1 http://www.talkingdrugs.org/dying-for-relief-access-to-pain-medication-and-suicide-in-russia 24 April 2015
35
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 GOVERNANCE
Board of Directors
Our experienced Board has a significant track record and
a wealth of knowledge across the biotechnology,
pharmaceutical and healthcare sectors spanning private
and publicly quoted companies.
PETER ALLEN
Non-Executive Chairman
SHAUN CHILTON
Chief Executive Officer-designate
PETER GEORGE
Chief Executive Officer
MARTIN ABELL
Chief Financial Officer
JOHN HARTUP
Non-Executive Director
IAN NICHOLSON
Non-Executive Director
ROBIN SIBSON
Non-Executive Director
JOHN BACON
Non-Executive Director
Appointed:
August 2012
Appointed:
Director in July 2013 and CEO-
designate in September 2016
Committees:
Nomination (Chairman), Audit
and Risk, Remuneration
Committees:
None
Appointed:
June 2010
Committees:
None
Profile:
Peter joined Clinigen when it formed
and has been at the forefront of the
strategic decisions and resulting
growth Clinigen has achieved. Peter
has an extensive range of experience,
starting his career in the UK’s National
Health Service before utilizing and
strengthening his experience in
the pharmaceutical industry where
he has held a number of senior
international roles including Executive
VP for Wolters Kluwer Health, with
responsibility for European and
Asia Pacific regions, CEO at Penn
Pharma Limited where he led a £67m
management buy-out in 2007 and
Chief Operating Officer for Unilabs
Clinical Trials International Limited.
Peter was CEO of the Year in the 2014
European Mediscience Awards.
Peter is retiring as CEO in November
2016 but will remain on the Board
as a Non-Executive Director.
External appointments:
Peter is currently a Non-Executive
Director of Ergomed Plc.
Profile:
Peter has a wealth of experience
and has held key senior positions
in a number of companies in the
healthcare industry and played
a significant role in their growth.
Peter spent 12 years at Celltech
Group plc (1992-2004) as CFO and
Deputy CEO, 6 years at ProStaken
Group plc as Chairman (2007-13)
and interim CEO (2010-11) and three
years as Chairman of Proximagen
Neurosciences plc (2009-12).
Profile:
Shaun holds responsibility for the
Group achieving its key performance
indicators on a day to day basis
and plays a central role in setting
and executing the Group strategy.
He previously held the position of
President within KnowledgePoint360
Group, a global pharmaceutical
information and services operation.
Shaun has 20 years’ experience
in the industry across a range of
disciplines, including commercial,
strategic, operational and sales
and marketing roles for companies
such as Pfizer and Sanofi.
Shaun will become CEO
in November 2016.
External appointments:
None.
External appointments:
Peter has a wealth of experience
on the Boards of both private and
publicly owned companies, including
Chairman, CEO and CFO positions.
He is also currently Chairman of
Advanced Medical Solutions Plc,
Future Plc, Oxford Nanopore
Technologies Plc and Diurnal Ltd.
36
Appointed:
Director in August 2015 and
CFO in October 2015
Committees:
None
Profile:
Before joining Clinigen, Martin worked
at the FTSE 250 recruitment group
Hays plc. At Hays, Martin spent the
first part of his career as Head of
Investor Relations and M&A, and was
later appointed Finance Director for
the Continental Europe and Rest
of World division which operated
across 21 countries with revenues
of over £1bn. Previously, Martin held
several financial roles at the FTSE
100 logistics group, Exel plc (now
part of Deutsche Post) including
Financial Controller of two of the UK
divisions. He is a qualified Chartered
Accountant, having trained at PwC in
the M&A Transaction Services team.
Appointed:
May 2011
Appointed:
September 2012
Appointed:
Appointed:
Non-Executive Director January 2016
October 2015
Committees:
Audit and Risk (Chairman),
Nomination, Remuneration
Committees:
Remuneration (Chairman),
Audit and Risk, Nomination
Committees:
None
Committees:
None
Profile:
Profile:
Profile:
Profile:
John has over 30 years’ experience
Ian has considerable experience
Robin joined Clinigen’s forerunner in
Previously Chairman of Link
as both an Executive Director
2003 and has been a consistent and
Healthcare, John Bacon founded the
and as a Non-Executive Director.
skilled presence through the evolution
organisation in the 1990s thereby
Ian is CEO of F2G Limited.
as a corporate lawyer dealing with
corporate finance and commercial
contract issues across a number of
industries. Formerly Managing Partner
at Ricksons LLP and subsequently
became a Partner at DWF LLP.
of Clinigen. He retired from the role
of CFO in October 2015 to become
a Non-Executive Director and to
focus on his charitable interests.
pioneering the supply of specialist
pharmaceuticals in the Australasian
markets. He has qualifications in
both science and business and
prior to forming Link Healthcare,
He has over 30 years’ experience in
held senior positions in both fields
the pharmaceutical industry, holding
across the Asia-Pacific region.
a number of senior, executive,
finance roles for companies such
as Abbott, Boots and BASF.
Robin is retiring as a Non-Executive
Director in November 2016.
External appointments:
None.
External appointments:
External appointments:
None.
External appointments:
Director Mount Cook Property
Limited, Director Mount
Cook Activity Limited.
External appointments:
None.
Ian currently holds positions as
Non-Executive Director of Consort
Medical plc and Bioventix plc, where
he is the Non-Executive Chairman.
Ian is also Chairman of the investment
committee at Cancer Research UK
Pioneer Fund, Director of Casewell
Consulting Limited and an Operating
Partner at Advent Life Sciences LLP.
Clinigen Group plc Annual Report and Accounts 2016 PETER ALLEN
SHAUN CHILTON
PETER GEORGE
Non-Executive Chairman
Chief Executive Officer-designate
Chief Executive Officer
MARTIN ABELL
Chief Financial Officer
JOHN HARTUP
Non-Executive Director
IAN NICHOLSON
Non-Executive Director
ROBIN SIBSON
Non-Executive Director
JOHN BACON
Non-Executive Director
Appointed:
August 2012
Appointed:
Director in July 2013 and CEO-
designate in September 2016
Committees:
Nomination (Chairman), Audit
and Risk, Remuneration
Committees:
None
Appointed:
June 2010
Committees:
None
Appointed:
Director in August 2015 and
CFO in October 2015
Committees:
None
Appointed:
May 2011
Appointed:
September 2012
Appointed:
Non-Executive Director January 2016
Appointed:
October 2015
Committees:
Audit and Risk (Chairman),
Nomination, Remuneration
Committees:
Remuneration (Chairman),
Audit and Risk, Nomination
Committees:
None
Committees:
None
Profile:
Peter has a wealth of experience
and has held key senior positions
in a number of companies in the
healthcare industry and played
a significant role in their growth.
Peter spent 12 years at Celltech
Group plc (1992-2004) as CFO and
Deputy CEO, 6 years at ProStaken
Group plc as Chairman (2007-13)
years as Chairman of Proximagen
Neurosciences plc (2009-12).
Profile:
Profile:
Profile:
Shaun holds responsibility for the
Peter joined Clinigen when it formed
Before joining Clinigen, Martin worked
Group achieving its key performance
and has been at the forefront of the
strategic decisions and resulting
at the FTSE 250 recruitment group
Hays plc. At Hays, Martin spent the
indicators on a day to day basis
and plays a central role in setting
and executing the Group strategy.
He previously held the position of
growth Clinigen has achieved. Peter
first part of his career as Head of
has an extensive range of experience,
Investor Relations and M&A, and was
starting his career in the UK’s National
later appointed Finance Director for
President within KnowledgePoint360
Health Service before utilizing and
Group, a global pharmaceutical
strengthening his experience in
the Continental Europe and Rest
of World division which operated
information and services operation.
the pharmaceutical industry where
across 21 countries with revenues
in the industry across a range of
disciplines, including commercial,
strategic, operational and sales
international roles including Executive
several financial roles at the FTSE
VP for Wolters Kluwer Health, with
responsibility for European and
100 logistics group, Exel plc (now
part of Deutsche Post) including
and marketing roles for companies
Asia Pacific regions, CEO at Penn
Financial Controller of two of the UK
such as Pfizer and Sanofi.
Pharma Limited where he led a £67m
divisions. He is a qualified Chartered
Accountant, having trained at PwC in
the M&A Transaction Services team.
Shaun will become CEO
in November 2016.
and interim CEO (2010-11) and three
Shaun has 20 years’ experience
he has held a number of senior
of over £1bn. Previously, Martin held
management buy-out in 2007 and
Chief Operating Officer for Unilabs
Clinical Trials International Limited.
Peter was CEO of the Year in the 2014
European Mediscience Awards.
Peter is retiring as CEO in November
2016 but will remain on the Board
as a Non-Executive Director.
Profile:
John has over 30 years’ experience
as a corporate lawyer dealing with
corporate finance and commercial
contract issues across a number of
industries. Formerly Managing Partner
at Ricksons LLP and subsequently
became a Partner at DWF LLP.
Profile:
Ian has considerable experience
as both an Executive Director
and as a Non-Executive Director.
Ian is CEO of F2G Limited.
Profile:
Previously Chairman of Link
Healthcare, John Bacon founded the
organisation in the 1990s thereby
pioneering the supply of specialist
pharmaceuticals in the Australasian
markets. He has qualifications in
both science and business and
prior to forming Link Healthcare,
held senior positions in both fields
across the Asia-Pacific region.
Profile:
Robin joined Clinigen’s forerunner in
2003 and has been a consistent and
skilled presence through the evolution
of Clinigen. He retired from the role
of CFO in October 2015 to become
a Non-Executive Director and to
focus on his charitable interests.
He has over 30 years’ experience in
the pharmaceutical industry, holding
a number of senior, executive,
finance roles for companies such
as Abbott, Boots and BASF.
Robin is retiring as a Non-Executive
Director in November 2016.
External appointments:
External appointments:
External appointments:
None.
Peter is currently a Non-Executive
None.
Director of Ergomed Plc.
External appointments:
None.
External appointments:
Peter has a wealth of experience
on the Boards of both private and
publicly owned companies, including
Chairman, CEO and CFO positions.
He is also currently Chairman of
Advanced Medical Solutions Plc,
Future Plc, Oxford Nanopore
Technologies Plc and Diurnal Ltd.
External appointments:
Director Mount Cook Property
Limited, Director Mount
Cook Activity Limited.
External appointments:
None.
External appointments:
Ian currently holds positions as
Non-Executive Director of Consort
Medical plc and Bioventix plc, where
he is the Non-Executive Chairman.
Ian is also Chairman of the investment
committee at Cancer Research UK
Pioneer Fund, Director of Casewell
Consulting Limited and an Operating
Partner at Advent Life Sciences LLP.
37
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 GOVERNANCE CONTINUED
Corporate Governance Statement
Each Director appointed by the Board is
subject to election by the shareholders at the
first AGM after their appointment. Following
advice from the Nomination Committee,
the Board has concluded that each Director
is qualified for election or re-election.
The Board is responsible to the Company’s
shareholders with its main objective to
increase the value of assets and long
term sustainability of the Company. The
Board reviews business opportunities
and determines the risks and control
framework. The Board makes decisions
on budgets, Group strategy and
major capital expenditure. The day-to
day management of the business is
delegated to the Executive Directors.
The Board meets regularly throughout
the year, with agendas, Committee
papers and other appropriate information
distributed prior to each meeting to
allow the Board to meet its duties.
Effective procedures are in place to deal
with conflicts of interest. Other interests
and commitments of Directors are
known by the Board and any changes
to their commitments are reported.
The Board has established a Nomination
Committee, Audit and Risk Committee and
Remuneration Committee with each having
separated duties and responsibilities.
NOMINATION COMMITTEE
The Chairman of the Nomination
Committee is Peter Allen with John Hartup
and Ian Nicholson the other members
of the Committee. The primary role of
the Committee is to regularly review the
structure, size and composition of the Board,
give full consideration to succession planning
for Directors and other senior executives
and evaluate the balance of skills, knowledge,
experience and independence on the Board.
The Committee meet at such times as
the Chairman of the Committee require.
AUDIT AND RISK COMMITTEE
The Chairman of the Audit and Risk
Committee is John Hartup with Peter Allen
and Ian Nicholson the other members
of the Committee. The primary role of
the Committee is to monitor, review and
challenge the financial statements and
regulatory environment, monitor the
relationship with the external auditor,
monitor the Group’s internal control and
risk management and ensure compliance
with laws and regulations. The Committee
meets at least two times a year.
REMUNERATION COMMITTEE
The Chairman of the Remuneration
Committee is Ian Nicholson with Peter
Allen and John Hartup the other members
of the Committee. The primary role of the
Committee is to determine and agree the
remuneration of the Company’s Chairman,
CEO, Executive Directors and company
secretary with the objective to ensure there
is an appropriate remuneration strategy in
place to encourage enhanced performance
and reward for individual contributions to the
success of the Company. The Committee
also reviews the design of all Group share
incentive plans and oversees major
changes to employee benefit structures
across the wider business. The Committee
meets regularly through the year.
RISK MANAGEMENT AND INTERNAL
CONTROL
The Board has responsibility for establishing
and maintaining the Group’s internal control
systems. The Board regularly review and
evaluate internal controls ensuring they
meet the needs of the Group. The internal
controls are designed to manage risk rather
than eliminate it and therefore cannot
provide absolute assurance against material
misstatement or loss. Primary responsibility
for reviewing internal controls has been
delegated to the Audit and Risk Committee.
As a company listed on AIM, the Group is
subject to the AIM Rules for Companies,
however the Group is not required to
comply with the UK Corporate Governance
Code (the Code). The Board believes that
effective corporate governance will assist
the delivery of the corporate strategy, the
generation of shareholder value and
protect the shareholders’ long-term
interests. Clinigen values corporate
governance highly, not only in the
boardroom but across the whole business.
The Board, as a matter of good practice,
aims to manage the Group in accordance
with guidance contained in the Code, as
applicable, in addition to complying with
the AIM Rules for Companies. The
following section outlines how the Board
manages the Groups governance.
THE BOARD AND COMPOSITION
The Board consists of three Executive
Directors and five Non-Executive Directors,
including the Chairman. The names of the
Directors and their biographies are set out
on pages 36 and 37.
The Board is satisfied with its composition
and the balance between Executive and
Non-Executive Directors.
The Group seeks to recruit the best
candidates at Board level and considers
candidates on merit and against objective
criteria and with due regard for the benefits
of diversity on the Board (including gender),
taking care that appointees have sufficient
time available to allocate to the position.
The Group supports the Code in respect
of diversity.
Robin Sibson stepped down as CFO and
became a Non-Executive Director in
October 2015. Martin Abell joined the Board
in August 2015 and was appointed as CFO in
October 2015.
John Bacon, the previous Chairman of Link
Healthcare, joined the Board as Non-
Executive Director in November 2015.
In November 2016, Peter George will retire as
CEO but remain as a Non-Executive Director.
Shaun Chilton, on the board since July 2013,
will take over as CEO. At the same time,
Robin Sibson will retire as a Non-Executive
Director.
38
Clinigen Group plc Annual Report and Accounts 2016 COMMUNICATION WITH INVESTORS
The Board realises effective communication
with shareholders on strategy and
governance is an important part of
their responsibilities. Interim and final
results are communicated via formal
meetings with roadshows, participation
in conferences and additional dialogue
with key investor representatives held in
the intervening periods. Care is taken to
ensure that all price sensitive information
is made available at the same time.
SHARE DEALING
The Company has established a share
dealing code appropriate to an AIM listed
company and all the Directors of the Group
understand the importance of compliance
to the Code.
ANNUAL GENERAL MEETING
The Company’s AGM is used by the Board to
communicate with shareholders who are all
entitled to attend. The presentation of the
results will be given by the CEO followed by
the formal business of the meeting. The
meeting provides an opportunity to ask
questions of each of the Board members as
part of the agenda, or more informally after
the meeting.
The Notice of AGM and all related papers
are sent to each shareholder at least 20
working days before the meeting. The
outcomes of the voting on resolutions
are announced to the London Stock
Exchange via the Regulatory News Service
and added to the Clinigen website.
WHISTLEBLOWING
During the year, our whistleblowing systems
and procedures successfully responded to
an anonymous complaint about Clinigen's
trading relationship with one of its
distributors. Led by our Chairman, Peter
Allen, an independent investigation was
swiftly convened and found no wrongdoing.
We remain confident that we have robust
and effective whistleblowing procedures in
place to respond to matters that may arise.
Spring Time Tango, by Klari Ries
39
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 GOVERNANCE CONTINUED
Remuneration Report
The Directors’ Remuneration Report regulatory requirements under Main Market UK listing Rules do not require compliance by AIM
quoted companies. The Group makes the following disclosures voluntarily and plans to develop disclosure further next year.
The remuneration policy has been constructed to offer appropriate, competitive remuneration to attract and retain senior executives and
encourage them to implement the Group’s strategy for the benefit of long-term shareholder value. The Board believes the remuneration
policy should be applied consistently, although be subject to regular review and be linked to the Group’s performance. The incentive based
reward should be related directly to the achievement of performance conditions aligned to shareholder interests and should not expose
shareholders to undue financial risk.
The Directors’ remuneration consists of four components to ensure there is a balance between fixed and performance related remuneration.
The details are set out below:
i) Base Salary: used to attract and retain senior executives providing a core level of reward
ii) Annual Performance Bonus: used to drive performance consistent with the medium to long-term strategic objectives for the Group. This
reward is based on the Group’s financial performance (EBITDA) and specific personal objectives set by the Remuneration Committee.
Going forward, part of this bonus will be subject to a deferral period
iii) Long-Term Incentive Plan ('LTIP'): used to align senior executives, interests with shareholders over the long-term. The reward is based
on the Group’s Total Shareholder Return ('TSR') versus the FTSE Small Cap Index (ex Investment Trusts) and going forward, will also be
based on Earnings per Share ('EPS') and personal objectives set by the Remuneration Committee
iv) Other: this includes pensions, car allowance and medical insurance used to provide a market competitive remuneration package
The Executive Directors and Non-Executive Directors remuneration for 2016 and 2015 are set out below:
£'000
P George
S Chilton
M Abell
P Allen
J Hartup
I Nicholson
R Sibson
J Bacon
Salary/fees
Bonus
LTIP
Other
Total
Salary/fees
Bonus
LTIP
Other
Total
2016
2015
413
228
190
80
50
48
131
32
–
242
177
–
–
–
–
–
5,655
2,828
–
477
–
–
–
–
35
40
20
4
–
–
20
–
6,103
3,338
387
561
50
48
151
32
357
209
–
79
49
47
221
–
172
101
–
–
–
–
108
–
–
–
–
–
–
–
–
–
38
22
–
3
–
–
24
–
567
332
–
82
49
47
353
–
There were three Directors (2015: three) who were members of the defined contribution pension scheme.
The amount payable to the highest paid Director in respect of emoluments was £6,103,000 (2015: £567,000), comprising basic salary and
bonus of £413,000 (2015: £529,000), long-term share incentive based payments of £5,655,000 (2015: nil) and other benefits made on their
behalf of £35,000 (2015: £38,000).
For the year, the annual performance bonus for the Executive Directors paid at 95% of their basic salary. Peter George waived his entire
bonus, and Shaun Chilton part of his bonus, and these amounts will be distributed as share options to employees across the business.
During the year share options were issued to Shaun Chilton and Martin Abell as part of the long term incentive plans as set out in the table
below. Peter George waived his entitlement to share options and share options of the amount waived were issued to employees.
Martin Abell was also issued shares as part of the Group’s sharesave plan.
During the year, Peter George, Shaun Chilton and Peter Allen, exercised share options, as shown in the table below following the long-term
incentive plan performance criteria being met.
40
Clinigen Group plc Annual Report and Accounts 2016 Directors who held share options at 30 June were as follows:
P George
S Chilton
M Abell
P Allen
Plan
30 June 2015
Exercised
Issued
30 June 2016
Clinigen Group Long Term Incentive Plan
Clinigen Group Long Term Incentive Plan
Clinigen Group Long Term Incentive Plan 2015
Clinigen Group Long Term Incentive Plan 2015
Clinigen Group Sharesave Plan
Chairman’s Option Agreement
825,556
662,978
–
–
–
91,464
825,556
412,778
–
–
–
91,464
–
36,182
123,172
3,846
–
250,200
36,182
123,172
3,846
All share options are over the Company’s ordinary shares of 0.1p each.
The Remuneration Committee carefully considers Executive Directors’ service contracts. These contracts are designed to recruit and retain
Directors of the quality required to manage the Company.
Details of the service contacts for the Executive Directors and Non-Executive Directors is set out below:
P George*
S Chilton
M Abell
P Allen
J Hartup
I Nicholson
R Sibson
J Bacon
Date of contract Unexpired Term
(months) or
Rolling Contract
Notice Period
(months)
1 July 2010
3 January 2012
3 August 2015
1 August 2012
1 June 2011
1 September 2012
1 January 2016
30 October 2015
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
3
Rolling
12
12
6
3
3
3
3
3
* Peter George’s remuneration and notice period will change to 3 months when his role changes from Chief Executive Officer to a Non-Executive Director in November 2016.
In the four years since IPO on 24 September 2012 until 20 September 2016, the Group’s Total Shareholder Return (TSR), defined as share
price growth including reinvested dividends, has outperformed the FTSE All Share Index by 265%, the FTSE 350 Pharma and Bio Index by
227% and the FTSE Small Cap Index (ex Investment Trusts) by 221%.
TSR (p, rebased to Clinigen)
900
800
700
600
500
400
300
200
100
0
Sep 12
Sep 13
Sep 14
Sep 15
Clinigen
FTSE All-Share
FTSE 350 Pharma & Bio
FTSE Small Cap
41
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 GOVERNANCE CONTINUED
Report of the Directors
for the year ended 30 June 2016
DIVIDEND
As explained in the CFO statement, the
Directors propose a final dividend of 2.7
pence per share, subject to approval at
the AGM on 11 November 2016. The
dividend will be payable on 25 November
2016 to all shareholders on the register
at 4 November 2016. Together with the
interim dividend of 1.3 pence per share
paid on 8 April 2016, this makes a combined
dividend for the year of 4.0 pence per
share (2015: 3.4 pence per share).
EVENTS AFTER THE REPORTING DATE
There have been no significant events to
report since the date of the balance sheet.
DIRECTORS AND APPOINTMENT OF
DIRECTORS
The Directors who served during the
year and up to the date of signing the
financial statements were, unless
otherwise stated, as follows:
P George
S Chilton
M Abell (appointed 3 August 2015)
P Allen (Non-Executive Chairman)
J Hartup (Non-Executive)
I Nicholson (Non-Executive)
R Sibson (Non-Executive)
J Bacon (Non-Executive) (appointed
27 October 2015)
With regard to the appointment of Directors,
the Company is governed by its Articles
of Association, the Companies Act and
related legislation. Directors are subject
to re-election at intervals of not more
than three years. J Hartup, Senior Non-
Executive Director and Shaun Chilton, CEO
– designate, will be retiring by rotation and
offering themselves for re-election at the
AGM to be held on 11 November 2016.
The Directors present their report
together with the Strategic Report and the
audited consolidated financial statements
for the year ended 30 June 2016.
Link Healthcare provides local
exclusive access to unlicensed,
licensed or generic medicines in the
Australasia, Africa and Asia region.
Clinigen Group plc is a public limited
company, which is listed on the Alternative
Investment Market and incorporated and
domiciled in the UK.
The five operating businesses work
in synergy to attain our primary aim
of supplying “the right medicine to
the right patient at the right time”.
PRINCIPAL ACTIVITIES
Clinigen is a specialty global pharmaceutical
and services company headquartered
in the UK, with offices in the US, South
Africa, Australia, New Zealand, Japan,
Hong Kong and Singapore. The Parent
Company is a holding company for the
Group, holding the product portfolio
of intangible assets of the Group and
providing management services for the
other Group companies which undertake
the Group’s five operating businesses.
During the year, Clinigen acquired Link
Healthcare and its subsidiary undertakings.
Due to an earn-out attached to the
acquisition, Link Healthcare remains a
separate operating business. Clinigen
Clinical Trial Services (CTS), Idis Managed
Access (“Idis MA”), Idis Global Access (“Idis
GA”) and Clinigen Specialty Pharmaceuticals
(“SP”) were unchanged by the acquisition.
Clinigen SP focuses on acquiring and
in-licensing specialist, hospital-only
medicines worldwide, commercialising and
revitalising them within niche markets.
Idis MA specialises in the consultancy,
development, management and
implementation of managed access
programmes for biotechnology and
pharmaceutical companies.
Clinigen CTS Limited and Clinigen CTS
Inc. jointly form the operating business
Clinical Trials Services ('Clinigen CTS'), which
sources commercial medical products for
use in clinical studies, including comparator
drugs, adjuvant drugs and rescue therapies.
Idis GA works directly with healthcare
providers to enable ethical compliant
access to unlicensed medicines.
BUSINESS REVIEW AND FUTURE
DEVELOPMENTS
The business review is included
within the operational review and
can be found on pages 18 to 27.
KEY PERFORMANCE INDICATORS
The Group’s key performance indicators
are discussed in the Strategic Report.
FINANCIAL INSTRUMENTS
The Group’s operations expose it to a
variety of financial risks that include credit
risk, liquidity risk and foreign exchange
risk. The Group has a risk management
programme that seeks to limit the adverse
effects on the financial performance of the
Group by monitoring levels of debt finance
and related finance costs and managing
foreign currency transactions. The Group
has implemented policies that require
appropriate credit checks before a sale is
made. The Group reduces its exposure
to currency fluctuations on translation by
managing currencies at Group level using
bank accounts denominated in foreign
currencies. Where there is sufficient
visibility of currency requirements, forward
contracts are used to hedge its exposure
to foreign currency fluctuations.
Further detail is provided in note 20.
CREDITOR PAYMENT POLICY
It is the policy and normal practice of the
Group to make payments due to suppliers
in accordance with agreed terms and
conditions, generally 30 days. Where
suppliers offer early settlement discounts,
these may be taken advantage of. The
policy will also be applied for 2017.
42
Clinigen Group plc Annual Report and Accounts 2016 DIRECTORS' INTERESTS
The interests of the Directors over the ordinary share capital of the Company are as follows:
P George
R Sibson
J Bacon
S Chilton
P Allen
M Abell
J Hartup
I Nicholson
Number of
shares at
30 June
2016
5,557,242
1,480,515
930,767
303,800
45,732
19,404
10,000
10,000
Number of
shares at
1 July
2015
5,557,242
2,480,515
-
303,800
45,732
-
10,000
10,000
8,357,460
8,407,289
There has been no change in the interests set out above between 30 June 2016 and 28 September 2016.
DIRECTORS’ RESPONSIBILITIES
STATEMENT
The Directors are responsible for
preparing the annual report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group financial
statements in accordance with International
Financial Reporting Standards ('IFRSs') as
adopted by the European Union, and the
Parent Company financial statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards and
applicable law). 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 the Company
and of the profit or loss of the Group for
that period. In preparing these financial
statements, the Directors are required to:
– select suitable accounting policies and
then apply them consistently;
– make judgements and accounting
estimates that are reasonable
and prudent;
– state whether IFRSs as adopted by the
European Union and applicable UK
Accounting Standards have been
followed, subject to any material
departures disclosed and explained in the
Group and Parent Company financial
statements respectively;
– prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Company and the Group and enable
them to ensure that the financial statements
and the Directors’ Remuneration Report
comply with the Companies Act 2006 and, as
regards the Group financial statements,
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of
the Company and the Group and hence for
taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual
Report and Accounts, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess a company’s
performance, business model and strategy.
Each of the Directors, whose names and
functions are listed in the Report of the
Directors confirm that, to the best of their
knowledge:
– the Group financial statements, which
have been prepared in accordance with
IFRSs as adopted by the European Union,
give a true and fair view of the assets,
liabilities, financial position and profit of
the Group; and
– the Directors’ report includes a fair review
of the development and performance of
the business and the position of the Group,
together with a description of the principal
risks and uncertainties that it faces.
43
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 GOVERNANCE CONTINUED
Report of the Directors
for the year ended 30 June 2016
DIRECTORS’ INDEMNITIES
The officers of the Company and its
subsidiaries would be indemnified in respect
of proceedings which might be brought by a
third party. No cover is provided in respect
of any fraudulent or dishonest actions.
AGM NOTICE
The notice convening the AGM to be held
on 11 November 2016, together with
an explanation of the resolutions to be
proposed at the meeting, is contained
in a separate circular to shareholders.
EMPLOYEES
The policies relating to employees are
discussed in the Corporate Responsibility
section of the Strategic Report.
POLITICAL DONATIONS
In line with the established policy, the
Group made no political donations.
INDEPENDENT AUDITORS
The auditors, PricewaterhouseCoopers LLP,
have expressed their willingness to continue
in office and a resolution to re-appoint them
will be proposed at the forthcoming AGM.
This report was approved by the Board
and signed by order of the Board:
MARTIN ABELL
Chief Financial Officer
27 September 2016
Although the Group does not make,
and does not intend to make, political
donations, the definition of political
donations under the Companies Act
2006 includes broad and potentially
ambiguous definitions of the terms “political
donation” and “political expenditure”,
which may apply to some normal business
activities which would not generally be
considered to be political in nature.
As in previous years, a resolution will be
proposed at the AGM seeking shareholder
approval for the Directors to be given
authority, to make political donations and/
or to incur political expenditure, in each
case within the meaning of the Companies
Act 2006. The Directors wish to emphasise
that the proposed resolution is sought on a
purely precautionary basis in order to avoid
inadvertent contravention of the Companies
Act 2006. The Board has no intention of
entering into any party political activities.
PROVISION OF INFORMATION TO THE
AUDITORS
Each of the Directors at the time
when this Report of the Directors is
approved has confirmed that:
– so far as that Director is aware, there is no
relevant audit information of which the
Company’s and the Group’s auditors are
unaware; and
– that Director has taken all the steps that
ought to have been taken as a Director in
order to be aware of any information
needed by the Company and the Group’s
auditors in connection with preparing
their report and to establish that the
Company and the Group’s auditors are
aware of that information.
44
Clinigen Group plc Annual Report and Accounts 2016 Independent auditors’ report
to the members of Clinigen Group plc
Report on the group financial statements
OUR OPINION
In our opinion, Clinigen Group plc’s group financial statements (the
“financial statements”):
– give a true and fair view of the state of the group’s affairs as at
30 June 2016 and of its profit and cash flows for the year then ended;
– have been properly prepared in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the
European Union; and
– have been prepared in accordance with the requirements of the
Companies Act 2006.
WHAT WE HAVE AUDITED
The financial statements, included within the Annual Report,
comprise:
– the consolidated statement of financial position as at 30 June 2016;
– the consolidated income statement and statement of
comprehensive income for the year then ended;
– the statement of cash flows for the year then ended;
– the statement of changes in equity for the year then ended; and
– the notes to the financial statements, which include a summary
of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the
preparation of the financial statements is IFRSs as adopted by the
European Union, and applicable law.
In applying the financial reporting framework, the directors have
made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they
have made assumptions and considered future events.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVES
We conducted our audit in accordance with ISAs (UK & Ireland). An
audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of:
– whether the accounting policies are appropriate to the group’s
circumstances and have been consistently applied and
adequately disclosed;
– the reasonableness of significant accounting estimates made by
the Directors; and
– the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’
judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, 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.
We test and examine information, using sampling and other auditing
techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
ADEQUACY OF INFORMATION AND EXPLANATIONS RECEIVED
Under the Companies Act 2006 we are required to report to you if, in
our opinion, we have not received all the information and
explanations we require for our audit. We have no exceptions to
report arising from this responsibility.
In addition, we read all the financial and non-financial information in
the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to report to you if, in
our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from
this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND
THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
As explained more fully in the Directors’ Responsibilities Statement
set out on page 43, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view.
OTHER MATTER
We have reported separately on the Company financial statements
of Clinigen Group plc for the year ended 30 June 2016.
ANDREW HAMMOND (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
27 September 2016
45
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Consolidated income statement
for the year ended 30 June 2016
(In £m)
Revenue
Cost of Sales
Gross profit
Administrative expenses
Profit from operations
Finance cost
Share of profit of joint venture
Profit before tax
Tax
Profit attributable to owners of the parent
Company
Earnings per share
Basic
Diluted
2016
underlying
2016
non-underlying
(note 6)
Note
2016
total
2015
underlying
2015
non- underlying
(note 6)
3
3
4
7
8
9
9
339.9
(239.2)
100.7
(51.1)
49.6
(4.0)
0.4
46.0
(10.3)
–
(4.6)
(4.6)
(24.8)
(29.4)
(0.7)
–
(30.1)
7.9
339.9
(243.8)
96.1
(75.9)
20.2
(4.7)
0.4
15.9
(2.4)
184.4
(130.7)
53.7
(26.7)
27.0
(0.9)
–
26.1
(5.7)
–
–
–
(17.8)
(17.8)
–
–
(17.8)
3.1
35.7
(22.2)
13.5
20.4
(14.7)
11.9
11.8
2015
total
184.4
(130.7)
53.7
(44.5)
9.2
(0.9)
–
8.3
(2.6)
5.7
6.5p
6.3p
Consolidated statement of comprehensive income
for the year ended 30 June 2016
(In £m)
Profit for the period attributable to the owners of the parent
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange gains/(losses) arising in the period on translation of
foreign operations
Total comprehensive income attributable to owners of
the parent
All amounts relate to continuing operations.
2016
underlying
2016
non-
underlying
(note 6)
2016
total
2015
underlying
2015
non-underlying
(note 6)
2015
total
35.7
(22.2)
13.5
20.4
(14.7)
5.7
0.6
–
0.6
(0.1)
–
36.3
(22.2)
14.1
20.3
(14.7)
(0.1)
5.6
The Company has elected to take exemption under section 408 of the Companies Act 2006 not to present the Company Income Statement.
The notes on pages 50 to 81 form an integral part of the consolidated financial statements.
46
Clinigen Group plc Annual Report and Accounts 2016
Consolidated statement of financial position
as at 30 June 2016
(In £m)
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in joint venture
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Trade and other payables
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Provisions
Loans and borrowings
Corporation tax liability
Financial instrument liability
Total current liabilities
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent company
Share capital
Share premium account
Merger reserve
Foreign exchange reserve
Retained earnings
Total equity
Note
2016
2015
restated
11
12
13
21
14
15
16
17
18
21
17
19
18
20
22
23
23
23
23
2.7
333.7
7.4
3.5
347.3
16.0
68.8
27.8
112.6
459.9
11.0
25.9
22.2
59.1
90.8
0.8
70.0
1.4
1.3
164.3
223.4
236.5
0.1
160.7
5.4
0.4
69.9
236.5
1.6
302.5
–
5.0
309.1
11.1
71.1
27.8
110.0
419.1
–
34.5
21.6
56.1
87.1
1.5
69.5
0.3
–
158.4
214.5
204.6
0.1
141.0
5.4
(0.2)
58.3
204.6
The notes on pages 50 to 81 form an integral part of the consolidated financial statements.
The financial statements on pages 46 to 81 were approved and authorised for issue by the Board of Directors on 27 September 2016 and
were signed on its behalf by:
P GEORGE
Director
M ABELL
Director
47
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016
Consolidated statement of cash flows
for the year ended 30 June 2016
(In £m)
Cash flows from operating activities
Profit for the year before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Impairment of intangible fixed assets
Loss on disposal of non-current assets
Provision for restructuring costs
Fair value of derivatives
Release of fair value on acquired inventory
Share of profit of joint venture
Finance cost
Share-based payment expense
Decrease/(increase) in trade and other receivables
Increase in inventories
(Decrease)/increase in trade and other payables
Cash generated from operations
Income taxes paid
Income taxes received
Interest paid
Net cash generated from operating activities
Investing activities
Purchases of property, plant and equipment
Purchase of intangible fixed assets
Purchase of subsidiary net of cash acquired
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Proceeds from loan
Loan repayments
Dividends paid
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains / (losses)
Cash and cash equivalents at end of year
48
Note
2016
2015
15.9
0.8
20.0
–
0.1
0.8
1.3
4.6
(0.4)
4.7
1.8
49.6
8.1
(2.1)
(6.2)
49.4
(3.7)
–
(3.6)
42.1
(1.3)
(6.7)
(22.4)
(30.4)
0.3
27.6
(36.1)
(4.1)
(12.3)
(0.6)
27.8
0.6
27.8
8.3
0.4
7.1
3.4
1.3
1.5
–
–
–
0.9
1.3
24.2
(10.3)
(1.8)
3.7
15.8
(5.2)
3.4
(0.9)
13.1
(0.2)
(8.4)
(179.7)
(188.3)
132.4
104.0
(52.5)
(2.6)
181.3
6.1
21.8
(0.1)
27.8
11
12
12
11
19
6
7
6
11
12
28
18
18
10
16
16
Clinigen Group plc Annual Report and Accounts 2016
Consolidated statement of changes in equity
for the year ended 30 June 2016
Foreign
exchange
reserve
Retained
earnings
(In £m)
At 1 July 2014
Profit for the period
Other comprehensive income
Total comprehensive income
Share based payment scheme
Deferred taxation on share based payment
scheme
Tax credit in respect of tax losses arising on
exercise of share options
Issue of new shares
Own shares distributed on exercise of share
options
Dividend paid (note 10)
Total contributions by and distributions to
owners of the parent, recognised directly in
equity
At 30 June 2015
(In £m)
At 1 July 2015
Profit for the period
Other comprehensive income
Total comprehensive income
Share based payment scheme
Deferred taxation on share based payment
scheme
Tax credit in respect of tax losses arising on
exercise of share options
Issue of new shares
Dividend paid (note 10)
Total contributions by and distributions to
owners of the parent, recognised directly
in equity
At 30 June 2016
Share
capital
0.1
–
–
–
–
–
–
–
–
–
–
0.1
Share
capital
0.1
–
–
–
–
–
–
–
–
–
0.1
Share
premium
account
8.6
–
–
–
–
–
–
132.4
–
–
132.4
141.0
Share
premium
account
141.0
–
–
–
–
–
–
19.7
–
19.7
160.7
Merger
reserve
5.4
–
–
–
–
–
–
–
–
–
–
5.4
Own
shares
(0.3)
–
–
–
–
–
–
–
0.3
–
0.3
–
(0.1)
–
(0.1)
(0.1)
–
–
–
–
–
–
–
(0.2)
5.4
–
–
–
–
–
–
–
–
–
5.4
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
0.6
0.6
–
–
–
–
–
–
0.4
–
58.3
132.7
204.6
Merger
reserve
Own
shares
Foreign
exchange
reserve
Retained
earnings
Total
equity
66.3
5.7
(0.1)
5.6
1.3
1.3
0.3
132.4
–
(2.6)
Total
equity
204.6
13.5
0.6
14.1
1.8
(1.6)
2.0
19.7
(4.1)
52.6
5.7
–
5.7
1.3
1.3
0.3
–
(0.3)
(2.6)
58.3
13.5
–
13.5
1.8
(1.6)
2.0
–
(4.1)
(1.9)
69.9
17.8
236.5
49
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
for the year ended 30 June 2016
1. ACCOUNTING POLICIES
The principal accounting policies adopted by the Group and applied in the preparation of these consolidated financial statements are set out
below. The policies have been consistently applied to all years presented, unless otherwise stated.
BASIS OF PREPARATION
The consolidated financial statements of Clinigen Group plc have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively ‘IFRSs’) issued by the International Accounting Standards
Board (‘IASB’) as adopted by the European Union (‘adopted IFRSs’) and with those parts of the Companies Act 2006 that are applicable to
companies that prepare financial statements in accordance with IFRSs. The consolidated financial statements have been prepared under the
historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair
value through profit or loss.
The financial statements for the year ended 30 June 2015 have been restated to reflect adjustments to the fair values of the assets and
liabilities acquired in Idis. The provisional fair values have been reviewed by the directors during the current year. This review resulted in a
reduction in the fair value of the computer software, an increase in the fair value of trade receivables, corresponding adjustments to deferred
taxation and an decrease in goodwill. Additional detail is disclosed in note 28.
The preparation of financial statements in conformity with adopted IFRS requires the use of certain critical accounting estimates. It also
requires Group management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 2.
GOING CONCERN
The Group’s strategy and forecasts, taking account of sensitivities within the trading projections and possible changes in trading performance,
show that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has further funds
available in the undrawn proportion of the bank facility, which combined with the Group’s cash balance and positive cash generation from
each of its operations provides funding for future acquisitions in line with the Group’s acquisitional growth strategy. The Group therefore
continues to adopt the going concern basis in preparing its consolidated financial statements. Further information on the Group’s borrowing
facilities is given in note 18.
PRESENTATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH IAS 1 (AS AMENDED 2012)
The financial statements are presented in accordance with IAS 1 ‘Presentation of Financial Statements’ (as amended 2012). The Group has
elected to present the ‘Statement of comprehensive income’ in one statement.
CHANGES IN ACCOUNTING POLICIES
(a) New and amended standards, interpretations and amendments adopted by the Group:
The following new or recent standards, interpretations and amendments to standards have been adopted by the Group where appropriate or
applicable to the Group for the financial year beginning 1 July 2015:
– There were no new standards, interpretations or amendments to standards that are effective to the Group for the financial year beginning
1 July 2015 that have a material impact
(b) New standards, interpretations and amendments not yet adopted:
The following standards and amendments have been published, endorsed by the EU, and are available for early adoption, but have not yet
been applied by the Group in these financial statements.
– Accounting for acquisitions of interests in joint operations (Amendments to IFRS 11) – effective for annual periods beginning on or after
1 January 2016.
– Clarification of acceptable methods of depreciation and amortisation (Amendments to IAS 16 and IAS 38) – effective for annual periods
beginning on or after 1 January 2016.
– Equity method in separate financial statements (Amendments to IAS 27) – effective for annual periods beginning on or after 1 January 2016.
– Disclosure initiative (amendments to IAS 1) – effective for annual periods beginning on or after 1 January 2016.
– Investment entities – applying the consolidation exception (Amendments to IFRS 10, IFRS 12 and IAS 28) – effective for annual periods
beginning on or after 1 January 2016.
In addition to the above, amendments to a number of standards under the annual improvements project to IFRS have been endorsed by the
EU but not yet adopted.
None of these new standards or amendments are expected to have a material impact on the Group’s financial statements.
50
Clinigen Group plc Annual Report and Accounts 2016 BASIS OF CONSOLIDATION
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Subsidiaries
are those entities where the Company has the ability to control the activities of and decisions made by that entity and to receive economic
benefits that can be affected by that control.
The results of subsidiaries acquired during the period are included in the consolidated statement of comprehensive income from the date on
which control is transferred to the Group. Accounting policies of subsidiaries are changed when necessary to ensure consistency with the
accounting policies adopted by the Group.
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. The Group’s share of
post-acquisition profit or loss is recognised in the consolidated statement of comprehensive income with a corresponding adjustment to the
carrying value amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the
Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines, at each reporting date, whether there is any objective evidence that the investment in associate is impaired. If this is
the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying
value and recognises the amount adjacent to “share of profit or loss of investment” in the consolidated statement of comprehensive income.
Under IFRS 11 ‘Joint Arrangements’, investments in joint arrangements are classified as either joint operations or joint ventures. The
classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.
Intercompany transactions and balances are eliminated on consolidation.
BUSINESS COMBINATIONS
The Group uses the acquisition method to account for business combinations of entities not under common control. The consideration
transferred for the acquisition of a subsidiary is equal to the fair value of the assets transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-
controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value
of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the
subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.
Acquisition costs and post-acquisition restructuring costs are recognised in the statement of comprehensive income as adjusting items as
they do not relate to normal trading activities and to reflect their one-off nature.
FOREIGN CURRENCY
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (the ‘functional currency’). The consolidated financial statements are presented in sterling, being the currency of
the primary economic environment in which the Company operates. This is the Group’s presentation currency.
(b) Transactions and balances
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they
operate (their ‘functional currency’) are recorded at the exchange rates prevailing at the dates of the transactions or valuation where items
are re-measured. Foreign currency monetary assets and liabilities are translated at the exchange rates prevailing at the reporting date. All
foreign exchange gains and losses are presented in the consolidated statement of comprehensive income within administrative expenses.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
a) assets and liabilities for each balance sheet presented are translated at the closing rate on the date of that balance sheet;
b) income and expenses for each income statement are translated at average exchange rates for the financial period which is being included
in the consolidated statement of comprehensive income; and
c) all resulting exchange differences are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
51
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
1. ACCOUNTING POLICIES CONTINUED
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up
to the date of disposal would be transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the Executive Directors.
The Board considers that the Group’s activities constitute five operating segments, as defined under IFRS 8. Management reviews the
performance of the Group by reference to the results of the operating segments against budget and the total results against budget.
Gross profit is the profit measure, as disclosed on the face of the consolidated statement of comprehensive income that is reviewed by the
chief operating decision maker at the segmental reporting level. The performance measures used by management are prepared under UK
GAAP whereas the figures in the Group financial information have been prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) and IFRIC Interpretations issued by the International Accounting Standards Board as adopted by the European Union.
SHARE-BASED PAYMENTS
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated
statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period
is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value
of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting
condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately
before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.
NON-UNDERLYING ITEMS
Non-underlying items are those significant items which the Directors consider are not related to the normal trading activities of the Group
and are therefore separately disclosed to enable full understanding of the Group’s financial performance.
a) Share-based payments are classified as non-underlying due to their significance and in order to provide the reader of the consolidated
financial statements with a consistent view of the underlying costs of the operating Group.
b) One-off items relating to acquisitions e.g. acquisition costs and the costs of restructuring post-acquisition are shown as non-underlying
items.
c) Amortisation of intangible fixed assets acquired as part of business combinations, the unwind of discounts in contingent consideration
and the release of the fair value of inventory acquired through a business combination are shown as non-underlying items in order to give a
clear view of the underlying results of the business.
d) The impairment of intangible assets and contractual costs incurred after the impairment are shown as non-underlying costs as these
relate to the cessation of development activity on one product and as such do not represent normal trade activities.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less accumulated depreciation. As well as the purchase price, cost includes
directly attributable costs.
Depreciation is provided on all items of property, plant and equipment at rates calculated to write off the cost of each asset on
a straight-line basis over its expected useful economic lives, as follows:
– Leasehold improvements
– Plant and machinery
– Fixtures, fittings and equipment
• remaining term of lease to which the improvements relate
• 20%
• 20% to 33% straight line
INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior to 1 July
2010, the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.
52
Clinigen Group plc Annual Report and Accounts 2016
For business combinations completed after 1 July 2010, goodwill represents the excess of the cost of a business combination over the
Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities including those intangible assets identified under
IFRS 3 ‘Business Combinations’.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of
comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration
paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
Goodwill is not amortised. Goodwill is assessed for impairment annually or more frequently if events or changes indicate a potential impairment.
Goodwill arising on business combinations is allocated on the basis of contribution to gross profit of the associated CGUs. This is then
assessed against the discounted cash flows of the CGUs for impairment.
Brand
The brand reflects the cashflows associated with the Idis business acquired April 2015 and the Link, Homemed and Equity brands purchased
in October 2015. Each brand was recognised following the associated business combination and is initially recognised at the fair value of the
asset at the acquisition date. The carrying value of the brand is calculated as cost less accumulated amortisation. Amortisation is calculated
using the straight line method to allocate the fair value cost of the asset over its estimated useful life, the estimated useful lives range
between 10 and 20 years. The amortisation expense is recognised within administrative expenses in the consolidated statement of
comprehensive income as an adjustment item.
Contracts
The contracts relate to key supplier contracts which were identified, on the business combination, as important to the trade of the acquired
business. The supply of product on a contractual and often exclusive basis is a key value driver of the business and in the decision to acquire
the business.
The contracts have been initially recognised at the fair value of the asset at the acquisition date. The assets are subsequently recognised at
initial fair value less accumulated amortisation.
Amortisation is scheduled to follow the expected economic benefits, recognising the fair value cost of acquiring these contracts against the
revenues generated from them. This is normally on a straight line basis over the term of the contract, except for managed access programs
which, due to their nature, have a short period of economic benefit i.e. until the product is licenced and becomes commercially available. The
economic benefits from managed access program contracts are weighted to the early stages of the contract.
The amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income as
an adjustment item.
Customer relationships
The customer relationships within acquired operating businesses can be separately identified. The customer relationships have been initially
recognised following a business combination at the fair value of the asset at the acquisition date.
Amortisation is calculated on a straight line basis to allocate the fair value cost of each asset over their estimated useful lives, as follows:
– Customer relationships – Link
– Customer relationships – CTS
– Customer relationships – GA
• between six and nine years
• seven years
• between seven years and 14 years
The amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income
as an adjustment item.
Trademarks and licences
Separately acquired trademarks and licences are initially recognised at cost, being the fair value of the purchase price of the asset and any
directly attributable cost of preparing the asset for its intended use.
The carrying value of trademarks and licences is calculated as cost less accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost of the trademarks and licences over their estimated useful lives of between seven and 15 years.
The amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income.
53
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016
Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
1. ACCOUNTING POLICIES CONTINUED
Computer software
Computer software purchased to improve the Group’s ability to deliver its goods and services and is intended to be used over a number of
years is capitalised and recognised at cost, being the purchase price of the asset and any directly attributable cost of preparing
the asset for its intended use. No internal cost for time spent is capitalised as part of the asset. The carrying value of computer software is
calculated as cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the
computer software over their estimated useful lives of three to five years.
The amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income.
Impairment reviews
Impairment reviews are undertaken annually at the end of the financial year or more frequently if events or changes in circumstances indicate
a potential impairment. The carrying value of individual intangible and tangible assets are compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. An impairment loss is recognised for the amount by which the asset’s carrying value
exceeds its recoverable amount.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of
assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (‘CGUs’). Goodwill is allocated on
initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.
Non-financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
INVESTMENTS
Investments in subsidiaries are recorded at historical cost, less any provision for impairment.
Investments in associates and joint ventures are accounted for using the equity method of accounting. Under the equity method, the
investment is initially recorded at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or
loss of the investee after the date of acquisition.
INVENTORIES
Inventories are initially recognised at cost and subsequently stated at the lower of cost and net realisable value. Individual units of drugs
cannot be interchanged as they are determined by the customer’s requirements for product name, dosage strength, pack size, batch number
and expiry date. In accordance with IAS 2 ‘Inventories’ paragraph 23, items are recorded at their individual cost. To minimise obsolescence,
cost is selected using first expiry, first out method. Cost comprises all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. Net realisable value is the estimated selling price less applicable variable
selling expenses. Provisions are made for slow moving and damaged inventories. Inventories which have expired are fully provided for until
they are destroyed, when they are written off.
A number of arrangements exist where the Group holds inventories on consignment. This is not recognised in the inventories of the Group
until the risks and rewards of ownership are transferred.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Derivative financial instruments are recognised initially at their fair value and re-measured at fair value at each period end. The gain or loss on
re-measurement to fair value is recognised immediately in the consolidated statement of comprehensive income. The Group has not applied
hedge accounting. Foreign forward exchange derivative gains and losses are recognised net.
TRADE AND OTHER RECEIVABLES
Trade receivables arise principally through the provision of goods and services to customers in the ordinary course of the business. They are
recognised initially at the original invoice value and subsequently original invoice value less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty
or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount
of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated
with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with
the movement in the provision being recognised within administrative expenses in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, deposits held at call with banks and other highly-liquid cash investments.
54
Clinigen Group plc Annual Report and Accounts 2016 BORROWINGS
Borrowings are initially recognised at fair value net of transaction costs, including facility fees incurred. Such interest bearing liabilities are
subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period
to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. Facility fees paid on
the establishment of facilities and for the maintenance of the facility are capitalised against the loans and borrowings balance. These are
amortised as the loan is repaid with the associated amortisation expense recognised in finance costs.
TRADE AND OTHER PAYABLES
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. They
are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables
are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.
DEFERRED AND CONTINGENT CONSIDERATION
Deferred consideration payable in cash in respect of the acquisition of intangible assets is recognised initially at its fair value at the date of
acquisition. There is no other form of deferred consideration payable. The difference between the fair value of the deferred consideration
and the amounts payable in the future is recognised as a finance cost over the deferment period.
Contingent consideration on business combinations is initially measured at fair value and is payable in cash. The fair value of the contingent
liability is re-measured at each period end and the change in fair value is recognised in the consolidated statement of comprehensive income
as a non-underlying item.
They are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
RETIREMENT BENEFITS: DEFINED CONTRIBUTION SCHEMES
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to
which they relate. The Group has no further payment obligations once the contributions have been paid.
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, it is
more likely than not that an outflow of economic benefits will be required to settle the obligation and the obligation can be estimated reliably.
Provisions are discounted if the impact on the provision is deemed to be material.
LEASED ASSETS
Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis.
Benefits received and receivable as an incentive to sign and operating lease are similarly spread on a straight-line basis over the lease term,
except where the period to the review date on which the rent is first expected to be adjusted to the prevailing market rate is shorter than the
full lease term, in which case the shorter period is used.
DIVIDENDS
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when paid. In the
case of final dividends, this is when approved by the shareholders.
CURRENT AND DEFERRED TAX
The tax expense 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 in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.
The current tax charge, including UK corporation tax and foreign tax, is calculated on the basis of the laws that have been enacted or
substantively enacted by the balance sheet date. Provisions are established, where appropriate, on the basis of amounts expected to be paid.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising on:
– the initial recognition of goodwill;
– the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting nor taxable profit; and
– investments in subsidiaries and jointly-controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future.
55
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
1. ACCOUNTING POLICIES CONTINUED
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
differences can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the deferred tax liabilities or assets are settled or recovered, respectively.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
– the same taxable Group Company; or
– different Company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be
settled or recovered.
SHARE CAPITAL
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Group’s Ordinary Shares are classified as equity instruments.
REVENUE
Revenue represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, VAT and
other sales-related taxes. The revenue recognition for the operational areas of the business is:
Supply of products
Revenue from the supply of products is recognised when the Group has transferred the significant risks and rewards of ownership to the
buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the
goods are delivered to the buyer. Revenue is recognised at the fair value of consideration received or receivable.
Managed Access service fees
All services provided in relation to Managed Access are contractually agreed with the product originator. Revenue for these services is
recognised in the period when the outcome of the services set out in the contract can be estimated reliably and the stage of completion can
be measured reliably.
Contracted program set up fees can be either for the whole project or triggered by milestones being achieved which are laid out in the
contract. Revenue is recognised in relation to these fees when the contracted milestones are achieved.
Monthly management fees are recognised as revenue in the month to which they relate and once contractual services have been provided.
Revenue in respect of program management fees is recognised when goods, provided under the program, have been dispatched to the
customer for whom the management fee relates. Revenue is recognised at the fair value of consideration received or receivable.
Royalties
Royalty income is earned on product distribution agreements based upon a percentage of sales, the income is recognized on an accrual basis.
Revenue in all years principally arises from the three income streams discussed above. Further information is available in note 3, Segment
information.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions 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.
(A) BUSINESS COMBINATIONS
In accounting for business combinations, the identifiable assets, liabilities and contingent liabilities acquired have to be measured at their fair
values. In particular, some judgement is required in estimating the fair value of inventory with reference to current selling prices and an
assessment of obsolescence and demand for inventory; the fair value of trade debtors with reference to the ageing and recoverability of these
and judgements in estimating the valuation of intangible assets with reference to forecast future sales under the pre-existing contracts and
relationships where legal contracts are not in place. Details concerning acquisitions and business combinations are outlined in note 28.
56
Clinigen Group plc Annual Report and Accounts 2016 (B) IMPAIRMENT OF GOODWILL
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1. The
recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and
the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information including
carrying values is included in note 12.
(C) CARRYING VALUE OF INTANGIBLE ASSETS EXCLUDING GOODWILL
The carrying value of intangible assets is at cost less amortisation and any impairment. Annual impairment trigger reviews are undertaken
at the end of the financial year or more frequently if events or changes in circumstances indicate a potential impairment. Trademarks and
licences are not traded in an active market hence the fair value of the asset is determined using discounted cash flows which involves the
Group using judgement and assumptions.
(D) INVENTORY PROVISIONING
The Company’s principal activities during the year related to the management, sale and distribution of pharmaceutical products which have
associated expiry dates. As a result it is necessary to consider the recoverability of the cost of the inventory and the associated provisioning
required. Management consider the nature and condition of inventory, the remaining expiry period, as well as apply assumptions around
expected future demand for the inventory, when calculating the level of inventory provisioning. See note 14 for the net carrying value of
inventory and associated provision.
(E) IMPAIRMENT OF TRADE RECEIVABLES
The Company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other
receivables, management considers factors including the credit rating and age profile of the receivable and historic experience. See note 15
for the net carrying amount of the receivables and the associated impairment provision.
(F) DEFERRED TAXATION
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the
difference can be utilised. The future taxable profits are based on forecasts and thus actual may vary.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the deferred tax liabilities or assets are settled or recovered. A change in rate would change these calculations.
The deferred tax asset recognised on share options, not yet exercised, is calculated based on the market price of the shares at the end of the
reporting period. The market price at the exercise date would be expected to be different, hence the actual asset recognisable at exercise is
likely to differ to the one recognised at the reporting date.
(G) CONTINGENT CONSIDERATION
Contingent consideration is initially measured at the net present value of the cash flows, discounted using an appropriate discount rate, to be
paid pursuant to the relevant agreements. The fair value of the contingent liability is re-measured at each period end utilising the latest
financial forecasts. The change in fair value is recognised in the consolidated statement of comprehensive income as a non-underlying item.
3. SEGMENT INFORMATION
The Group has five main reportable segments, being the Group’s operating businesses:
Clinigen Clinical Trial Services (‘CTS’) sources commercial medical products for use in clinical studies, including comparator drugs, adjuvant
drugs and rescue therapies. This operating business accounts for the largest proportion of the Group’s revenue, generating 40% (2015: 61%)
of its external revenues.
Idis Managed Access (‘MA’) specialises in the consultancy, development, management and implementation of managed access programs for
biotechnology and pharmaceutical companies. The operating business contributed 30% (2015: 16%) of the Group’s external revenues.
Idis Global Access (‘GA’) provides high quality ethical access to post approval and short-supply medicines, in regions where patients have low
or non-existent access to these often essential drugs. In FY16, it contributed 12% (2015: 5%) to the Group’s external revenues; this operating
business was acquired as part of Idis and hence, the 2015 revenue and gross profit figure represent two months of trading.
Clinigen Specialty Pharmaceuticals (‘SP’) manufactures and distributes its own and in-licensed specialist, hospital-only medicines worldwide
and contributed 11% (2015: 18%) of the Group’s external revenues.
Link Healthcare specialises in distribution of pharmaceutical products in South Africa and the APAC region. Although there is some overlap
with the nature of products and services supplied by MA, GA and SP, the geographical location and specialised regulatory experience required
57
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
3. SEGMENT INFORMATION CONTINUED
in these areas determines the separate management of this operating business. In FY16, it contributed 7% to the Group’s external revenues;
this operating business was acquired in October 2015 and is new to the Group. The revenue and gross profit figures represent the eight
months of trading since acquisition.
FACTORS THAT MANAGEMENT USED TO IDENTIFY THE GROUP’S REPORTABLE SEGMENTS
The Group’s reportable segments are strategic operating business units that provide different products and service offerings into different
market environments. They are managed separately because each operational business requires different expertise to deliver the different
product or service offering they provide.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker has been identified as the Executive Directors.
MEASUREMENT OF OPERATING SEGMENT PROFIT OR LOSS, ASSETS AND LIABILITIES
The accounting policies of the operating segments are the same as those described in note 1.
The Group evaluates performance of the operational segments on the basis of gross profit or loss from operations.
CLASSES OF BUSINESS
(In £m)
Revenue arises from:
Clinical Trial Services
Managed Access
Global Access
Specialty Pharmaceuticals
Link Healthcare
Gross profit arises from:
Clinical Trial Services
Managed Access
Global Access
Specialty Pharmaceuticals
Link Healthcare
Adjustment for fair value of acquired stock sold in period
Gross profit
Administrative expenses relating to underlying operations
Administrative expenses relating to non-underlying operations (note 6)
Costs of restructuring
Share-based payment expense
Social security costs in respect of share-based payments
Acquisition costs
Finance costs
Share of profit of joint venture
Profit before tax
Breakdown of revenues by products and services:
Products
Services
Royalties
58
2016
2015
137.9
100.8
39.6
37.1
24.5
339.9
19.7
26.5
13.8
31.9
8.8
100.7
(4.6)
96.1
(51.1)
(15.5)
(5.6)
(1.8)
(0.5)
(1.4)
(4.7)
0.4
15.9
112.7
28.8
9.2
33.7
–
184.4
13.5
8.3
2.8
29.1
–
53.7
–
(53.7)
(26.7)
(6.0)
(3.8)
(1.3)
(1.0)
(5.7)
(0.9)
–
8.3
2016
2015
304.2
31.4
4.3
339.9
168.8
12.1
3.5
184.4
Clinigen Group plc Annual Report and Accounts 2016 GEOGRAPHICAL ANALYSIS
(In £m)
Revenue arises from the following locations:
UK
Europe
USA
Rest of World
Gross profit arises from the following locations:
UK
Germany
France
Rest of Europe
USA
Rest of World
Analysis of concentration of customers (based on customers contributing at least 10% of revenue):
Customer A – Clinical Trial Services
Other
Earnings before interest, taxation, depreciation and amortisation (‘EBITDA’) is calculated as:
2016
2015
52.1
138.5
100.1
49.2
339.9
19.3
5.1
7.6
26.2
29.3
13.2
100.7
–
339.9
339.9
26.6
57.8
77.7
22.3
184.4
8.8
5.6
6.1
12.5
17.1
3.6
53.7
28.1
156.3
184.4
(In £m)
Revenue
Cost of sales
Gross profit
Administrative expenses excluding depreciation and
amortisation (notes 11 and 12)
EBITDA
4. PROFIT/(LOSS) FROM OPERATIONS
Profit/(loss) from operations is stated after charging:
(In £m)
2016
2015
Underlying Non-underlying
Total
Underlying Non-underlying
Total
339.9
(239.2)
100.7
(45.3)
55.4
–
(4.6)
(4.6)
(9.8)
(14.4)
339.9
(243.8)
96.1
(55.1)
41.0
184.4
(130.7)
53.7
(21.4)
32.3
Staff costs
Amortisation of intangible fixed assets
Impairment of intangible fixed assets
Depreciation
Impairment of tangible fixed assets
Loss on disposal of non-current assets
Operating lease rentals – land and buildings
Difference on foreign exchange
Auditors’ remuneration
Fees payable to the Company’s auditors for the audit of the parent company and consolidated financial statements
Fees payable to the Company’s auditors for other services:
– The audit of the Company’s subsidiaries
– Other advisory services
– Tax advisory services
Included in staff costs are share-based payments of £1.8m (2015: £1.3m), or £2.3m (2015: £2.3m), including social security costs.
–
–
–
(10.9)
(10.9)
2016
28.0
20.0
–
0.8
–
0.1
1.6
(1.7)
0.2
0.2
0.1
–
184.4
(130.7)
53.7
(32.3)
21.4
2015
12.5
7.1
3.4
0.3
0.1
1.3
0.5
0.8
0.2
0.1
–
0.1
59
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
5. STAFF COSTS
(In £m)
Staff costs (including Directors) comprise:
Wages and salaries
Share-based payments
Social security costs
Other pension costs
EMPLOYEE NUMBERS
The average monthly number of staff employed by the Group during the financial year amounted to:
Number
Directors
Staff
2016
2015
23.0
1.8
2.4
0.8
28.0
2016
3
462
465
8.8
1.3
2.1
0.3
12.5
2015
3
152
155
DIRECTORS’ EMOLUMENTS
Details of the remuneration, shareholdings, share options and pension contributions of the Executive Directors are included in the
Remuneration Report on pages 40 to 41.
KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group. This is considered to be the Board of Directors.
(In £m)
Directors’ remuneration included in staff costs:
Wages and salaries
Defined contribution pension cost
Share-based payment expense
2016
2015
1.6
0.1
0.6
2.3
1.4
0.1
0.6
2.1
6. NON-UNDERLYING ITEMS
The reconciling items between the adjusted profit used for calculating adjusted basic and diluted adjusted EPS and the reported profit are:
(In £m)
Adjusted profit used in calculating basic and diluted Adjusted EPS
Amortisation of intangible fixed assets included in underlying administrative expenses
Credit in respect of tax on amortisation costs
Underlying profit after tax in Income Statement
Non-underlying items (see below)
Reported profit
2016
39.7
(5.0)
1.0
35.7
(22.2)
13.5
2015
24.4
(5.0)
1.0
20.4
(14.7)
5.7
60
Clinigen Group plc Annual Report and Accounts 2016
The adjustment items have been split out in order to give the reader of the financial statements a better understanding of the operations of
the Group. These items relate to share based payment items, amortisation and non-underlying items which are one off in nature.
(In £m)
a) Adjustment for fair value of acquired stock sold in the period
b) Share based payment costs
b) Credit in respect of deferred tax on share based payments
c) Acquisition costs
d) Restructuring costs
e) Impairment of intangible fixed assets
f) Amortisation of intangible fixed assets acquired through business combinations
g) Finance cost: unwind of discount
h) Credit in respect of tax on non-underlying costs
i) Credit in respect of rate differences on deferred tax
j) Corporation tax adjustments in respect of prior year
2016
4.6
2.3
(0.3)
1.4
5.6
0.5
15.0
0.7
(4.9)
(1.4)
(1.3)
22.2
2015
–
2.3
(0.2)
5.7
3.9
3.8
2.1
–
(2.9)
–
–
14.7
a) Under IFRS 3 inventory acquired in a business combination is valued at fair value on acquisition, which includes the profit margin in the
stock’s carrying value. The £4.6m above represents the profit margin on the stock sold in the period which was acquired with both the Idis
and Link businesses.
b) The share based payment costs are made up of the share based payment charge of £1.8m (2015: £1.3m) and related social security costs
of £0.5m (2015: £1.0m). The share based payment costs and the related tax credit in respect of the share based payment charge of £0.3m
(2015: £0.2m) are reclassified to non-underlying due to their significance and in order to provide the reader of the consolidated financial
statements with a consistent view of the costs of the Group.
c) The acquisition costs incurred in the period relating to Link Healthcare amounted to £1.4m. The main costs included £0.5m of legal advice,
£0.4m for corporate finance advice and £0.1m of stamp duty.
d) The restructuring costs of £5.6m relate mainly to the integration of the Idis and Link Healthcare acquisitions. These costs include £2.0m
of redundancy costs, £1.0m related to the closure and integration of offices, and £1.9m of incremental costs related to maintaining the Idis
IT systems which will need to be used in the short term before a new system is implemented across the Group.
e) The impairment of intangible fixed assets are further costs in respect of Vibativ to comply with the regulatory requirements up to when
this product was transferred back to the vendor on 4 August 2016. This product was fully impaired in the second half of the previous
financial year due to its loss making position.
f) The amortisation of intangible assets acquired as part of the business combination with Idis and Link, (namely Brand, trade names,
customer relationships and contracts) are reclassified to adjustments due to their significance and to provide the reader with a consistent
view of the underlying costs of the operating Group.
g) The finance cost relates to the non-cash unwind of the discount applied to the deferred consideration payable in relation to the acquisition
of Link Healthcare.
h) The tax credit in respect of non-underlying items reflects the tax benefit on the costs incurred during the year.
i) The reduction in corporation tax rate to 19% and 18% from 1 April 2017 and 1 April 2020, respectively, reduces the deferred tax balances
expected to unwind in the future creating a credit to the income statement of £1.4m. The credit is recognised in non-underlying items as
the associated deferred tax balances relate to share based payments and the fair value of acquired intangible assets.
In the prior year, the final corporation tax computations took account of allowable non-underlying items on which the tax effect had not
been recognised in the consolidated income statement. The credit has been recognised as non-underlying in line with the associated cost
in the prior year.
j)
7. FINANCE COST
(In £m)
Bank interest
Other loan interest
Borrowings costs
Amortisation of facility issue costs
Deferred consideration: unwind of discount
Underlying finance cost
Unwind of discount on contingent consideration
Total finance cost
2016
3.2
–
0.3
0.4
0.1
4.0
0.7
4.7
2015
0.7
0.2
–
–
–
0.9
–
0.9
61
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
8. INCOME TAX
(In £m)
Current tax expense
Current tax on profits of the year
Adjustment in respect of prior years
Total current tax expense
Deferred tax expense
Decrease/(increase) in deferred tax assets (note 21)
Decrease in deferred tax liability (note 21)
Total deferred tax benefit
Income tax expense
All income tax is attributable to continuing operations.
2016
2015
8.4
(1.3)
7.1
0.1
(4.8)
(4.7)
2.4
2.8
0.4
3.2
(0.2)
(0.4)
(0.6)
2.6
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profit
for the year as follows:
(In £m)
Profit before tax
Expected tax charge based on corporation tax rate of 20.0% (2015: 20.75%)
Expenses not deductible for tax purposes other than goodwill amortisation and impairment
Adjustments to tax charge in respect of prior years
Higher rates of taxes on overseas earnings
Loss arising in year for which no deferred income tax is recognised
Rate differences
Total tax expense
2016
15.9
3.2
0.5
(1.3)
0.9
0.3
(1.2)
2.4
2015
8.3
1.7
0.3
0.4
0.3
0.2
(0.3)
2.6
In the current year management have reassessed the presentation of the tax reconciliation and as such have reclassified the prior year
comparatives.
Amounts recognised directly in equity:
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but
directly debited or (credited) to equity:
(In £m)
Deferred tax: unexercised share options and losses arising not allowable in statement of comprehensive income
Adjustment in respect of prior years
Tax losses:
(In £m)
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 38%
2016
(0.4)
–
(0.4)
2016
2.0
0.8
2015
(1.4)
(0.3)
(1.7)
2015
1.1
0.4
The unused tax losses were incurred in the US subsidiary, Idis Inc prior to the acquisition into the Group. Due to the company being loss making,
taxable income is not likely to arise in the foreseeable future.
62
Clinigen Group plc Annual Report and Accounts 2016 A change to the UK corporation tax rate was announced in the Chancellor’s Budget on 16 March 2016. The change announced is to reduce the
main rate to 17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had
already been substantively enacted on 26 October 2015. As the change to 17% had not been substantively enacted at the balance sheet date
its effects are not included in these financial statements. The overall effect of that change, if it had applied to the deferred tax balance at the
balance sheet date, would be to reduce the deferred tax asset and liability by an additional £0.2m and £0.7m respectively. The decrease to the
tax expense for the period would have been £0.5m.
9. EARNINGS PER SHARE (‘EPS’)
(In £m)
Reported profit used in calculating basic and diluted EPS
Number of shares (million)
Weighted average number of shares
Dilution effect of share options
Weighted average number of shares used for diluted EPS
Reported EPS
Basic
Diluted
2016
13.5
113.1
1.3
114.4
11.9p
11.8p
The adjusted EPS, based on the following earnings figure for the year and weighted average number of shares of 113,084,261 is
35.0p (2015: 28.0p).
(In £m)
Underlying profit after tax
Add back of amortisation
Less tax associated with amortisation
Adjusted underlying earnings used in calculating basic and diluted adjusted EPS
2016
35.7
5.0
(1.0)
39.7
2015
5.7
87.2
2.6
89.8
6.5p
6.3p
2015
20.4
5.0
(1.0)
24.4
Number of shares (million)
Weighted average number of shares
Dilution effect of share options
Weighted average number of shares used for diluted EPS
Adjusted EPS
Basic
Diluted
2016
2015
113.1
1.3
114.4
35.0p
34.6p
87.2
2.6
89.8
28.0p
27.2p
EPS is calculated based on the share capital of Clinigen Group plc and the earnings of the combined Group.
Diluted EPS takes account of the weighted average number of outstanding share options being 1,312,942 (2015: 2,621,694).
10. DIVIDENDS
(In £m)
Final dividend in respect of the year ended 30 June 2015 of 2.3p (2015: 2.1p) per Ordinary Share
Interim dividend of 1.3p (2015: 1.1p) per Ordinary Share paid during the year
2016
2.6
1.5
4.1
2015
1.7
0.9
2.6
The Board proposes to pay a final dividend of 2.7p per Ordinary Share, subject to approval at the AGM on 11 November 2016.
63
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
Leasehold
improvement
Plant and
machinery
Fixtures, fittings
and equipment
Total
0.6
0.3
0.1
1.0
–
0.1
0.1
0.2
0.8
1.0
0.3
0.7
(0.2)
0.1
1.9
0.2
0.2
(0.1)
–
0.3
1.6
–
–
–
–
–
–
–
–
–
–
0.1
0.1
–
–
0.2
–
–
–
–
–
0.2
0.7
0.6
0.1
1.4
0.4
0.2
–
0.6
0.8
1.4
0.2
0.5
(0.1)
0.1
2.1
0.6
0.6
(0.1)
0.1
1.2
0.9
1.3
0.9
0.2
2.4
0.4
0.3
0.1
0.8
1.6
2.4
0.6
1.3
(0.3)
0.2
4.2
0.8
0.8
(0.2)
0.1
1.5
2.7
11. PROPERTY, PLANT AND EQUIPMENT
(In £m)
Cost
At 1 July 2014
Acquisition of subsidiary
Additions
At 30 June 2015
Accumulated depreciation
At 1 July 2014
Charge for the year
Impairment
At 30 June 2015
Net book value
At 30 June 2015
Cost
At 1 July 2015
Acquisition of subsidiary
Additions
Disposals
Exchange differences
At 30 June 2016
Accumulated depreciation
At 1 July 2015
Charge for the year
On disposals
Exchange differences
At 30 June 2016
Net book value
At 30 June 2016
64
Clinigen Group plc Annual Report and Accounts 2016 12. INTANGIBLE ASSETS
(In £m)
Cost
At 1 July 2014
Acquisition of subsidiary (note 28)
Additions
Disposals
At 30 June 2015
Accumulated amortisation
At 1 July 2014
Charge for the year
Impairment charge
At 30 June 2015
Net book value
At 30 June 2015
Cost
At 1 July 2015
Acquisition of subsidiary (note 28)
Additions
At 30 June 2016
Accumulated amortisation
At 1 July 2015
Charge for the year
At 30 June 2016
Net book value
At 30 June 2016
Brand
Contracts
Customer
relationships
Trademarks and
licences
Computer
software
Goodwill
(restated)
Total
(restated)
–
49.4
–
–
49.4
–
0.4
–
0.4
49.0
49.4
4.7
–
54.1
0.4
2.7
3.1
–
17.7
–
–
17.7
–
1.0
–
1.0
16.7
17.7
9.3
–
27.0
1.0
7.9
8.9
–
43.0
–
–
43.0
–
0.7
–
0.7
42.3
43.0
2.2
–
45.2
0.7
4.4
5.1
51.0
18.1
40.1
48.3
–
7.5
–
55.8
7.6
4.3
3.4
15.3
40.5
55.8
0.7
10.7
67.2
15.3
4.3
19.6
47.6
1.2
1.0
1.0
(1.3)
1.9
0.1
0.7
–
0.8
1.1
1.9
0.2
0.7
2.8
0.8
0.7
1.5
1.3
8.7
144.2
–
–
152.9
–
–
–
–
58.2
255.3
8.5
(1.3)
320.7
7.7
7.1
3.4
18.2
152.9
302.5
152.9
22.7
–
175.6
–
–
–
320.7
39.8
11.4
371.9
18.2
20.0
38.2
175.6
333.7
On 30 October 2015, Clinigen Group plc acquired the share capital of Link Healthcare Private Limited, a company incorporated in Singapore,
and its subsidiaries in Singapore, South Africa, Australia, New Zealand, Japan, Malaysia and Hong Kong. On 29 April 2015, Clinigen Group plc
acquired Idis Group Holdings Limited, a company incorporated in the United Kingdom, and its subsidiaries in the United Kingdom and United
States of America. For both business combinations, brands, supplier contracts and Customer relationships were identified as separable
intangible assets.
BRAND
The brands represent the Idis, Link, Equity and Homemed brands acquired as part of the business combinations, each brand has been fair
valued at the acquisition date by reference to the operating businesses acquired which utilise each brand. The fair value is based on a
Relief-from-Royalty-Method which calculates the value of the brand as equivalent to the royalty savings accrued over time, as the brand is
owned and royalties are not required to be paid to a third party for the branding of products. The remaining amortisation periods are:
Idis
Link
Equity
Homemed
– 18 years 10 months
– 19 years 4 months
– 14 years 4 months
– 9 years 4 months
65
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016
Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
12. INTANGIBLE ASSETS CONTINUED
CONTRACTS
Contracts acquired with the Idis business combination related to client contracts within the Idis Managed Access business fair valued at the
acquisition date based on the discounted value of future cash flows. These contracts are with large pharma businesses and provide for Idis to
manage the access programs on behalf of large pharma business. The remaining amortisation period is three years ten months.
The acquired Link business has a number of supplier contracts which provide for the availability of product to Link on a contractual, exclusive
supply basis. This accessibility to product is a key driver in growing the business. These exclusive supply contracts have been fair valued at the
acquisition date based on the discounted value of future cash flows. The remaining amortisation period is between six years four months and
eight years four months.
CUSTOMER RELATIONSHIPS
The nature of the acquired businesses is that there are no contracts with customers. However there are long standing relationships with
significant repeat business. These relationships have been fair valued at the acquisition date using a discounted valuation of future cash
flows. The customer relationships for each area of the business are being amortised over different useful economic lives (see note 1).
The remaining amortisation periods range from six years four months to 13 years ten months.
TRADEMARKS AND LICENCES
On 1 March 2016, Clinigen Group plc acquired the intellectual property for the product Totect. This consisted of the patents, trademarks,
New Drug Application (NDA) with the US Food & Drug Administration and the manufacturing dossier. The cost of the addition recognised is
the purchase price plus the directly attributable costs incurred as a result of the acquisition, the costs of transferring the patents, trademarks
and licences incurred to date.
On 29 April 2016, Clinigen Group plc extended the Foscavir asset by acquiring the exclusive global rights to a new bag presentation for the
product. The payment for the product extension is spread over three years to align cash outflows with the expected achievement of
marketing authorisations for the new product presentation. The acquired asset has been recognised at the initial consideration plus the fair
value of the deferred consideration. Future costs expected to be incurred in developing this product and obtaining the market authorisations
will be recognised as incurred.
A total of 331 trademarks and licences are held. The average carrying value per trademark/licence is £143,200 and the average remaining
amortisation period is eight years four months.
COMPUTER SOFTWARE
The Group’s software has been fully written down in the prior year. The Group is undertaking the development and implementation of a new
Oracle system, the costs for which will be recognised as incurred. The amortisation of the new system will commence when the system is
implemented and in operation by the business.
GOODWILL (RESTATED)
The goodwill is deemed to have an indefinite useful life. It is currently carried at cost and is reviewed annually for impairment. The goodwill
relating to Idis, acquired in April 2015, has been restated following the revision of the fair value of trade receivables and computer software
acquired. The revised fair values are discussed in note 28, Business Combinations.
The goodwill relates to four operating businesses CTS, GA, MA and Link. The addition in the year of £22.7m relates to goodwill arising on the
acquisition of Link Healthcare Private Limited. This goodwill relates solely to the Link operating business acquired.
An impairment test is a comparison of the carrying value of assets of a business or cash-generating unit (CGU) to their recoverable amount.
The Group has defined its CGUs as CTS, MA, GA, SP and Link. Where the recoverable amount is less than the carrying value, an impairment
results. During the year, goodwill was tested for impairment, with no impairment charge arising.
2016
(In £m)
CTS
MA
GA
Link
Total
66
Opening
(restated)
33.6
109.0
10.3
–
152.9
Addition
Total
–
–
–
22.7
22.7
33.6
109.0
10.3
22.7
175.6
Clinigen Group plc Annual Report and Accounts 2016 2015
(In £m)
CTS
MA
GA
Total
Opening
Addition
(restated)
Total
(restated)
8.7
–
–
8.7
24.9
109.0
10.3
144.2
33.6
109.0
10.3
152.9
The recoverable amounts in 2016 were measured based on post-tax value in use (2015: based on post-tax value in use). This methodology is
considered reasonable given the significant levels of headroom noted from this assessment. The pre-tax discount rate has been calculated
as being 11.0%.
CTS
Details relating to the discounted cash flow model used in the impairment tests are as follows:
Valuation basis
Key assumptions
Value in use
Sales growth
Profit margins
Discount rate
Terminal growth rate
0% per annum
16.5%
8.8%
1.8%
Determination of assumptions
Detailed forecasts for the next three years have been used which are based on approved annual
budgets and strategic projections representing the best estimate of future performance.
Margins are based on past experience and cost estimates.
Discount rate is based on weighted average cost of capital, and is a post-tax rate of 8.8%.
If any one of the following changes were made to the assumptions, the carrying amount and recoverable amount would be equal. These have
been calculated based on sensitivity analysis for each category listed.
Valuation basis
Value in use
Terminal growth rate
A reduction from 1.8% to (32.4)%
Discount rate
Increase from 8.8% to 25.3%
MA
Details relating to the discounted cash flow model used in the impairment tests are as follows:
Valuation basis
Key assumptions
Value in use
Sales growth
Profit margins
Discount rate
Terminal growth rate
13.7% per annum
30%
8.8%
1.8%
Determination of assumptions
Detailed forecasts for the next three years have been used which are based on approved annual
budgets and strategic projections representing the best estimate of future performance.
Margins are based on past experience and cost estimates.
Discount rate is based on weighted average cost of capital, and is a post-tax rate of 8.8%.
If any one of the following changes were made to the assumptions, the carrying amount and recoverable amount would be equal. These have
been calculated based on sensitivity analysis for each category listed.
Valuation basis
Value in use
Terminal growth rate
A reduction from 1.8% to (3.9)%
Discount rate
Increase from 8.8% to 13.1%
67
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
12. INTANGIBLE ASSETS CONTINUED
GA
Details relating to the discounted cash flow model used in the impairment tests are as follows:
Valuation basis
Key assumptions
Value in use
Sales growth
Profit margins
Discount rate
Terminal growth rate
(6.5)% per annum
42.5%
8.8%
0.7%
Determination of assumptions]
Detailed forecasts for the next three years have been used which are based on approved annual
budgets and strategic projections representing the best estimate of future performance.
Margins are based on past experience and cost estimates.
Discount rate is based on weighted average cost of capital, and is a post-tax rate of 8.8%.
If any one of the following changes were made to the assumptions, the carrying amount and recoverable amount would be equal. These have
been calculated based on sensitivity analysis for each category listed.
Valuation basis
Value in use
Terminal growth rate
A reduction from 0.7% to (1.4)%
Discount rate
Increase from 8.8% to 10.5%
LINK
Details relating to the discounted cash flow model used in the impairment tests are as follows:
Valuation basis
Key assumptions
Value in use
Sales growth
Profit margins
Discount rate
Terminal growth rate
3.5% per annum
35%
8.8%
1.8%
Determination of assumptions
Detailed forecasts for the next three years have been used which are based on approved annual
budgets and strategic projections representing the best estimate of future performance.
Margins are based on past experience and cost estimates.
Discount rate is based on weighted average cost of capital, and is a post-tax rate of 8.8%.
If any one of the following changes were made to the assumptions, the carrying amount and recoverable amount would be equal. These have
been calculated based on sensitivity analysis for each category listed.
Valuation basis
Value in use
Terminal growth rate
A reduction from 1.8% to (7.4)%
Discount rate
Increase from 8.8% to 15.3%
Management do not consider any of the above sensitivities to be probable.
68
Clinigen Group plc Annual Report and Accounts 2016 13. INVESTMENTS
SUBSIDIARIES
The principal subsidiaries of Clinigen Group plc at each reporting date have been included in these consolidated financial statements.
Subsidiaries at the end of the reporting year were as follows:
Name
Country of incorporation
Nature of business
Clinigen Healthcare Limited
Clinigen Clinical Trials Limited
Clinigen CTS Limited
Clinigen CTS Inc.
Idis Group Holdings Limited
Idis Group Limited
Idis Limited
Idis Inc
Clinigen Asia Pte Limited
Link Healthcare Singapore Pte Limited
Link Healthcare KK
Clinigen KK
Link Healthcare SDN BHD
Link Healthcare Hong Kong Limited
Link Healthcare Pty Limited
Link Medical Products Pty Limited
Link Pharmaceuticals Limited
Link Healthcare Pty Limited
Homemed Pty Limited
Equity Pharmaceuticals Pty Limited
Equity Medical Technologies Pty Limited
Equipharm Specialised Distribution Pty Limited
Plurilinx (Pty) Limited
Chloromix (Pty) Limited
PMIP Pty Limited
Link Holding 1 Pty Limited
Link Holding 2 Pty Limited
Idis MA Limited
Idis GA Limited
Clinigen GAP Inc
Idis Trustee (UK) Limited
Employee Benefit Trust 1
Employee Benefit Trust 2
Clinigen GAP Limited
Clinigen SP Limited
Idis Pharma Private Limited
Keats Healthcare Limited
Clinigen Pharma Limited
United Kingdom
United Kingdom
United Kingdom
USA
United Kingdom
United Kingdom
United Kingdom
USA
Singapore
Singapore
Japan
Japan
Malaysia
Hong Kong
Australia
Australia
New Zealand
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Australia
Australia
Australia
United Kingdom
United Kingdom
USA
United Kingdom
Jersey
Jersey
United Kingdom
United Kingdom
India
United Kingdom
United Kingdom
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Holding company
Sales and distribution of pharmaceutical products
Provision of business development services
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Non trading trustee of Employee Benefit Trust
Employee Benefit Trust
Employee Benefit Trust
Dormant
Dormant
Dormant
Dormant
Dormant
All shareholdings in subsidiaries are owned 100% (2015: 100%) through the subsidiaries’ ordinary share capital.
69
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
13. INVESTMENTS CONTINUED
JOINT VENTURES
Set out below are the joint ventures of the Group as at 30 June 2016. These were acquired as part of the acquisition of Link Healthcare group.
The Group had no joint ventures in the prior year. The joint ventures as listed below have share capital consisting solely of ordinary shares,
50% of which are held directly by the Group. The country of incorporation is also their principal place of business.
Name
Novagen Pharma Pty Limited
Medical Stockings Pty Limited
Year end
31 March
30 June
Country of incorporation
Measurement method
South Africa
Australia
Equity
Equity
As at 30 June 2016, the carrying value of the investment in Novagen was £7.4m reflecting the fair value of the investment at the acquisition
date of £7.0m plus £0.4m being the 50% share of the total profit of £0.8m in the year. Medical Stockings Pty Limited is held at £nil.
14. INVENTORIES
(In £m)
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2016
2.8
1.1
12.1
16.0
2015
0.7
0.2
10.2
11.1
Inventory acquired, in October 2015, as part of the acquisition of Link has been fair valued at the acquisition date. The fair valuation resulted in
an uplift of the carrying value of inventories of £1.7m.
In April 2015, the inventory held by Idis Limited was fair valued on acquisition of the company by the group. At 30 June 2016, finished goods
include an amount of £1.4m (2015: £6.8m) carried at fair value less costs to sell.
The cost of inventories recognised as an expense and included in cost of sales amounted to £236.9m (2015: £127.3m).
15. TRADE AND OTHER RECEIVABLES
(In £m)
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments and accrued income
Payments made on account
Other receivables
Total trade and other receivables
2016
62.8
(5.2)
57.6
7.0
1.4
2.8
68.8
2015
(restated)
56.3
(4.9)
51.4
11.9
6.1
1.7
71.1
When assessing for impairment, the credit risk of the client is taken into account when reviewing specific overdue balances. Due to the
short-term nature of trade and other receivables, the book value approximates to their fair value save for where specific provision for
impairment has been made. The past payment history with the customer is taken into account, where applicable.
The following table provides information on the movement in the provision for impairment in the year:
(In £m)
At 1 July 2015 (restated)
Released to the Consolidated income statement
Charged to the Consolidated income statement
70
4.9
(1.4)
1.7
5.2
Clinigen Group plc Annual Report and Accounts 2016 The provision recognised on acquisition of Link, in April 2015, of £8.9m has been reviewed and restated to reflect cash received during the
year following the acquisition. The restated opening provision of £4.9 represents the ageing of the trade receivables acquired and the
potential risk of default on those balances.
As at 30 June 2016 trade receivables of £23.0m (2015: £15.1m) were past due but not impaired, of which, £16.9m was received after the
year end.
They relate to the customers with no default history. The ageing analysis of these receivables is as follows:
(In £m)
Up to three months
Three to six months
More than six months
16. CASH AND CASH EQUIVALENTS
(In £m)
Cash at bank and in hand
2016
17.9
3.4
1.7
23.0
2016
27.8
27.8
2015
13.5
1.6
–
15.1
2015
27.8
27.8
Due to the short-term nature of cash at bank and short-term deposits, and as the credit risk has been adjusted for where required, the
carrying value approximates to their value. The credit risk of the banks was very low and therefore the carrying amount has not been adjusted;
their credit ratings were RBS: BBB+, HSBC: AA-, ABSA BBB and JP Morgan A+.
17. TRADE AND OTHER PAYABLES
Non-current liability (In £m)
Deferred consideration
Contingent consideration
2016
2.5
8.5
11.0
2015
–
–
–
Deferred consideration is payable in respect of the acquisition of Totect and the Foscavir product extension and is payable in stage payments.
Contingent consideration is payable in respect of the Link business combination if certain profit milestones are achieved. This is recognised
at the fair value of the contingent liability at the period end. The fair value of the contingent consideration was initially measured at £7.8m at
the date of acquisition.
Current liability (In £m)
Trade payables
Payments received on account
Tax and social security
Other payables
Accruals and deferred income
Deferred consideration
2016
68.6
1.9
1.4
1.0
15.7
2.2
90.8
2015
48.1
1.0
2.1
0.3
35.6
–
87.1
Deferred consideration is payable in respect of the acquisition of Totect and the Foscavir product extension and is payable in stage payments.
Due to the short-term nature of current trade and other payables, the fair value approximates to their value. Creditors are unsecured.
71
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
18. LOANS AND BORROWINGS
The book value of loans and borrowings are as follows:
(In £m)
Non-current liability
Bank borrowings
Current liability
Bank borrowings
Total loans and borrowings
2016
2015
25.9
70.0
95.9
34.5
69.5
104.0
The Group has a total bank facility of £131.0m available (2015: £140.0m). This consists of a five year fixed term repayment loan of £36.0m
(2015: £45.0m) and a revolving credit facility (RCF) of £95.0m (2015: £95.0m). The RCF will continue to be available to the Group for a period of
3 years 10 months and is renewable on a monthly basis. It is therefore included within current liabilities.
Interest is payable on a tiered scale based on the level of borrowing. The applicable interest rate on amounts drawn down is up to 2.75
percent. plus LIBOR/EURIBOR (as applicable) on both the RCF and the Term Loan Facility. The margin payable is dependent on the adjusted
leverage ratio and will reduce to a minimum of 1.25 percent. plus LIBOR/EURIBOR (as applicable) as adjusted leverage decreases.
The bank loans are secured on the intangible fixed assets of the Group.
MATURITY OF LOANS AND BORROWINGS
The maturity profile of the carrying amount of the Group’s borrowings at the period end was as follows:
(In £m)
Within one year
In more than one year but less than two years
In more than two years but less than five years
2016
2015
Gross
borrowings
Unamortised
issue costs
Net
borrowings
Gross
Borrowings
Unamortised
issue costs
Net
Borrowings
70.3
9.0
18.0
97.3
(0.3)
(0.4)
(0.7)
(1.4)
70.0
8.6
17.3
95.9
69.8
9.0
27.0
105.8
(0.3)
(0.4)
(1.1)
(1.8)
69.5
8.6
25.9
104.0
FAIR VALUE OF BORROWINGS
The carrying amount and the fair value of the Group’s borrowings are as follows:
(In £m)
Bank borrowings
Carrying amount
Fair value
2016
97.3
97.3
2015
105.8
105.8
2016
94.4
94.4
2015
101.2
101.2
The fair values of the Group’s borrowings are within Level 2 of the fair value hierarchy.
At 30 June 2016, the fixed term loan was fully utilised at £36.0m and £61.3m was borrowed against the revolving credit facility. All borrowings
are in pounds sterling. There were no instances of default, including covenant terms, in either the current or the preceding period.
19. PROVISIONS
(In £m)
At 1 July 2015
Utilised in the period
Charged to the income statement
At 30 June 2016
Restructuring
1.5
(1.5)
0.8
0.8
The provision relates to costs associated with the restructuring of the acquired entities and is expected to be fully utilised by 30 June 2017.
72
Clinigen Group plc Annual Report and Accounts 2016 20. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks:
– credit risk;
– foreign exchange risk; and
– liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the
Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout these financial statements.
PRINCIPAL FINANCIAL INSTRUMENTS
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
– trade and other receivables;
– cash and cash equivalents;
– trade and other payables; and
– loans and borrowings.
The Group does not issue or use financial instruments of a speculative nature.
A summary of the financial instruments held by category is provided below:
(In £m)
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Loans and borrowings
Total financial liabilities
2016
2015
27.8
61.8
89.6
100.4
97.3
197.7
27.8
59.2
87.0
85.0
105.8
190.8
RISK MANAGEMENT
A description of the Group’s treasury policy and controls is included in the Financial Review on page 29.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales and payments made on account to suppliers. It is Group policy,
implemented locally, to assess the credit risk of new customers, by obtaining credit ratings, before entering contracts or offering credit
terms. The credit terms are then continually assessed on an individual basis, and amended accordingly, as a trading history is developed with
the customer. Purchase limits are established for each customer, which represents the maximum open amount without requiring approval
from the Group Finance Controller or Group Finance Director.
Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below. Further disclosures regarding trade and
other receivables at the end of the reporting period, which are past due but not impaired, are provided in note 15.
(In £m)
Financial assets – maximum exposure
Cash and cash equivalents
Trade and other receivables
Total financial assets
2016
2015
27.8
61.8
89.6
27.8
59.2
87.0
73
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
20. FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the
same as the functional currency in which the Group companies are operating. The Group’s overseas subsidiaries contribute approximately
21% (2015: 29%) to the Group’s revenue, all of which is transacted in non-sterling currencies. The overseas subsidiaries operate separate
bank accounts, which are used solely for that subsidiary, thus managing the currency in that country. The Group’s net assets arising from
such overseas operations are exposed to currency risk resulting in gains or losses on retranslation into sterling. Given the levels of materiality,
the Group does not hedge its net investments in overseas operations.
Foreign exchange risk also arises when individual Group entities enter into transactions denominated in a currency other than their functional
currency. The Group hedges currency transactions internally through currency bank accounts and by managing group wide currency
requirements centrally. This limits the currency risk exposure and allows retranslation of these balances into sterling to be planned in order to
minimise the exposure to foreign exchange rate fluctuations. The Group uses forward contracts on large transactions in the Clinigen CTS
operating business where the contract is not naturally hedged. This reduces the risk to fluctuating foreign exchange rates and permits the
management of that operating business to have visibility of gross profit margins.
At the reporting date the Group had entered into time option contracts with the bank for Swiss Francs, US dollars, Euros, Japanese Yen,
South African Rand and sterling. These options all mature within 12 months of the reporting date. Forward exchange contracts have not been
formally designated as hedges and consequently no hedge accounting has been applied. Forward exchange contracts are carried at fair
value. The mark-to-market valuation at the reporting date has been recognised in the balance sheet as a financial instrument liability.
At 30 June 2016 if the currency had weakened/strengthened by 10% against both the US dollar and Euro with all variables held constant,
profit for the period would have been £0.2m (2015: nil) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US
dollar/Euro trade receivables, cash & cash equivalents and trade payables. The figure of 10% used for sensitivity analysis has been chosen
because it represents a range of reasonable fluctuations in exchange rates.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The Board receives cash flow projections based on working capital modelling as well as information regarding cash balances monthly. At the
end of the financial year, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under
all reasonably expected circumstances.
The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:
(In £’000)
At 30 June 2016
Trade and other payables
At 30 June 2015
Trade and other payables
Up to
3 months
Between 3 and
12 months
>12 months
89.4
85.0
–
–
11.0
–
More details in regard to the line items are included in the respective notes:
Trade and other payables – note 17
Loans and borrowings – note 18
Valuation hierarchy
The table below shows the financial statements carried at fair value by valuation method:
(In £m)
Liabilities
Derivative financial instruments
– forward foreign exchange contracts
Deferred consideration
74
2016
Level 1
2016
Level 2
2016
Level 3
2015
Level 1
2015
Level 2
2015
Level 3
–
–
1.3
–
–
11.0
–
–
–
–
–
–
Clinigen Group plc Annual Report and Accounts 2016 The level 2 forward foreign exchange valuations are derived from mark-to-market valuations as at 30 June 2016. Fair value losses of £1.3m
(2015: nil) relating to the movement on open forward foreign exchange contracts have been recognised in underlying administrative
expenses.
The notional principal amount of the outstanding forward foreign exchange contracts at 30 June 2016 was £16.3m (2015: nil).
Fair value movements show:
(a) the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability;
(b) the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at
maturity to the holder of the obligation;
(c) the methods used to arrive at the above amounts; and
(d) if the entity believes that the disclosure given to comply with the above does not faithfully represent the change in the fair value of the
financial liability attributable to changes in its credit risk, should disclosed the reasons for reaching this conclusion and the factors it
believes are relevant.
Capital management
The Group monitors ‘adjusted capital’ which comprises all components of equity (ie share capital, share premium account, merger reserve,
foreign exchange reserve and retained earnings) and long-term debt.
The Group’s objectives when maintaining capital are:
– to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
– to ensure the Group has the cash available to develop the products and services provided by the Group in order to provide an adequate
return to shareholders.
Pricing, sale and acquisition decisions are made by assessing the level of risk in relation to the expected return.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in
the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
Net debt is calculated as total debt (as shown in the consolidated statement of financial position) less cash and cash equivalents.
21. DEFERRED INCOME TAX
The analysis of deferred income tax assets and liabilities is as follows:
(In £m)
Deferred tax assets:
Deferred tax assets to be recovered after more than 12 months
Deferred tax liabilities:
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax liabilities within 12 months
The gross movement on the deferred income tax account is as shown below:
Deferred tax liabilities
At 30 June 2015
Acquisition of subsidiary
Credited to the income statement
At 30 June 2016
2016
2015
(3.5)
(5.0)
19.4
2.8
22.2
Fair
value gains
21.6
5.4
(4.8)
22.2
19.0
2.6
21.6
Total
21.6
5.4
(4.8)
22.2
75
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
21. DEFERRED INCOME TAX CONTINUED
Deferred tax assets
At 30 June 2015 (restated)
Acquisition of subsidiary
(Charged)/credited to the income statement
Charged direct to equity
At 30 June 2016
Unexercised
share options
Tax losses
Timing
differences
(restated)
Total
(restated)
2.5
–
(0.1)
(1.6)
0.8
1.3
–
(0.1)
–
1.2
1.2
0.2
0.1
–
1.5
5.0
0.2
(0.1)
(1.6)
3.5
Deferred income taxes are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through
future taxable profits is probable. The Group did not recognise deferred income tax assets of £0.8m in respect of tax losses amount to £2.0m
that can be carried forward against future taxable income.
Deferred tax is calculated in full on temporary differences under the liability method using the enacted tax rate for the period when the
temporary difference is expected to reverse. These rates are 20% for the period to 31 March 2017, 19% for the period 1 April 2017 to
31 March 2020 and 18% thereafter (2015: 20%).
22. SHARE CAPITAL
Authorised, issued and fully paid
At 1 July 2014
Issue of new shares
At 30 June 2015
Issue of new shares
At 30 June 2016
(In £m)
Ordinary shares of 0.1p each
Number
of Shares
(‘000s)
Ordinary shares
of 0.1p each
82,556
27,153
109,709
4,892
114,601
2016
0.1
2015
0.1
On 30 October 2015, 3,102,558 new ordinary shares of 0.1p each were issued, as part consideration for the acquisition of Link Healthcare
Limited. Please see note 28 for further details.
During the year a further 1,789,434 shares were issued to satisfy share options that were exercised.
76
Clinigen Group plc Annual Report and Accounts 2016 23. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share premium account
Amount subscribed for share capital in excess of nominal value, except where recognition in merger
reserve is used (see below).
Merger reserve
Amount subscribed for share capital in excess of nominal value when shares are issued in exchange for
at least a 90% interest in the shares of another company.
Foreign exchange reserve
Gains/losses arising on retranslating the net assets of overseas operations into sterling.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
Included within the retained earnings reserve as at 30 June 2016 is £2.8m (2015: £5.2m) relating to unexercised share options which is not
distributable.
24. LEASES
OPERATING LEASES
The total future value of minimum lease payments under non-cancellable operating leases are:
(In £m)
Land and buildings:
In one year or less
Between one and five years
In five years or more
2016
2015
2.1
5.3
3.3
10.7
0.9
1.2
0.5
2.6
25. POST-EMPLOYMENT BENEFITS
The Group operates a defined contribution pension scheme for the benefit of its employees. The assets of the scheme are held separately
from those of the Group in an independently administered fund. Pension costs represent the contributions payable by the Group to the funds
and amounted to £0.8m (2015: £0.3m).
77
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
26. SHARE-BASED PAYMENTS
The Company operated the following schemes:
Plan
Tax authority status
Employees
Granting, vesting conditions and exercise of share options
Chairman’s Option
Agreement
Clinigen Group
Long-Term
Incentive Plan
Unapproved
Chairman
Unapproved
All employees
Clinigen Group
Sharesave Plan
HMRC approved
All employees
The option vested on 18 September 2015 and was exercised in
the period.
Subject to performance criteria comparing total shareholder return
(TSR) versus the FTSE Small Cap Index (excluding investment
companies) over a three year period.
If the individual leaves earlier than the earliest vesting date, they may,
if certain conditions are met, be still entitled to a proportion of
the shares.
Options are exercisable at a price equal to the average opening price
as published in the Financial Times on the date of invitation and the
two dealing days preceding the date of invitation, less 20%.
3-year vesting period.
If options remain unexercised after a period of six months from the
vesting date the options expire.
If monthly contributions are not made for more than six months over
the three year period, the options lapse.
Clinigen Group Company
Share Option Plan
HMRC approved for
UK employees
All employees
Options granted to employees who have invested in the shares of
the Company.
Unapproved for
US employees
Options are granted to match the shares acquired by the employee
or those granted through the initial grant under the Sharesave or US
Stock Purchase Plan.
Clinigen Group US Stock
Purchase Plan
US tax authority
approved
All US
employees
Clinigen Group Long
Term Incentive Plan 2015
Unapproved
All employees
Clinigen Group All Staff
Long Term Incentive Plan
Unapproved
All employees
3-year vesting period.
Options vest if employee still owns shares in three years or exercises
their options under the Sharesave or US Stock Purchase Plan.
Options are exercisable at a price equal to the average opening price
as published in the Financial Times on the date of invitation and the
two dealing days preceeding the date of invitation, less 15%.
2-year vesting period.
Subject to performance criteria comparing total shareholder return
(TSR) versus the FTSE Small Cap Index (excluding investment
companies) over a three year period.
If the individual leaves earlier than the earliest vesting date,
entitlement is at the discretion of the Remuneration Committee.
Subject to performance criteria comparing total shareholder return
(TSR) versus the FTSE Small Cap Index (excluding investment
companies) over a three year period.
If the individual leaves earlier than the earliest vesting date, their
share option lapses.
78
Clinigen Group plc Annual Report and Accounts 2016 Details of the share options outstanding during the year are as follows:
Outstanding at start of year
Granted during year
Forfeited during the year
Exercised during year
Outstanding at end of year
2016
2015
Weighted
average
exercise price
(p)
Number
Weighted
average
exercise price
(p)
Number
2,771,403
0.35
1,012,156
2.17
1.36
(276,926)
0.07 (1,789,434)
1.47
1,717,199
0.42
–
1.46
–
0.35
2,623,465
324,671
(98,911)
(77,822)
2,771,403
Of the total number of options outstanding at 30 June 2015, 13,125 share options had vested (2015: none).
The weighted average share price (at the date of exercise) of options exercised during the period was £6.83 (2015: £4.71).
The exercise price of options outstanding at 30 June 2016 ranged between £nil and £6.49 and their weighted average contractual life was two
years eleven months.
The weighted average fair value of each option granted during the year was £3.19 (2015: £4.25).
The following information is relevant in the determination of the fair value of options granted during the period under the equity-settled
share-based remuneration schemes operated by the Group. The Black-Scholes pricing model is used for all schemes except for the Long-
Term Incentive Plan and the Chairman’s Award, where a Stochastic valuation model is used.
Option pricing model
Weighted average share price at grant date (£)
Exercise price
Weighted average contractual life (in years)
Expected volatility (%)
Expected dividend yield (%)
Risk-free interest rate (%)
2016
2015
Black-Scholes
£6.63
Nil to £6.49
3
37.6
0.5 to 0.6
0.9 to 1.0
Black-Scholes
£4.57
nil
nil
39.5
0.7
0.7
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the period since the Company listed.
The share-based remuneration expense comprises equity-settled schemes of £1.8m (2015: £1.3m).
The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous year.
27. RELATED PARTY TRANSACTIONS
ULTIMATE CONTROLLING PARTY
The Company’s shares are listed on the Alternative Investment Market (‘AIM’) and are widely held. There is no one controlling party or group
of related parties who have control of the Group.
TRANSACTIONS WITH RELATED PARTIES
The remuneration payable to the Directors of the Company is disclosed in note 5.
During the year and the preceding year, the Group had no transactions with related parties.
79
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes forming part of the consolidated financial statements
continued
for the year ended 30 June 2016
28. BUSINESS COMBINATIONS
On 30 October 2015 the Clinigen Group plc acquired the share capital of Link Healthcare Private Limited, a company incorporated in
Singapore, and its subsidiaries in Singapore, South Africa, Australia, New Zealand, Japan, Malaysia and Hong Kong.
The transaction strengthens the Group’s global footprint and allows the Group to benefit from greater global market opportunities,
accessing customers and key opinion leaders and strengthening local knowledge and expertise.
Clinigen Group plc paid initial consideration of £41.6m, being a cash payment of £22.3m and an issue of 3,102,558 shares in Clinigen Group plc
which had a fair value of £19.3m which represented the market price on 30 October 2015. Both components of the initial payment were
transferred to the vendors on 30 October 2015. Cash paid for the acquisition was raised by a combination of existing borrowings facilities and
cash held in the business.
The provisional fair value of assets acquired and liabilities assumed on the Link Healthcare acquisition were as follows:
(In £m)
Intangible assets
Investment in joint venture
Property, plant and equipment
Inventories
Trade and other receivables
Cash
Trade and other payables
Provision for deferred tax
Net assets acquired
Goodwill arising on acquisition
Total consideration
17.1
7.0
0.6
7.3
6.6
1.9
(6.3)
(5.4)
28.8
22.7
51.5
The fair values set out above are provisional figures which will be finalised in the 2017 financial statements following management’s final
review of key reconciliations and judgemental areas relating to acquired creditor balances.
The total consideration of £51.5m, is made up of initial consideration of £41.6m, payment for working capital of £2.0m and contingent
consideration of £7.8m, being the discounted expected deferred payment which would be payable in October 2017. This contingent
consideration is subject to performance against target EBITA and is calculated based on the expected results of the Link Group during that
period taking into account Link Healthcare’s historical track record and their financial forecasts. The contingent consideration is included in
the Group balance sheet in non current trade and other payables. Under the sale and purchase agreement, the minimum further amount
payable is nil and the maximum amount payable is £55.5m (payment assumed in the balance sheet: £9.8m discounted back to £7.8m).
The fair value of intangible assets recognised on business combination comprise the Link and Equity brands at £4.7m, customer relationships
at £2.2m, supplier contracts at £9.3m, product dossiers of £0.7m and computer software of £0.2m.
The investment in joint venture represents the fair value of the 50% investment in Novagen Pharma Pty Limited. The joint venture has been
valued using a multiple of earnings. In this valuation, the earnings were based on a multiple based on selected industry comparators.
The fair value of acquired inventories represents inventories valued at the sale price in line with IFRS 3 (revised) less provision for
obsolescence and slow moving inventory following the application of Clinigen’s group accounting policies. This provision takes account of the
condition of inventory, the remaining expiry period and applies assumptions around expected future demand for the inventory.
The goodwill of £22.7m arising from the acquisition represents the geographical expansion potential provided through access to the South
Africa and APAC markets, and the benefit of having local in-house regulatory expertise and distribution capabilities. None of the goodwill is
expected to be deductible for income tax purposes.
The amounts included in the consolidated statement of comprehensive income since 30 October 2015 included revenue of £24.5m and a
gross profit of £8.8m over the same period. If the transaction had occurred on the first day of the financial period, then estimated
contribution to Group revenues would have been £37.2m and profit after tax would have been £2.6m before one off items relating to the
acquisition.
80
Clinigen Group plc Annual Report and Accounts 2016 Following the acquisition of Idis in April 2015 and the disclosure of the provisional fair values in the annual report for the financial year ended
30 June 2015, the directors have reviewed the fair value of the assets and liabilities acquired. This review resulted in a further impairment of
£2.0m in the Idis IT system as the system acquired required significant further expenditure to make fit for purpose. The provisioning for non
payment of trade debtors was decreased by £4.0m following the receipt of monies in respect of this aged debt
The revised fair value of assets acquired and liabilities assumed on the Idis acquisition were as follows:
(In £m)
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash
Trade and other payables
Loans and borrowings
Provision for deferred tax
Net assets acquired
Goodwill arising on acquisition
Total consideration
111.2
0.9
6.8
36.6
19.8
(64.4)
(35.3)
(20.3)
55.3
144.2
199.5
29. CAPITAL COMMITMENTS
At 30 June 2016, the group had committed £6.0m (2015: nil) of expenditure for the design and implementation of Oracle and £0.3m (2015: nil)
on the technical transfer of the manufacturing of Ethyol.
81
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Independent Auditors’ report
to the members of Clinigen Group plc
Report on the company financial statements
OUR OPINION
In our opinion, Clinigen Group plc’s company financial statements
(the “financial statements”):
– give a true and fair view of the state of the company’s affairs as at
30 June 2016;
– have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
– have been prepared in accordance with the requirements of the
Companies Act 2006.
WHAT WE HAVE AUDITED
The financial statements, included within the Annual Report,
comprise:
– the company balance sheet as at 30 June 2016;
– the statement of changes in equity for the year then ended; and
– the notes to the financial statements, which include a summary
of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the
preparation of the financial statements is United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law (United Kingdom Generally
Accepted Accounting Practice).
In applying the financial reporting framework, the directors have
made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they
have made assumptions and considered future events.
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, 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.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
ADEQUACY OF ACCOUNTING RECORDS AND INFORMATION
AND EXPLANATIONS RECEIVED
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
– we have not received all the information and explanations we
require for our audit; or
– adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the financial statements are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to report to you if, in
our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from
this responsibility.
82
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND
THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
As explained more fully in the Directors’ Responsibilities Statement
set out on page 43, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVES
We conducted our audit in accordance with ISAs (UK & Ireland). An
audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of:
– whether the accounting policies are appropriate to the
company’s circumstances and have been consistently applied
and adequately disclosed;
– the reasonableness of significant accounting estimates made by
the directors; and
– the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial
statements.
We test and examine information, using sampling and other auditing
techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in
the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Clinigen Group plc Annual Report and Accounts 2016 OTHER MATTER
We have reported separately on the group financial statements of
Clinigen Group plc for the year ended 30 June 2016.
ANDREW HAMMOND (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
27 September 2016
83
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Company balance sheet
as at 30 June 2015
Assets
Non-current assets
Tangible fixed assets
Intangible fixed assets
Investments
Deferred tax assets
Total non-current assets
Current assets
Debtors: amounts falling due within one year
Cash at bank and in hand
Total current assets
Total assets
Current liabilities
Creditors: amounts falling due within one year
Loans and borrowings
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Creditors: amounts falling due after more than one year
Loans and borrowings
Total non-current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Total shareholders’ funds
2016
2015
Note
£’000
£’000
£’000
£’000
3
4
5
10
6
7
9
8
9
11
0.6
45.5
296.2
2.0
344.3
8.7
1.8
10.5
354.8
(53.6)
(70.0)
(123.6)
(113.1)
231.2
(11.0)
(25.9)
(36.9)
194.3
0.1
160.7
5.4
28.1
194.3
–
(34.5)
163.2
16.7
163.2
0.8
37.8
244.7
3.8
287.1
4.3
1.5
5.8
292.9
(25.7)
(69.5)
(95.2)
(89.4)
197.7
(34.5)
0.1
141.0
5.4
The financial statements on pages 84 to 95 were approved by the Board of Directors on 27 September 2016 and were signed on its behalf by:
P GEORGE
Director
M ABELL
Director
84
Clinigen Group plc Annual Report and Accounts 2016
Statement of changes in equity
for the year ended 30 June 2016
(£m)
At 1 July 2014
Loss for the year
Share-based payment scheme
Deferred taxation on share-based payment scheme
Tax credit in respect of tax losses arising on exercise of share options
Dividend paid
Issue of new shares
Own shares distributed on exercise
of share options
Total contributions by and distributions to owners of the parent,
recognised directly in equity
At 30 June 2015 and 1 July 2015
Loss for the year
Share-based payment scheme
Deferred taxation on share-based payment scheme
Tax credit in respect of tax losses arising on exercise of share options
Dividend paid
Dividends received from group undertakings
Issue of new shares
Total contributions by and distributions to owners of the parent,
recognised directly in equity
At 30 June 2016
Share
capital
Share premium
account
Merger
reserve
Profit and loss
account
(restated)
Total
equity
(restated)
0.1
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
0.1
8.6
–
–
–
–
–
132.4
–
132.4
141.0
–
–
–
–
–
–
19.7
19.7
160.7
5.4
–
–
–
–
–
–
–
–
5.4
–
–
–
–
–
–
–
–
5.4
28.1
(11.4)
1.3
1.3
0.3
(2.6)
–
(0.3)
–
16.7
(7.3)
1.8
(1.6)
(2.0)
(4.1)
20.6
–
18.7
28.1
42.2
(11.4)
1.3
1.3
0.3
(2.6)
132.4
(0.3)
132.4
163.2
(7.3)
1.8
(1.6)
(2.0)
(4.1)
20.6
19.7
38.4
194.3
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share premium account
Merger reserve
Profit and loss account
Amount subscribed for share capital in excess of nominal value, except where recognition in merger
reserve is used (see below).
Amount subscribed for share capital in excess of nominal value when shares are issued in exchange
for at least a 90% interest in the shares of another company.
All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
The results for 30 June 2015 were restated in the company accounts to reflect intercompany royalties
and management charges which had been omitted in the preparation of the accounts.
85
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes to the Company balance sheet
for the year ended 30 June 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Parent Company present information about the Company as a separate entity and not about its group.
The accounting policies, set out in the consolidated accounts, unless otherwise stated have been applied consistently to the period
presented in these Company financial statements.
ADOPTION OF FRS 101
The Company financial statements have been prepared and approved by the Directors in accordance with FRS 101.
This is the first year in respect of which the Company has prepared its financial statements under FRS 101. The previous financial statements
for the year ended 30 June 2015 were prepared under ‘old UK GAAP’. The date of transition to FRS 101 for the Company is 1 July 2014. Set out
below are descriptions of the various implementation options applied by the Company in preparing the financial statements for the year
ended 30 June 2016, as well as reconciliations from ‘old UK GAAP’ to FRS 101 for total equity as at 1 July 2014 and 30 June 2015.
MANDATORY EXCEPTIONS TO RETROSPECTIVE APPLICATION
The only mandatory exception applicable to the retrospective application in IFRS 1 applied in converting from ‘old UK GAAP’ to FRS 101 is the
Exemption for estimates which retains estimates made as at 1 July 2014 under FRS 101, ensuring they are consistent with those made
previously under ‘old UK GAAP’.
IFRS 1 EXEMPTIONS OPTIONS
Set out below are the applicable IFRS 1 exemptions applied by the Company in converting from ‘old UK GAAP’ to FRS 101. Management
expect that these exemptions will continue to apply for the period ended 30 June 2017:
(a) Business combinations
Paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67 of IFRS 3 ‘Business
Combinations’ as the equivalent disclosures are included in the consolidated financial statements of the Group.
(b) Share-based payments
Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise prices of share
options, and how the fair value of goods and services received was determined).
ACCOUNTING PRINCIPLES
The Company Statement of Financial Position has been prepared under the historical cost convention.
BASIS OF PREPARATION
No income statement is presented for the Company as permitted by Section 408(2) and (3) of the Companies Act 2006. The loss dealt with in
the accounts of the Company was £7.3m (2015: loss £11.4m). Fees paid to PricewaterhouseCoopers LLP and its associates for audit and
non-audit services to the Company itself are not disclosed in the individual financial statements of Clinigen Group plc because the Group
financial statements are required to disclose such fees on a consolidated basis.
INVESTMENTS
Investments in subsidiaries are recorded at historical cost, less any provision for impairment.
The Company has elected to apply the exemption in s408 of the Companies Act and has not presented its separate statement of
comprehensive income and related notes. It has also taken advantage of the exemptions under FRS 101 not to disclose related party
transactions entered into between two or more members of the Group and not to prepare a cash flow statement. The Company has elected
not to prepare disclosures under IFRS 7 in accordance with the exemptions under FRS 101. The Company’s information relating to these
disclosures are included within the consolidated accounts of Clinigen Group plc.
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 2 of the consolidated accounts.
The Company financial statements are prepared on the historical cost basis.
86
Clinigen Group plc Annual Report and Accounts 2016 2. STAFF COSTS
(£m)
Staff costs (including Directors) comprise:
Wages and salaries
Share-based payments
Defined contribution pension cost
Social security costs
EMPLOYEE NUMBERS
The average monthly number of staff employed by the Company during the financial year amounted to:
Directors
Staff
2016
2015
4.6
1.8
0.2
0.9
7.5
3.7
1.3
0.1
1.5
6.6
2016
Number
2015
Number
3
83
86
3
62
65
KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Company. This is considered to be the Board of Directors.
(£m)
Directors’ remuneration included in staff costs:
Wages and salaries
Defined contribution pension cost
Share-based payment expense
Total emoluments of Directors (including pension contributions) amounted to £2.3m (2015: £2.1m). Information relating to Directors’
emoluments, share options and pension entitlements is set out in the Remuneration Report on pages 40 to 41.
3. TANGIBLE FIXED ASSETS
(£m)
Cost
At 30 June 2015
At 30 June 2016
Accumulated depreciation
At 30 June 2015
Charge for the year
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
Leasehold
improvement
Plant and
machinery
Furniture,
fittings and
equipment
0.6
0.6
0.1
–
0.1
0.5
0.5
0.1
0.1
–
0.1
0.1
–
0.1
0.7
0.7
0.5
0.1
0.6
0.1
0.2
2016
2015
1.6
0.1
0.6
2.3
1.4
0.1
0.6
2.1
Total
1.4
1.4
0.6
0.2
0.8
0.6
0.8
87
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes to the Company balance sheet continued
for the year ended 30 June 2015
4. INTANGIBLE FIXED ASSETS
(£m)
Cost
At 30 June 2015
Additions
At 30 June 2016
Accumulated amortisation
At 30 June 2015
Charge for the year
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
Trademarks and
licences
Computer
software
46.5
10.5
57.0
8.7
2.9
11.6
45.4
37.8
–
0.1
0.1
–
–
–
0.1
–
Total
46.5
10.6
57.1
8.7
2.9
11.6
45.5
37.8
On 1 March 2016, Clinigen Group plc acquired the intellectual property for the product Totect. This consisted of the patents, trademarks,
New Drug Application (NDA) with the US Food & Drug Administration and the manufacturing dossier. The cost of the addition recognised is
the purchase price plus the directly attributable costs incurred as a result of the acquisition, the costs of transferring the patents, trademarks
and licences incurred to date.
On 29 April 2016, Clinigen Group plc extended the Foscavir asset by acquiring the exclusive global rights to a new bag presentation for the
product. The payment for the product extension is spread over three years to align cash outflows with the expected achievement of
marketing authorisations for the new product presentation. The acquired asset has been recognised at the initial consideration plus the fair
value of the deferred consideration. Future costs expected to be incurred in developing this product and obtaining the market authorisations
will be recognised as incurred.
5. INVESTMENTS
(£m)
Cost or valuation
At 30 June 2015
Additions
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
The addition during the year reflects the acquisition of Link Healthcare Pte Limited for £51.5m.
Investments
in subsidiary
companies
244.7
51.5
296.2
296.2
244.7
88
Clinigen Group plc Annual Report and Accounts 2016 SUBSIDIARY UNDERTAKINGS
Subsidiaries at the end of the reporting year were as follows:
Name
Country of incorporation
Nature of business
Clinigen Healthcare Limited
Clinigen Clinical Trials Limited
Clinigen CTS Limited
Clinigen CTS Inc.
Idis Group Holdings Limited
Idis Group Limited
Idis Limited
Idis Inc
Clinigen Asia Pte Limited
Link Healthcare Singapore Pte Limited
Link Healthcare KK
Clinigen KK
Link Healthcare SDN BHD
Link Healthcare Hong Kong Limited
Link Healthcare Pty Limited
Link Medical Products Pty Limited
Link Pharmaceuticals Limited
Link Healthcare Pty Limited
Homemed Pty Limited
Equity Pharmaceuticals Pty Limited
Equity Medical Technologies Pty Limited
Equipharm Specialised Distribution Pty Limited
Plurilinx (Pty) Limited
Chloromix (Pty) Limited
PMIP Pty Limited
Link Holding 1 Pty Limited
Link Holding 2 Pty Limited
Idis MA Limited
Idis GA Limited
Clinigen GAP Inc
Idis Trustee (UK) Limited
Employee Benefit Trust 1
Employee Benefit Trust 2
Clinigen GAP Limited
Clinigen SP Limited
Idis Pharma Private Limited
Keats Healthcare Limited
Clinigen Pharma Limited
United Kingdom
United Kingdom
United Kingdom
USA
United Kingdom
United Kingdom
United Kingdom
USA
Singapore
Singapore
Japan
Japan
Malaysia
Hong Kong
Australia
Australia
New Zealand
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Australia
Australia
Australia
United Kingdom
United Kingdom
USA
United Kingdom
Jersey
Jersey
United Kingdom
United Kingdom
India
United Kingdom
United Kingdom
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Holding company
Sales and distribution of pharmaceutical products
Provision of business development services
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Holding company
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Sales and distribution of pharmaceutical products
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Non trading trustee of Employee Benefit Trust
Employee Benefit Trust
Employee Benefit Trust
Dormant
Dormant
Dormant
Dormant
Dormant
All shareholdings in subsidiaries are owned 100% (2015: 100%) through the subsidiaries’ ordinary share capital.
JOINT VENTURES
Set out below are the joint ventures of the Group as at 30 June 2016, these were acquired as part of the acquisition of Link Healthcare group.
The Group had no joint ventures in the prior year. The joint ventures as listed below have share capital consisting solely of ordinary shares,
50% of which are held directly by the Group. The country of incorporation is also their principal place of business.
Name
Novagen Pharma Pty Limited
Medical Stockings Pty Limited
Year end
Country of incorporation
Measurement method
31 March
30 June
South Africa
Australia
Equity
Equity
The Directors have reviewed the carrying value of the investments and believe the value is recoverable.
89
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes to the Company balance sheet continued
for the year ended 30 June 2015
6. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(£m)
Amounts owed by Group undertakings
Other debtors
Prepayments and accrued income
7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(£m)
Trade creditors
Amounts owed to Group undertakings
Tax and social security
Other creditors
Accruals and deferred income
Deferred consideration
2016
8.2
–
0.5
8.7
2016
0.5
46.8
1.3
0.3
2.4
2.3
53.6
Amounts owed to Group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand.
8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
(£m)
Deferred consideration
Contingent consideration
2016
2.5
8.5
11.0
2015
2.6
0.3
1.4
4.3
2015
0.2
20.8
1.8
0.1
2.8
–
25.7
2015
–
–
–
Deferred consideration is payable in respect of the acquisition of Totect and the Foscavir product extension and is payable in stage payments.
Contingent consideration is payable in respect of the Link business combination if certain profit milestones are achieved. This is recognised
at the fair value of the contingent liability at the period end. The fair value of the contingent consideration was initially measured at £7.8m at
the date of acquisition.
All amounts are due within five years.
9. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
(£m)
Non-current liability
Bank borrowings
Current liability
Bank borrowings
Total loans and borrowings
2016
2015
25.9
70.0
95.9
34.5
69.5
104.0
The Group has a total bank facility of £131.0m available (2015: £140.0m), this consists of a five year fixed term repayment loan of £36.0m
(2015: £45.0m) a revolving credit facility (RCF) of £95.0m (2015: £95.0m). The RCF is repayable within one month and therefore included within
current liabilities.
Interest is payable on a tiered scale based on the level of borrowing. The applicable interest rate on amounts drawn down is up to 2.75
percent. plus LIBOR/EURIBOR (as applicable) on both the RCF and the Term Loan Facility. The margin payable is dependent on the adjusted
leverage ratio and will reduce to a minimum of 1.25 percent. plus LIBOR/EURIBOR (as applicable) as adjusted leverage decreases.
90
Clinigen Group plc Annual Report and Accounts 2016 The bank loans are secured on the intangible fixed assets of the Group.
At 30 June 2016, the fixed term loan was fully utilised at £36.0m (2015: £45.0m) and £61.3m (2015: £60.8M) was borrowed against the
revolving credit facility. All borrowings are in pounds sterling. There were no instances of default, including covenant terms, in either the
current or the preceding period.
MATURITY OF LOANS AND BORROWINGS
The maturity profile of the carrying amount of the Group’s borrowings at the period end was as follows:
(£m)
Within one year
In more than one year but less than two years
In more than two years but less than five years
2016
2015
Gross
borrowings
Unamortised
issue costs
Net borrowings
Gross
borrowings
Unamortised
issue costs
Net borrowings
70.3
9.0
18.0
97.3
(0.3)
(0.4)
(0.7)
(1.4)
70.0
8.6
17.3
95.9
69.8
9.0
27.0
105.8
(0.3)
(0.4)
(1.1)
(1.8)
69.5
8.6
25.9
104.0
FAIR VALUE OF BORROWINGS
The carrying amount and the fair value of the Group’s borrowings are as follows:
(£m)
Bank borrowings
Carrying amount
Fair value
2016
97.3
97.3
2015
105.8
105.8
2016
94.4
94.4
2015
101.2
101.2
The fair values of the Group’s borrowings are within Level 2 of the fair value hierarchy.
10. DEFERRED TAX
Deferred tax consists of the following and is calculated using the effective tax rate of 20% (2015: 20%). The movement on the deferred tax
account is as shown below:
(£m)
Deferred tax asset – opening balance
Recognised
Adjustment in respect of prior years
(Charged) / credited to the profit and loss account
Tax expense recognised in equity
Deferred tax asset – closing balance
The deferred tax balance is made up as follows:
(£m)
Losses
Share-based payment scheme
2016
3.8
–
(0.2)
(1.6)
2.0
2016
1.2
0.8
2.0
2015
2.0
(0.3)
0.2
1.9
3.8
2015
1.3
2.5
3.8
91
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes to the Company balance sheet continued
for the year ended 30 June 2015
11. CALLED UP SHARE CAPITAL
Authorised, issued and fully paid
At 1 July 2014
Issue of new shares
At 30 June 2015
Issue of new shares
At 30 June 2016
(£m)
Ordinary shares of 0.1p each
Number of Shares
(‘000s)
Ordinary shares of
0.1p each
82,556
27,153
109,709
4,892
114,601
2016
0.1
2015
0.1
On 30 October 2015, 3,102,558 new ordinary shares of 0.1p each were issued, as part consideration for the acquisition of Link Healthcare Limited.
During the year a further 1,789,434 shares were issued to satisfy share options that were exercised.
FAIR VALUE MEASUREMENT
12.
The table below analyses the fair value of the Company’s assets and liabilities, into a fair value hierarchy based on the valuation technique
used to determine fair value.
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
– Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices)
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(£m)
Level 1
Level 2
Level 3
Total
2016
Liabilities measured at fair value (see below):
Creditors: amounts falling due after more than one year
2015
Liabilities measured at fair value (see below):
Creditors: amounts falling due after more than one year
There have been no transfers between level 1, level 2 or level 3 during the year.
–
–
–
–
(11.0)
(11.0)
–
–
92
Clinigen Group plc Annual Report and Accounts 2016 FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as
follows:
(£m)
Loans and receivables
Cash and cash equivalents
Debtors excluding prepayments (note 6)
Total loans and receivables
Total financial assets
Financial liabilities measured at amortised cost
Loans and borrowings
Creditors: amounts falling due within one year (note 7)
Creditors: amounts falling due after more than one year (note 8)
Total financial liabilities measured at amortised cost
Total financial liabilities
Total financial instruments
Fair value
2016
1.8
8.2
10.0
10.0
(94.4)
(53.6)
(11.0)
(159.0)
(159.0)
(149.0)
Carrying
amount
2016
1.8
8.2
10.0
10.0
(97.3)
(53.6)
(11.0)
(161.9)
(161.9)
(151.9)
Fair value
2015
Carrying
amount
2015
1.5
2.9
4.4
4.4
(101.2)
(25.7)
–
(126.9)
(126.9)
(122.5)
1.5
2.9
4.4
4.4
(105.8)
(25.7)
–
(131.5)
(131.5)
(127.1)
Management considers that the carrying amount of financial assets and liabilities recognised at amortised cost in the financial statements
approximate their fair value. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
13. RELATED PARTY TRANSACTIONS
ULTIMATE CONTROLLING PARTY
The Company’s shares are listed on the Alternative Investment Market (‘AIM’) and are widely held. There is no one controlling party or group
of related parties who have control of the Group.
TRANSACTIONS WITH RELATED PARTIES
The remuneration payable to the Directors of the Company is disclosed in note 2.
There were no transactions with related parties during the year or the preceding year.
14. TRANSITION TO FRS 101
For all periods up to and including the year ended 30 June 2015, the Company prepared its financial statements in accordance with United
Kingdom generally accepted accounting practice (UK GAAP). These financial statements, for the year ended 30 June 2016, are the first the
Company have prepared in accordance with FRS 101.
Accordingly, the Company has prepared financial statements which comply with FRS 101 applicable for periods beginning on or after 1 July
2014 and the significant accounting policies meeting those requirements are described in the relevant notes.
In preparing these financial statements, the company has started from an opening balance sheet as at 1 July 2014, the Company’s date of
transition to FRS 101, and made those changes in accounting policies and other restatements required for the first-time adoption of FRS 101.
As such, this note explains the principal adjustments made by the Company in restating its UK GAAP balance sheet as at 1 July 2014 and its
previously published UK GAAP financial statements for the year ended 30 June 2015.
On transition to FRS 101, the Company has applied the requirements of paragraphs 6 – 33 of IFRS 1 ‘First time adoption of International
Financial Reporting Standards’
93
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Notes to the Company balance sheet continued
for the year ended 30 June 2015
14. TRANSITION TO FRS 101 CONTINUED
RECONCILIATION OF EQUITY AS AT 1 JULY 2014
(£m)
Non-current assets
Tangible fixed assets
Intangible fixed assets
Investments
Deferred tax asset
Total non-current assets
Current assets
Debtors: amounts falling due within one year
Cash at bank and in hand
Total current assets
Total assets
Current liabilities
Creditors: amounts falling due within one year
Loans and borrowings
Total current liabilities
Net current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Total equity
Notes
UK GAAP
FRS 101 Re-
classifications
FRS 101 Re-
measurements
FRS 101
1.0
37.5
9.1
2.0
49.6
4.3
8.1
12.4
62.0
(3.3)
(16.5)
(19.8)
(7.4)
42.2
0.1
8.7
5.4
28.0
42.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.0
37.5
9.1
2.0
49.6
4.3
8.1
12.4
62.0
(3.3)
(16.5)
(19.8)
(7.4)
42.2
0.1
8.7
5.4
28.1
42.2
94
Clinigen Group plc Annual Report and Accounts 2016 RECONCILIATION OF EQUITY AS AT 30 JUNE 2015
(£m)
Non-current assets
Tangible fixed assets
Intangible fixed assets
Investments
Deferred tax asset
Total non-current assets
Current assets
Debtors: amounts falling due within one year
Cash at bank and in hand
Total current assets
Total assets
Current liabilities
Creditors: amounts falling due within one year
Loans and borrowings
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Loans and borrowings
Total non-current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Total equity
Notes
UK GAAP
FRS 101 Re-
classifications
FRS 101 Re-
measurements
FRS 101
A
0.8
37.8
244.7
1.9
285.2
4.3
1.5
5.8
291.0
(25.7)
(69.5)
(95.2)
(89.4)
195.8
(34.5)
(34.5)
161.3
0.1
141.0
5.4
14.8
161.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.9
1.9
–
–
–
0.8
37.8
9.1
3.8
287.1
4.3
1.5
5.8
1.9
292.9
–
–
–
–
1.9
–
–
1.9
–
–
–
1.9
1.9
(25.7)
(69.5)
(95.2)
(89.4)
197.7
(34.5)
(34.5)
163.2
0.1
141.0
5.4
16.7
163.2
Notes to the reconciliation of equity as at 1 July 2014, 30 June 2015:
A DEFERRED TAX ASSET ON SHARE BASED PAYMENTS
Under IAS 12, the deferred tax asset arising from the future tax deduction available when share options are exercised should be recognised.
Upon transition deferred tax assets arising on share options historically under UK GAAP has been reviewed at 1 July 2014 and at 30 June 2015
to identify any material re-measurements required. As a result a further £1.9m has been recognised as at 30 June 2015, with a corresponding
credit entry to retained earnings.
95
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWClinigen Group plc Annual Report and Accounts 2016 Adviser and investor contacts
COUNTRY OF INCORPORATION
United Kingdom
COMPANY NUMBER
06771928
DIRECTORS
P George
S Chilton
M Abell
P Allen (Non-Executive Chairman)
J Hartup (Non-Executive)
R Sibson (Non-Executive)
J Bacon (Non-Executive)
I Nicholson (Non-Executive)
COMPANY SECRETARY AND REGISTERED OFFICE
J Haddleton
Pitcairn House
Crown Square
Centrum 100
Burton on Trent
Staffordshire DE14 2WW
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
Cornwall Court
19 Cornwall Street
Birmingham B3 2DT
NOMINATED ADVISER
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
JOINT BROKERS
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
96
Clinigen Group plc Annual Report and Accounts 2016 C
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Clinigen Group plc
Pitcairn House
Crown Square
Centrum 100
Burton‑on‑Trent
Staffordshire
DE14 2WW
T: 01283 495010
F: 01283 495011
E: info@clinigengroup.com
www.clinigengroup.com